Latin American Middle Class

Outstanding article in Financial Times on the middle class in Latin America. The problem is that things are not changing as much as often claimed.

Rising incomes are, of course, to be cheered. But the World Bank also points to “abysmally low” levels of intergenerational mobility in the region: while people’s fortunes have improved within the current generation, there are still enormous barriers to social mobility between generations. In other words, the class you are born into is a bigger factor than any other in determining your future prospects. The children of poor parents still face daunting challenges making their way in the world. 

“We are measuring the extent of correlation between parents’ backgrounds and their kids’ achievements,” says Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean (though not one of the report’s authors). “The correlation is very high in Latin America compared with other regions. Family background is much more important.” 

De la Torre describes this as a probable result of “self-sorting” behaviour. 

“Better off families send their children to schools that less well-off families can’t afford,” he says. “That’s different from Asia, for example, where public education is relied on by everybody.” 

It’s not just education. Better-off Latin American opt out of public health systems by buying private health insurance. They opt out of public security services by paying private guards – typically sitting in a makeshift hut on the street, collecting monthly payments from residents. They even opt out of public electricity services by buying their own generators.

Yes to all that. Rising incomes are good for everyone, but they can often obscure long-standing barriers to advancement. There's a tremendous amount of de facto segregation.