Inequality in Mexico Increases: UNDPBy Rodrigo Brugada | Tue, 06/29/2021 - 14:00
High inequality and low growth threaten decades of progress in Latin America and the Caribbean, warns a recent report from the United Nations Development Program (UNDP). The report analyzes the concentration of power, violence in all its forms and the design of social protection and labor market systems and regulatory frameworks in the region.
Latin America and the Caribbean are “in a development trap,” states the report. “Despite decades of progress, some of which could be wiped out by the COVID-19 pandemic, two characteristics of the region have remained largely undisturbed: high inequality and low growth.” Latin America, the Caribbean and every country in them are vastly diverse regions where multiple historical, social structures and power dynamics converge. While inequality itself is a complex and multidimensional problem, many intersecting factors may affect how it comes to be and behaves through time. And while there was a reduction in income inequality during the turn of the century, parts of the region are seeing it rise. This region remains the second most unequal in the world, just behind Sub-Saharan Africa. The countries in Latin America and the Caribbean exhibit higher inequality than those in other regions at similar levels of economic development.
Among the Latin American countries analyzed, Chile, Mexico and Brazil have the highest income concentration at the top of the population. In those countries, the top 10 percent of the population held more than 57 percent of the national income, while the top 1 percent captured more than 28 percent. Income concentration in these countries has remained persistently high and has increased over time. There is also an large consolidation of economic power in the hands of a few giant firms. In the case of Mexico, the revenues of the top 50 firms represent 40 percent of GDP. This consolidation of economic power often comes accompanied by a consolidation in political power that benefits giant firms, states the report.
While people in the region often know there is inequality, they are not necessarily aware of how big the gaps may be. Besides the concern brought by this unequal distribution of wealth, there is also a rising sentiment of injustice in the delivery of social goods and services and the distribution of political power. Across the region, 77 percent believed that their countries are run according to the interest of a few powerful groups. In the case of Mexico, the percentage of respondents with such an opinion reached 70 percent.
These perceptions matter because they shape people’s political attitudes and preferences for specific policies. One example given by the report is fiscal policies, where Latin Americans think that the tax burden should increase with income. These perceptions can also determine different choices that affect life paths. A key example is how there is less upward social mobility and meritocracy is being questioned. As the report states: “if the aspirational reference seems too far away or unattainable, individuals can get discouraged, resulting in frustration and reasons for opting out of the social contract.” The report also explores how violence takes an unequal toll on society, often disproportionately affecting vulnerable people, and how social protection policies and safety nets fall short.
Through this report, the UN urges societies to improve and become more inclusive. “If talent is indiscriminately distributed at birth, unequal societies waste the talent of a relevant portion of society if they exclude a share of human capital from the labor market or sentence some groups to lower capital accumulation.”