Latin American countries had a higher income concentration than
in the early-to-mid 1950s.
During the ‘lost decade’ of the 1980s, inequality in Latin America
was affected by the 1982-84 world recession, the debt crisis, a
large decline in commodity prices, and the recessionary
adjustments introduced to respond to these shocks. Altogether, the
1980s were characterized by regressive distributive outcomes, as
income inequality fell only i n 3 c o u n t r i e s ( Colombia, Uruguay
and Costa Rica) out of 11 with available data (Altimir, 1996).
Despite the return to moderate growth and the extensive
liberalization of the external sector, income polarization did not
decline during the 1990s, and in half of the cases it worsened
further if at a slower pace than in the 1980s (Gasparini et al.2009,
and Figure 1). A revi ew of inequality changes over the 1990s, based
on 76 standardized surveys for 17 countries covering 90% of
the regional population, shows that inequality rose in 10
countries and stagnated or declined in 7 (Székely 2003). The
worsening was particularly acute during the “lost half-decade” of
1998-2002.
One of the k e y features of the rise in income inequality was a
decline in the labor share in total income and a parallel rise in the
capital share. For instance, between 1980 and the late 1980s, the
labor share declined by 5-6 percentage points in Argentina, Chile
and Venezuela and by ten in Mexico. The se trends were not
reversed during the mild recovery of 1991-98. In several countries,
such as Chile during the military dictatorship, the fall in the labor
share was due, inter alia, to the relaxation of norms on workers
dismissals, a restriction of the power of trade unions, the
suspension of wage indexation, a reduction of public employment
and the coverage of the minimum wage, a s we ll a s to the
reduction or elimination of wealth, capital gains and profit taxes.
From an analytical perspective, the fall in the labor share can be
decomposed into five components. First, sluggish growth resulting
from a slowdown in jobs creation (Tokman 1986). Second,
informal employment became more common. Third, formal
sector wages evolved less favorably than GDP per capita.
Fourth, the minimum wage fell in relation to t h e average