Uruguay : Poverty Update 2003
After a decade of continuous growth, the Uruguayan economy experienced a recession over 1998-2001, with a deeper contraction registered in 2002 following the unraveling of the Argentinean crisis in late 2001, which culminated in default, and devalu...
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| Format: | Policy Note |
| Language: | English en_US |
| Published: |
Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2004/06/4966352/uruguay-poverty-update-2003 http://hdl.handle.net/10986/15682 |
| Summary: | After a decade of continuous growth, the
Uruguayan economy experienced a recession over 1998-2001,
with a deeper contraction registered in 2002 following the
unraveling of the Argentinean crisis in late 2001, which
culminated in default, and devaluation in early 2002. The
recession had a deteriorating effect on poverty, and other
social indicators, although considered better than in the
majority of Latin American countries. Notably, increased
unemployment began in 1998 - unemployment, and
self-employment - was accompanied by a reduction in real
wages in the private sector. In addition, since 1999,
pensions, which constitute a sizeable portion of household
incomes, have been falling as well. Vulnerable groups were
the most affected, which are groups composed by households
in which the head is unemployed, employed in the informal
sector, or self-employed; crowded households; households
headed by construction sector workers; and, by individuals
with low educational attainment, or by young persons. There
are also some "new poor", notably individuals
living in households with intermediately educated heads.
This growth in poverty resulted from three broad factors: a)
higher incidence of unemployment, combined with longer
unemployment spells, and less hours worked, all of which
affected more the vulnerable segments; b) reductions in real
earnings originated by inflation, and the reduced rate of
increase in nominal remunerations. These were compounded by
occupational, and sectoral shifts in the labor market, that
contributed to the reduction of average earnings; and, c)
higher household income inequality. The government response
to the recession included many positive actions, in
particular, the existence of a firmly established, and
overall well designed set of social programs, including
social assistance, and, there are three programs that play
an important role in mitigating and coping with social
risks: an early child development program; a housing program
targeted to poor households in rural areas; and, a housing
program with similar characteristics, but targeted to urban
slums, introduced in 2000. Notwithstanding, some
fragmentation within institutions, and overlapping program
objectives across institutions, were found in some social
interventions. A key question arising from the analysis in
the Report is why nominal wages kept growing in the face of
reduced economic activity, forcing a significant quantity
adjustment of the labor market. Analyses of the effect of
policies showed, that public wage rigidities exerted a
negative, although small, impact on employment as a whole
until 2001, especially for intermediately educated
individuals, and those belonging to the three lowest
quintiles of the income distribution. The report finds that
both the public wage bill, and overall wage inequality would
be lower if, public workers earned accordingly with the
private pay structure. As noted in the final chapter,
however, a deeper analysis of the labor market is needed, to
assess other factors preventing adjustments in this market.
Currently, the existing evidence in this regard is contradictory. |
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