Uruguay - Income Distribution

Income distribution

Uruguay's pattern of income distribution remained the most egalitarian in Latin America, although it apparently worsened under military rule from 1973 to 1985. In 1976 the poorest fifth of Uruguayan households received 4.8 percent of total household income, the top 10 percent of households took in 30.1 percent of total household income, and the top 20 percent of households took in 46.4 percent of income. Although unequal, this pattern was closer to that of the developed world than to the rest of Latin America.

Despite erosion of the minimum wage, the net impact of the recovery of real wages and pensions in the first year after the return to democracy in March 1985 appears to have slightly improved the distribution of incomes. Both in Montevideo and elsewhere in Uruguay, the highest 10 percent of households were reported to take in just under 30 percent of household income in 1986, while the lowest 20 percent of households garnered just under 6 percent of income.

During the first half of the twentieth century, living standards in Uruguay approximated those of the developed world. Since the 1950s, however, economic stagnation and even decline have meant severe falls in real wages. This process became particularly marked starting in 1968, the year in which the government imposed a wage and price freeze and abolished the so-called wage councils, in which government representatives, employers, and unions negotiated salaries. (The councils were revived in 1985.)

Real wages grew particularly fast from 1985 to 1987. However, this was less true in the public sector, where in 1989 they remained below their 1980 level. The Colorado government also allowed the real value of the legal minimum wage to continue to fall.

Although the Colorado government made only cautious attempts to redistribute income to the most needy, the revival of economic growth helped to produce some improvement in various indicators of income distribution. The wage share of national income grew from 30.3 percent to 31.4 percent between 1985 and 1987, while the income share of the self-employed grew from 10 percent to 12.7 percent. According to the household survey of the General Directorate of Statistics and Census, the proportion of families below the poverty line in Montevideo fell from 27 percent in 1984 to 16 percent in 1987.

Reliable data on rural wages were hard to collect. Clearly, they were much lower than in interior towns or Montevideo, but official statistics suggested that they did not fall as far or as fast as wages in the rest of the economy in the 1970s.

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