Colombia - Income Distribution

Income distribution

The question of who has benefited from economic growth has been the subject of considerable controversy in Colombia. In the opinion of some observers, growth during the 1970s worsened the skewed distribution of income. The World Bank, in contrast, has concluded that the real incomes of the poorest workers improved significantly during the 1970s.

Data from a variety of sources suggest that there was a redistribution of income toward the two extremes of the population during the 1970s. Income growth was faster for those groups at both the top and the bottom of the income distribution ladder. By contrast, all the evidence suggests that the middle class, which did well in the 1960s, lost ground in the 1970s. For the poor, increased employment of females and other secondary workers at higher wage rates explained most of the improvements; for the rich, the higher income of the head of the household accounted for the betterment.

Agricultural workers and small landholders made up the majority of the poor in Colombia in the late 1980s, although this proportion was decreasing. The urban poor consisted mainly of persons without primary education, who with their numerous children were grouped in large households where few of the members worked. The poorest households were often headed by a single parent--typically a woman. Those who worked were concentrated in domestic service, construction, manufacturing, and retail trade. The wages of the rural and urban poor stagnated until the mid-1970s, improved significantly in the latter half of the decade, but then deteriorated somewhat in the mid-1980s. Real earnings, however, improved more than the wage rates in view of greatly increased employment among household members, which was more significant in urban locations that had greater opportunities for female employment. The income per member of poor urban families also was likely to have benefited from the decline in fertility in urban areas.

Relative wages in low-paid occupations tended to converge over the 1970s. Those paid the least at the beginning of the decade gained, the better-paid semiskilled workers faced stagnant or falling wages, and higher-paid workers suffered substantial setbacks. Important factors contributing to the improvement in the lot of the poor included rapidly expanding educational opportunities since the early 1950s, reinforced by population, nutrition, and related social policies since the late 1960s. Strongly complementary was the employment boom of the 1970s that enabled increasing numbers of women and other "secondary" workers in the poorer households to find jobs, significantly increasing household incomes.

The economic positions of the higher-income group apparently also improved substantially during the 1970s. Rapid economic growth in this period provided ample opportunities for raising entrepreneurial profits, and substantial real interest rates were available to owners of capital. The decade also witnessed booming markets in coffee, emeralds, urban residential housing, and illegal trade.

By contrast, persons in the intermediate range of the income distribution fared poorly. This situation was caused in part by the surging supply of educated workers during the 1970s.

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