Poverty and the Labor Market in Venezuela 1982-1995
By Gustavo Márquez, Carola Alvarez (12/96, En) See also Poverty and Inequality
The purpose is to describe the performance of the Venezuelan labor market in the period between 1982 and 1995, and to analyze its impact on the evolution of poverty. This period is a convulsed one, along which Venezuela suffered from the consequences of both changes in the international financial market conditions, and a sustained deterioration of economic management. Growth and inflation were highly volatile, real wages fell in a sustained way, and poverty increased dramatically.
In spite of repeated attempts to produce some kind of adjustment to the changing international market conditions -first by a contractual policy between 1982 and 1985 followed by a short-lived expansion between 1986 and 1988, in turn followed by an orthodox adjustment in 1989 that led to another short-lived expansion between that date and 1992, which in turn was followed by a deep recession between that date and 1995- the underlying determinants of the Venezuelan economic crisis remain in place today as firmly as they were in 1982. In spite of the variety of policy orientations of these adjustment attempts, they could never reverse in a sustained way the falling trend of productivity (as reflected by average product per worker), and always resulted in an increasing gap between average product per worker and real wages.
During the 1980's Venezuela experienced a severe increase in the percentage of the population living in poverty. By 1989 poverty had increased over 150% from its 1980 level. The largest rise in poverty took place at the beginning of the decade when the head count ratio rose by 36% between 1982 to 1985. However, poverty increased in Venezuela both during this recessionary sub-period and during the expansion between 1986 and 1988. The percentage of the population with incomes below the poverty line continued to rise throughout the decade. By 1992, after a fast growth period that lasted 3 years, poverty incidence had been reduced to pre-1985 levels. However, the stalling of the adjustment policy in 1992 resulted in stagnant growth, and poverty levels resumed their ascending curve. Today, the percentage of household with incomes below the poverty line is at its highest point since the beginning of the 80's.
Section 1 focuses the main labor market problem (and the main explanation of the surge in poverty counts) in Venezuela is falling real wages, not unemployment. The labor market appears to have an unending ability to absorb labor, even though the price is the collapse in productivity and real wages. Section II is dedicated to an exploration into the dynamics of the Venezuelan labor market through the use of conceptual framework derived from segmented labor market models such as Harris-Todaro´s. Section III will open with an analysis of the overall evolution of poverty, to go on with an analysis of the sub-periods identified in the previous section. Finally, in Section IV some concluding remarks will be presented.
Last updated: 05/08/07
