Poverty in Iguala

Economic growth doesn’t always help the working poor

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El Daily Post
Source: El Daily

Mexico’s economic growth has been weak and hasn’t led to any increase in the well-being of the population, nor has it been sufficient to reverse the increase in the working poor, according to the #SemáforoEconómico.

poverty, Mexico, growth, economy
A construction worker in Guerrero, one of the poorest states in México. Photo: Cuartoscuro.

In the early stages of the 2008-2009 global economic crisis, the number of Mexico’s working poor began to increase. It hasn’t gone down since, even as growth began again. Thus #SemáforoEconómico’s work poverty indicator has stayed on red since the fourth quarter of 2008.

The work poverty indicator measures the percentage of the population that cannot adequately feed a family with the household’s working income. It’s a short-term tool that the economic observatory México ¿Cómo Vamos? calculates using the Working Poor Trend Index of Wage Intervals” (ITLP_IS for its Spanish initials), published quarterly by Coneval, the National Commission for the Evaluation of Social Development Policy.

According to the most recent data from the #SemáforoEconómico, working poverty had its biggest increase in the third quarter of 2008, going upo 2.9 percentage points from 32.9 percent to 35.8 percent. It has continued to grow, reaching 41.4 percent in the first quarter of 2015.

Even though economic growth hasn’t shown the hoped-for dynamism (0.4 percent in the first quarter of 2015, quarterly adjusted rate), it did manage to outpace the negative growth rates during the height of the crisis, since, after that stage, it has maintained positive quarterly growth rates, with the one exception of the second quarter in 2013, when it dropped to -1 percent.

What these figure reflect is that weak economic growth hasn’t led to any increase in the well-being of the population, nor has it been sufficient to reverse the negative trend in labor poverty, according to #SemáforoEconómico de México. Even more alarming are the results at the state level. In eight states, the percentage of the population qualifying as working poor has increased by 10 percentage points from the third quarter of 2008 to the first quarter of 2015.

The two most worrisome cases are Zacatecas and Querétaro,  the two states with the most growth during this period, with an annual rate of 4.9 percent and 4.4 percent respectively. This means that even stronger economic growth isn’t able to raise workers’ salaries.

There may be a number of explanations for these results. One could be migratory movements, which tend to increase working poverty in urban zones even as they drive economic growth. In this period, working poverty in urban zones increase by 6.8 percentage points as compared to 1.2 in rural areas.

Another possible explanation that has gained traction in the economic literature lately is that in the most unequal economies, poor people tend to receive fewer benefits from economic growth, and therefore its effect on inreducing poverty is less (Ravallion, 2013). The data shows that inequality may have been the main influence in Zacatecas, since it was that state where inequality in work income rose the most in that same period (raising the Gini coefficient from 0.403 to 0.428.

Given this outlook, academics and experts from México ¿Cómo Vamos? estimate that its is not only necessary to increase economic growth, but all that the growth translate into increased well-being of the population. As long as growth isn’t inclusive and the number of working poor isn’t reduced, the #SemáforoEconómico will stay on red.

The economic observatory México ¿Cómo Vamos? is an initiative consisting of a diverse group of economic and public policy experts committed to promoting economic growth in Mexico. Some of the more notable institutions represented in the organization include the universities Anáhuac, CIDE, Colmex, ITAM, ITESM and UNAM, and the research centers IMCO, México Evalúa, CIDAC and CEESP.

The #SemáforoEconómico is an economic tool that was designed to identify how well Mexico’s economy is advancing. It tracks compliance with specific goals in well-being, productivity, investment and competitiveness that must be met if Mexico is to grow. The #SemáforoEconómico is available in its national version as well as one for each state plus the Federal District at www.mexicocomovamos.mx  and via twitter at @mexicocomovamos.

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