WASHINGTON, 2 October 2008: Between one fourth and one half of income inequality observed among Latin America and the Caribbean adults is due to personal circumstances endured during childhood that fell outside of their control or responsibility, such as race, gender, birthplace, parent’s educational level and their fathers occupation.
These circumstances reveal the level of inequality of opportunity in the region.
This is one of the findings of a report made public today by the World Bank, written by Ricardo Paes de Barros, researcher at the Instituto de Pesquisa Economica Aplicada (IPEA/Brazil) and World Bank economists Francisco Ferreira, José Molinas and Jaime Saavedra. This is the first time a Human Opportunity Index (HOI) is presented.
The HOI shows how personal circumstances play in gaining or preventing access to those services needed for a productive life, such as running water, sanitation, electricity or basic education among children in the region. This opens up a whole new field of study dedicated to designing public policy focused on equity.
– Latin America and the Caribbean is one of the most unequal regions in the world, where the richest 10 percent of the population captures 40 percent of total income, while the poorest 10 percent receives a mere 1 percent. To a large extent, this can be attributed to the fact that not everybody has the same opportunities. This has to change. The HOI is a new tool that will help governments assign budget allocations more efficiently, and generate opportunities for all, Pamela Cox, World Bank Vice-president for Latin America and the Caribbean, said.
For this reason, the World Bank decided to apply the HOI in Latin America first, with household survey data representing 200 million children from 19 countries in the region. The HOI measures the proportion of opportunities needed for children to attain universal access to basic services that are available and equitably distributed.
The composite index runs from 0 (total deprivation) to 100 (universality) and is calculated using potable water, sanitation, electricity and basic education services, which directly influence the chances that a child has to forge a decent future.
The IOH improves when there are more opportunities and when they are more equitably distributed. It allows also to identify factors which determine a greater/lower access to these basic services.
The results highlight challenges that need to be resolved, but they also show clear progress. Several countries, like Brazil, with a high level of income inequality between adults, show important advances towards equality of opportunity among children.
– Latin Americans have always felt an uneven playing field beneath our feet, that our destiny is predetermined from childhood by circumstances over which we have no control. Now that we can measure the inequality in opportunities, we are seeing that their feelings were real. But, even more importantly, now we can do something about it: We can establish public policies focused on equity, added Marcelo Giugale, World Bank Director of Economic Policy and Poverty Reduction for Latin America.
HOI results also show that a person’s birthplace, and in second place, parents´ income, are a powerful determinant for access to running water, sanitation and electricity services. Both parental education and socioeconomic status are closely related to their children’s educational achievements.
Among 19 Latin American countries, Argentina (88 percent), Chile (91 percent), Costa Rica (86 percent), Uruguay (85 percent) and Venezuela (86 percent) are closer to achieving universality of opportunities.
Guatemala (50 percent), Honduras (53 percent) and Nicaragua (46 percent) are farthest from that goal, due both to low coverage and unequal distribution.
Between 1995 and 2005, the average annual HOI growth in the region reached 1 percent. Paraguay and Peru grew at a higher rate of 1,4 percent annually.
On average, two thirds of improvements in the HOI are due to increasing the coverage rate, while one third is due to reducing inequity in the distribution of available educational and housing opportunities taken into account.
The study also finds that between one fourth (Colombia) and one half (Guatemala) of income inequality among Latin American adults is due to circumstances outside of their control, faced in the beginning of their lives.
Race is a key factor to explain income differentials, especially for the most disadvantaged groups.
Countries in the region should focus on achieving universality of access for these services, in order to widen opportunities for tomorrow’s adults and increasing their chances of avoiding the inequality endured by their parents.
As long as birthplace, gender or parental background have an important effect on access of Latin American children to basic services and other opportunities, there will be no leveled playing field, and equity will continue to be an objective to achieve.
