The State of Poverty
What poverty in Argentina looks like and why it's not getting better
Following last week’s post about how poverty is defined and how it (broadly) evolved, I wanted to do an exploration of who is poor, how poor they are, and what policies the government is (or isn’t) using to help them.
Who is poor in Argentina?
Poverty is not equally distributed among population groups, which should not come as a surprise. Historically, the poverty rate has been inversely proportional to age - meaning the oldest people are often the least poor, and children the most. Half the explanation is math: low-income families are larger than non-poor ones (4.1 members vs 2.6), mostly due to childre. The average poor woman has 3.7 children, while the average non-poor woman has 1.9.
This has the very clear implication that children are overrepresented in the poverty headcount, while adults and the elderly are underrepresented. The groups that most clearly show this disparity are children (under 15) and young adults (15 to 29): the former make up two thirds of the immiserated and the latter are 55%, despite both being a quarter of the total population. The elderly only make up 5% of the poor - despite being 11% of the country.
While official statistics about the matter are not published, it is evident that, since women work fewer hours than men (33 per week, vs 43), earn less than their counterparts (77 cents on the peso), and are far likelier to be the single parents in charge of children, they should be overrepresented among the poor.
Chronic poverty and quality of life
We can define “chronic poverty” as a distinct concept - the group of poor people who are the most vulnerable to remaining poor over time and across generations, rather than circumstancially (say, a family that has lived in slums over multiple generations, versus a lower middle class family that’s been hit by hard times). Its correlation to income poverty is two sided - the chronically poor are often, but not always, below the poverty line; they are, however, extremely likely to have unmet basic needs.
Chronically poor households are even larger than “normal” poor families (6.1 members vs 4.7), due to more children (2.5), and 43.4% have a female head of household. Even while all groups have universal access to clean water, only 63% of the chronically poor have hygienic bathrooms, and just 29% have sewage - versus almost all of the population for the former, and 63% of the rest of the poor for the latter. The chronically poor only have 5.7 years of education, compared to 16 for non-vulnerable househoulds and 10 for the non-chronic poor (although this disparity is much smaller for children and teenage girls - it is normally boys over 15 who leave education for work). And poor children have lower performance: almost half of high schoolers in the lowest quintile are too old for their current grade, versus basically none in the top 30%.
35% of the chronically poor do not have a stable job, and their unemployment rate is higher for all age groups. And only a third of those who do have a job even have a pension, or health benefits. While prime-aged men have a labor participation rate greater than 90% in all age groups, chronically poor women have an abyssmal 46.7% - 44 points lower than their non poor counterparts, and 30 below the circumstantially poor.
What is welfare good for?
Argentina does have a welfare state to help the poor - unfortunately it is small, sloppy, and badly distributed. There are basically three kinds of transfers: pensions and other program for the elderly, child benefits, and various other smaller, less relevant programs.
Starting with pensions, they are messy enough to merit a whole post on the subject. Broadly, there are two main kinds of “welfare”: direct payments via pensions, and health insurance through PAMI. The latter is fairly generous and led to a whopping 90% of retirees having at least one source of coverage. The former is also widely spread, even while a plurality of retirees do not meet the legal requirements to obtain a pension, which has been the case for a while. Both of these are extremely costly, with government expenditures on the elderly surpassing 10% of GDP in 2020 (an unusually high figure, which is usually in the 8-9% range).
For children, the panorama is different. Since 2010 there has been virtually one major program for them: the Universal Child Allowance, or AUH (in Spanish). The AUH is a conditioned cash transfer, meaning families have to fulfill certain criteria to continue receiving money. Not to dive too deeply into the weeds, the program has been fairly effective at accomplishing its goals in the childcare area, and hasn’t had many negative effects in employment (although it has been noted to discourage transitioning to formal jobs from informal ones). Its impact on poverty seems to be narrow, and mostly benefitting households that are a small distance from the poverty line. Covering 92% of children, the program (alongside much smaller ones, such as the Unviersal Pregnancy Allowance) costs an approximate 1% of GDP.
You can very clearly see the issue here: the elderly, making up just 11% of the country, get 10 times as much as minors - who are between a quarter and a third of the population. This disparity becomes even starker after realizing that most pensions are multiple times the amount of the child allowance, and that healthcare costs are higher for the elderly. In per capita terms, this means that the age disparities are not improved much by the welfare state - in fact, excessive means testing of welfare programs via too narrow targeting means they are worsened.
Conclusion
As you can clearly see, poverty is a serious issue, and one where public policy could go much further. Widening chasms in living conditions, access to education, and job market opportunities means the problem has gotten worse, not better. These disparities between members of a same age cohort are only worsened when considering that the government seems to be more interested in alleviating poverty for the elderly, but not for children.
A further issue to consider is growth. Per capita growth has stalled in Argentina in the past decade, and successive recessions have only reduced it. Stagnant real wages, due to persistent high inflation, and lackluster employment levels, caused by excessively restrictive policies and rent seeking, are only reducing the main avenue for upwards mobility.
Empirical evidence has shown that every percentage point that GDP grows, poverty goes down by 2%. Over the past 18 years, GDP has grown at a meager 1.3% a year - and that is without any macro stability. Assuming macro issues are solved immediately, it would take almost twenty five years for the poverty rate to reach pre-recession levels (25.7%). At twice that rate, social conditions would still not recover until 2040. At a (very unrealistic) 5% growth rate, it would still take a full decade.
Sources
INDEC, “Poverty In The Second Semester of 2020” - in Spanish
CIPPEC, “Chronic Poverty (2018) - in Spanish
CIPPEC, “The Challenge Of Poverty In Argentina” (2019) - in Spanish
UCA, “Poverty As Denial Of More Than Income” (2020) - in Spanish
Cetrangolo & Curcio, “Analysis And Proposed Improvements For The Universal Child Allowance” (2017) - in Spanish
Apella & Rofman, “Social Protection In Argentina In A Context Of Demographic Transition” (2010) - in Spanish
Excellent article. Thank you for giving a solid boost for my depression -.-