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Argentina's Poor: A Profile

 

Argentina FY95 PA

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Poverty Profile

The first World Bank poverty report on Argentina, i.e. Argentina's Poor: A Profile, reviews progress on poverty reduction in recent years. The report focuses on the typology and profile of the poor. It is essentially urban-based and time- specific, covering events up to the end of 1993. About 85 percent of Argentina's 33 million population live in the urban areas, and a third or about 11 million reside in metropolitan Buenos Aires (MBA).

The report finds that Argentina significantly reduced poverty in the early 1990s compared to the immediately preceding years as a result of a successful macroeconomic stabilization program. In 1993, the incidence of urban poverty was estimated to be about 20 percent in the nation as a whole. In MBA, the 1993 estimated poverty rate was 17.6 percent or about half its 1990 level. The continued reduction in poverty incidence in the first three years of the 1990s provides a dramatic contrast to the 1989 crisis when almost 50 percent of the MBA population reported incomes below the poverty line. Not only was poverty in MBA greatly reduced in the 1990s but the poor as a group also did not experience such extreme poverty as in the past. By 1993, the poverty gap index decreased to less than half of its 1990 level, and the poverty severity index fell to two-fifth of its 1990 level.

Social Indicators

The long-term improvement in the living conditions of the Argentines can be gleaned from the major indicators of basic human needs as measured by the Necesidades Basicas Insatisfechas (NBI). Between 1980 and 1991, households identified with unmet basic needs represented by an aggregate NBI indicator (which measures adequacy of dwelling space, housing material, sanitary conditions, and the school attendance of children 6-12 years old) went down by 3.8 percentage points, from 18.3 to 14.5 percent. Also, Argentina's social indicators improved steadily during the decade of the 1980s as in most Latin American countries. The demographic and epidemiological profiles of Argentina resemble those of developed countries with high life expectancy and low fertility rates. The infant mortality rate declined continuously from 33.2 in 1980 to 21.5 in 1992, although rates reaching 50 infants per thousand were observed in isolated cases in some northern provinces. Traditional measures indicated that the educational attainment of the Argentine population in the last decade has steadily increased. Nevertheless, there are signs that the quality of education may have deteriorated in some areas and that students/graduates may lack marketable skills in a more demanding labor market.

Poverty Groups

The report presents a snapshot of the poor in MBA based on income: the indigent, the stagnant poor, and vulnerable poor. The indigent population (defined as those lacking the income required to purchase the minimum food basket) was about 3.4 percent of the total MBA population in 1993. With the recent improvement in the general poverty situation, policymakers have begun to focus more attention on those with incomes near the poverty line. This group (defined in the report as those falling within a band of 0.75 and 1.25 times the poverty line or franja de pobreza) is classified as the vulnerable group. In 1993, about 14 percent of the MBA population (or 1.5 million) were in the vulnerable group, of whom a little more than half (7.3 percent) were below the poverty line. This group is getting more official attention as economic restructuring has resulted in redundancies and changing labor skill requirements. The stagnant poor (those whose income is insufficient to purchase the minimum food basket and non-food consumption goods) accounted for about 6.9 percent of the 1993 population. This group is above the indigent line but below the lower end of a defined poverty band. The limited employability of this group makes their poverty status more permanent than that of the vulnerable group but less critical than the indigent.

The indigent in 1993 belonged to households characterized by the largest average family size (5.4), the youngest demographic profile, and the highest dependency ratio. The vulnerable group tended to share common household characteristics with the population below the poverty line rather than with the non-poor group. This is especially true with regard to family size, the educational level of household head, and the skill levels of household members. Where the vulnerable group was markedly different from the poor group was in its lower rate of unemployment and its tendency to be employees rather than being self-employed. The vulnerable group had a closer affinity with the non-poor groups in these labor market characteristics.

Between 1990 and 1993, the vulnerable group exhibited the most significant reduction in the time spent in their current jobs. Also, those who were above the poverty line among the vulnerable group showed the highest average unemployment spells in 1993. A marked increase was also noted in the unemployment of people in their mid-forties whose skills may now be outdated relative to Argentina's labor market requirements. These observations to some extent reflect the effects on the labor market of Argentina's economic restructuring in recent years. The need for policy to focus on the employment and income situation of the vulnerable group becomes more significant when one considers the fact that this group contained twice the number of the stagnant poor and four times more than the indigent in 1993.

Location of the Poor

The incidence of poverty varied considerably by region, with the highest rates (averaging 40 percent) being registered in the northeast and northwestern provinces. The rate of decline of poverty incidence between 1990 and 1992 has been much swifter in MBA than in the more remote provinces. While all provincial cities have experienced a fall in poverty between 1990 and 1992, the speed of decline has been slowest in the Northwest and Northeast.

Data on rural poverty continues to be a major weakness of poverty analysis in Argentina. A number of existing studies of the rural population are not comparable over time, but they provide interesting information based mostly on case studies, key informants, and limited surveys. A recent limited survey on the rural poor commissioned by the Poverty Committee of the Ministry of Economy revealed that about 60 percent of the households surveyed have a migrant in the urban areas. As male workers migrate out of the provinces, farming becomes more difficult for those left behind, and thus poverty notably affects the elderly, women, and children in the rural areas. Families usually depend on income remittances from workers in urban areas. It was also noted that educational attainment among the rural poor is low; for example, close to 70 percent of the rural poor surveyed have had no schooling whatsoever.

Income Distribution

Income distribution in Argentina (as depicted by MBA household income) worsened markedly during the recession cycle of the 1980s. By 1993, however, the share of income destined for the lowest quintile has recovered much of the purchasing power lost between 1980 and 1989. In addition, large gains were recorded by those in the middle-income category. Nevertheless, while poverty rates dropped markedly between 1990 and 1993, income distribution has been rather stable. The income share of the lowest quintile was relatively unchanged between 1990 and 1993. This is partly explained by high unemployment and underemployment rates, the brunt of which was borne by this group, as well as the lagged recovery of their wage (relative to the top quintile) over the period.

Education and Poverty

The importance of the educational level attained in reducing the probability of being poor was observed in the results of a probit model exercise using household data for 1991 and 1993. Individuals from a family with a household head who possessed a higher education were the least likely to be poor, other things being equal. However, the marginal improvement in poverty incidence is greatest for those individuals whose household heads completed secondary school.

Universal access to primary education and partly subsidized secondary and higher education in Argentina does not seem to ensure that the poor gain from the formal education system. Children from poor families enter primary school at a later age and suffer from high drop-out rates. The poor also tend to receive an education of lower quality than that received by the non-poor. Differences in quality depend to a large extent on the school's geographic location. Poor preparation at the primary level and lower tuition subsidies reduce the chances of students from poor families finishing secondary school. This in turn restricts their ability to be gainfully employed. Hence, while equality of access to educational opportunities theoretically exists in Argentina, the quality and structural attributes of the current education system do not seem to counterbalance the limited opportunities available to children from poor households. Given these circumstances, an intergenerational poverty cycle may be difficult to break.

Public Social Expenditure

An analysis of the distribution of the benefits of total public social expenditures reveals that traditional social sector expenditures tend to be progressive while social insurance expenditures are clearly regressive. Although the progressivity in the per capita allocation of social sector spending is a positive finding, the poor quality of some services limits the impact of social programs even if a considerable fiscal resources have been allocated to them. The lack of efficient targeting mechanisms for most programs also casts doubt on their actual impact on the poor.

Poverty Strategy

The achievement of economic stability and growth in the early 1990s has been a key factor in the recent notable increase in the incomes of the majority of the Argentine population. The government views as equally important the creation of appropriate employment opportunities and investment in human capital. In general, a dual track poverty alleviation strategy, namely increasing income opportunities through sustained economic growth and boosting investment in human capital, is well-articulated in Argentina. The challenge is to implement these strategies with affordable instruments and to target them to appropriate groups in society. With the Bank's assistance, the government is now developing targeting approaches for social programs and the necessary capacity for monitoring and evaluating programs and projects.

The report proposes areas where further work should be undertaken to increase our knowledge of poverty. Prominent among these are: (a) an improvement in the information base for poverty analysis including enhancing the scope and timeliness of provincial household income and expenditure data; (b) analysis of regional poverty pockets including generating appropriate information on rural poverty; (c) a study linking education, employment, and poverty; and (d) an examination of social service delivery at the provincial level.

Statistical System

Part of having an effective social policy is a continuous awareness of the situation of the poor and vulnerable groups in the society. The report highlighted the importance of collecting reliable and up-to-date information on poverty and on factors affecting the poor's situation in all parts of Argentina. The government also emphasized that Argentina's existing household income survey was primarily designed to estimate the unemployment rate; the statistical significance of this variable is higher than any other data in the survey. Systematic poverty monitoring would thus require making improvements in the following areas: (a) the scope and timeliness of household survey information in all provinces; (b) a reduction in household income underreporting and non-response rate; (c) the inclusion of rural areas in the household surveys; (d) systematic updating and increases in geographical coverage in household expenditure surveys to allow the estimation of basic consumption baskets for both urban and rural areas and by province; (e) re-examination of the scope of the aggregate NBI indicator to describe the situation of the structural poor; (f) systematic and timely generation of provincial and municipal social expenditure data by program/project including their target beneficiaries; and (g) periodic studies/surveys of the utilization of social programs by intended beneficiaries using, where appropriate, participatory methodologies.

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