Latin America's Middle Class Grows, but with a Tenuous Grasp on Status

Article excerpt

Although 56 million households have joined Latin America's middle class, many lack the benefits and job security to ensure stability.

With a regular salary as a beauty salon manager, Edgar Ladino supports his two children, leases a compact car, and is able to make rent payments on time.

"It's not my dream job, but it's OK," he says with a shrug, sipping a latte at a Bogota shopping mall.

Mr. Ladino may not love his job, but it has landed him a spot in the burgeoning Latin American middle class. Millions across the region are finally setting up new companies, buying cars and homes, and helping to further stabilize democracies. In the world's most unequal region, their rise has dominated policy documents, academic papers, and press reports.

Fifty-six million households have joined the Latin American middle class in the past decade and a half, according to new analysis by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), which studied 10 countries in the region representing 80 percent of the population. The growth mirrors trends in the rest of the world, the group says, with 1.3 billion people today calling themselves middle class.

But behind good news lies a troubling reality. While new members of Latin America's middle class might be better off than their parents, the benefits often taken for granted by their Western counterparts remain far from their grasp. Many are barely holding on to their new status, with insecure jobs and poor access to quality education for their children. In most cases, they are more likely to fall into poverty again than rise into affluence.

Ladino's situation, for example, is far from stable. Like millions of Colombians, he only has a one-year contract. It expires at the end of May. It's entirely up to his employer whether to renew the contract or not. "What kills me is the uncertainty," he says. If his boss decides to not sign him on again, Ladino isn't sure where the next car payment will come from.

"This is not a European or US middle class," says Christopher Sabatini, editor-in-chief of the policy journal Americas Quarterly in New York, which is published by the Council of the Americas. "I think we are at risk of over-blowing the stability and type of middle class that has grown. ... It is very, very fragile."

Several factors are driving up economic status, including greater access to education and credit and macroeconomic policies that have kept inflation in check.

Across the region, GDP grew by an average of 2.6 percent between 2000 and 2008, according to the World Bank. Many countries have reduced poverty by paying families who keep their children in school. Demographics have also been a boon, as the population of those of working age is greater than those not - giving families extra income.

Growing informal economy

But no longer categorized as poor, many in the region find they are surviving on the fringes, without a base in place to secure them. One reason is the growing informal economy.

According to the OECD's Latin America Economic Outlook 2011, which looked at the heterogeneity of the middle class, more than half of 72 million "middle sector" workers in Bolivia, Brazil, Chile, and Mexico - those with household income per capital between 50 percent and 150 percent of the national median - work informally, which means they have no safety net in the case of illnesses, retirement, or job loss. …