Magazine article Americas Quarterly

Mexico's Fragile Middle Class

Magazine article Americas Quarterly

Mexico's Fragile Middle Class

Article excerpt

With the right policies, the Mexican government can protect the middle class and overcome intergenerational poverty-despite the crisis.

Can Latin American governments tackle inequality in the midst of the global economic downturn? Although some countries-most notably Brazil and Chile-have made dramatic gains in reducing poverty and expanding the middle class, Latin America remains, in the first decade of the twenty-first century, one of the world's most unequal regions. Inequality has deep roots in the region's colonial history and institutions, but a major driver of today's income gap is the uneven access to public goods such as education. Unequal access to education and other productive assets is not only the source of wide economic disparities, but it also prevents intergenerational mobility.

Examining the case of Mexico can help us find ways to understand this phenomenon. The gap between the rich and the poor in Mexico has remained largely unchanged over the past two decades. Recent studies about intergenerational mobility indicate that public support for education, especially for the most needy, is the key to providing equal opportunity. The lesson is applicable to the entire region, particularly if it is to shore up and defend the social gains of the last decade in the midst of an economic crisis.

Intergenerational mobility captures the extent to which an individual's socioeconomic position depends on social background. In an immobile society, "accidents of birth" strongly determine individual attainment. In a mobile society, by contrast, the opportunity for economic success (and failure) will be more equally distributed across individuals of different social backgrounds. As such, mobility provides a measure of equality of opportunity across countries.

Even though mobility and inequality are correlated-higher levels of inequality mean that parental resources weigh more on individual attainment-mobility matters in and of itself for at least three reasons. The first of these is normative. A society that fails to value equal opportunity and merit over social background and economic status is simply unjust. Social mobility also matters from an efficiency perspective. A social and economic system that does not reward individual merit wastes its most precious resource: human capital and its corresponding potential for innovation. Finally, immobility threatens social integration and can lead to social conflict.

Unequal Opportunity in Mexico

I examine mobility in Mexico using a household index of economic well-being based on the occupational status of the head, as well as a set of household durables, services and assets ranging from running water and computer ownership to financial assets for parents and children. This index closely gauges the permanent income of families, avoiding the distortions from short-term year-to-year fluctuations. By dividing the economic well-being index into quintiles for the parents and the children, we can evaluate the extent to which advantage and disadvantage persist across generations.

As FIGURE 1 shows, Mexican mobility is limited. Wealth, as well as poverty, is reproduced across generations. In 2006, those who came from the poorest quintile had almost a 50 percent chance of staying there. Their possibility of reaching the wealthiest quintile was a depressing 4 percent. Moving to the other extreme, for those who came from the wealthiest quintile, the chances of retaining their advantaged status is 60 percent, and the chance of remaining in the top two quintiles is a solid 85 percent. In other words, if you're born wealthy in Mexico, you're likely to stay there. If you're born poor (the two lowest quintiles) you're about 74 percent likely to remain there too.

Is the Mexican level of intergenerational immobility unusual? For the purposes of comparison I look at Chile, which has comparable levels of economic development and inequality, and Sweden, known for its high mobility. …

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