How middle class are middle-income households in Latin America?

By Ángel Melguizo (OECD Development Centre) and Nora Lustig (Tulane University)

On labour informality and its causes

 One of the most important achievements of the recent period of economic expansion in Latin America has been the substantial reduction of poverty and the surge of an emerging middle class. According to World Bank estimates (Ferreira et al, 2013), in 2009 the Latin American population with a daily income of between 4 and 50 dollars a day (in parity of purchasing power) represents 68% in the region today, compared with 29% who still are moderate poverty. These ‘middle sectors’ are composed of 38% belonging to a vulnerable population, which has between 4 and 10 dollars a day, and 30% middle class, between 10 and 50 dollars. Continue reading

India’s Development Tug-of-War: Which side will win?

By Shailaja Chandra, Former Permanent Secretary of the Government of India and former Chief Secretary, Delhi; Former Executive Director, National Population Stabilisation Fund, India

For a chaotic country full of argumentative Indians many of whom are poor and uneducated, India’s continuous economic growth (not prosperity) remains a surprise. But something else is even more striking. The country has the world’s largest youngest population: 27 million babies are added each year. With such youth to bank on, India’s productivity seems to possess the best ingredients for success for decades to come.

But all great stories have another side that also must be told. Most births in India take place in some of the country’s poorest states where high fertility, low age of marriage, and a disproportionately large number of mother’s and children’s deaths present an ever-distressing picture. A group of five states have had the dubious distinction of accounting for around 45% of the country’s population, suffering and stymied from poor investments in health and education. No wonder these states were officially referred to as the BIMARU states, an acronym for their names of Bihar, Madhya Pradesh, Rajasthan, Odisha and Uttar Pradesh, which denotes much more since the word bimaru in Hindi means sickly.

For decades, these states have defied conventional experience about the process of development and held back the achievements of the rest of the country. The differences are stark: some other states in India reached replacement level of fertility as early as 1989 and 1992. Bihar, Madhya Pradesh, Rajasthan, Odisha and Uttar Pradesh, however, may need another five years to get there. The infant and maternal mortality in the progressive states is lower by half, and in some cases even 70% less, than in these laggard states.

Some 15 years ago, the Indian government decided to pay focused attention to these states, particularly in the highly neglected area of reproductive health. Around the same time, the five states were reorganised and became eight in number with the hope that being smaller would help them respond better to the process of development. They were rechristened the Empowered Action Group (EAG), and the pejorative title BIMARU was wiped out of the official vocabulary.  In 2005, the National Rural Health Mission, India’s largest-ever health programme, started pumping resources into these “high-focus states.”  Strategies included revamping rural health infrastructure, promoting health centre-based deliveries, facilitating access to emergency obstetric care, and assigning a trained health activist to make family-level contact, undertake pregnancy tracking and provide access to contraceptives.

Many hoped that with such a high dose of attention, the EAG would eventually catch up. Most, however, did not share this optimism, and not without reason. Even today, strong patriarchal attitudes continue to discriminate against women. Girls are denied access to schooling once they reach puberty. They are married off well before the legal age of 18 and subjected to a host of discriminatory barriers. The political leadership in most of these states has seldom accorded high priority to health or education; many have invested in perpetrating caste-based divisions in society. This backdrop naturally fails to inspire change.

Yet the good news is that by focusing attention on these laggard states and monitoring health indicators annually, a decline in fertility has begun and it is faster than anywhere else in the country. The increase in institutional deliveries has been impressive, and family health surveys and other research show that an increase in the age of marriage and greater use of contraception have contributed to lowering fertility. After decades of stagnation, the population growth rate in these states has registered a significant fall for the first time, dropping from 25% to 20.9%. From the point of view of women, the opportunity to have hospital-based deliveries stands out, complemented by such popular incentives as transportation to a health facility, compensation for leaving home, supplementary nutrition and contraception advice.

While these are positive trends, the push has to continue. These states will contribute 50% of India’s population within the next five years, equalling if not exceeding the combined population of the rest of India. The prospect of half of India holding back the other half is a dismal one. Only if the special efforts mounted receive commensurate political support that simultaneously encourage girls’ education and skill learning, later marriages and spacing between children will the laggard 50% eventually catch up. Happily, the process has begun.

India has been a member of the OECD Development Centre since 2001.


This article should not be reported as representing the official views of the OECD, the OECD Development Centre or of their member countries. The opinions expressed and arguments employed are those of the author.

Closing the gap on youth well-being

By Alexandre Kolev, Head of the social cohesion unit at the OECD Development Centre

Today’s world youth population ages 10 to 24, is 1.8 billion people strong and represents the largest cohort ever to be transitioning to adulthood. The vast majority of these young people – 88% – live in developing countries. These young people are the next generation. If properly nurtured, they can be engines for economic and social progress. However, if policies and programmes fail to reach them, particularly the disadvantaged youth, and give them a voice in decision-making, the youth bulge may well turn into a brake for economic and social development, leading to increasing poverty, illegal migration or failed citizenship.

While world leaders are defining the post-2015 agenda, building on the achievements of the Millennium Development Goals, the evidence suggests that a large segment of youth in both developed and developing countries continues to remain outside of mainstream economic and social life. Perspectives on Global Development 2012 “Social Cohesion in a Shifting World” discusses how social discontent worldwide is a sign of dissatisfaction with a development model that seems to put narrow aggregate income measures first and issues of inequality and widening social gaps on the backburner. More and more, the sentiment is that the fruits of growth are not being shared equally.

Gaps in initial education and skills, for example, are forcing too many young people to leave the school system at an early age, unprepared for work and life. Today, one out of four children in the world drops out of primary education. Surprisingly, no progress has been made on this over the last decade. Youth joblessness and vulnerable employment are widespread; young people are three times more likely to be unemployed than adults. Adolescent reproductive and sexual health needs are poorly addressed while new health risks have emerged. Not all youth have equal opportunities for legal mobility, and too many young people remain excluded from decision-making processes that affect their lives.

Yet, the opportunity to close the youth well-being gap is real.

Many governments demonstrate growing political will to develop comprehensive policies to better respond to the needs and aspirations of young people. In fact, nearly 2 out of 3 countries in the world today have a national youth policy. Such good intentions, however, continue to be undermined by serious challenges: fragmented responsibilities and weak implementation in national administrations, the lack of reliable knowledge and data, insufficient analytical and financial ressources, difficulties capturing the needs of disadvantaged groups, or the absence of appropriate monitoring and evaluation plans. No wonder countries are turning to development partners for strategic guidance on how to develop, implement or update youth policies that are based on rigorous empirical evidence and international good practices.

Designing and implementing an inclusive well-being agenda for youth calls for a number of actions.

First, data. A large number of young people, especially in low- and middle-income countries, are exposed to risk factors that threaten their development. These factors ultimately contribute to well-being deficits. Measuring and analysing the problems of disadvantaged youth is a prerequisite for developing evidence-based policies for youth. Doing this is an important feature of the OECD Development Centre’s work on social cohesion. Through country reviews on youth well-being, the Centre is actively engaged in an evidence-based dialogue with countries to help them identify policies and institutions that work well for youth under different economic, social and political contexts. The Centre is doing this work with the European Union.

Second, timely investments. Sharing good practices and exchanging information on what does and does not work and why have crucial roles to play in youth policy making in both poor and rich countries. Young people become more disadvantaged when risk factors in different areas multiply and reinforce each other or when risks lead to deprivation in one or more well-being dimension. And they suffer when there are few or no effective policies in place to prevent or mitigate such risks (prevention programmes) or to relieve the impact of such risks once they have occurred (second chance programmes).

Third, specific interventions. Policies that intervene at critical stages can significantly reduce the risks of youth becoming disadvantaged. A growing body of evidence on the promising impact of youth programmes comes from rigorous impact evaluations of specific interventions across a broad range of sectors. In the area of education, for instance, teaching children, particularly from disadvantaged groups, until at least secondary school appears to be one of the most effective policies to prevent low literacy among young adults. Facilitating the transition to the world of work through labour market counselling and comprehensive on-the-job training services are fostering youth economic inclusion. Effective youth health outcomes begin with maternal health and nutrition at an early age. During adolescence and early adulthood, youth-friendly health services, grounded in non-judgemental counselling and practical services, such as testing for and treating sexually transmitted diseases, access to contraceptives and information on HIV/AIDS prevention, become crucial for reproductive and sexual health. When advice on nutrition and mental health problems are included in the services, it can ensure a balanced life and improve the overall well-being of young people. The evidence also suggests that cultural and creative activities, violence prevention programmes and juvenile justice services, to name a few, can support active citizenship among the youth.

The youth bulge offers tremendous potential for development, but also large and interlinked economic and social challenges. Tapping into the evidence to design better policies is one of the best ways to minimize those challenges and maximize the potential, turning the youth bulge into a youth bonanza.

Africa, a European Priority

By Mario Pezzini, Director of the OECD Development Centre, and Romano Prodi, former president of the European Commission and former United Nations special envoy for the Sahel

How should Europe view Africa? One day the headlines are optimistic: it’s the fastest growing region of the world, with an expanding middle class. The next day, tragic news about terrorist attacks and uncontrolled pandemics paints a far more sombre picture.

It is these two sides of a single, quickly evolving reality that we must understand in order to find an answer.

Thanks to world demand for its raw materials, to its demographic dynamism and to the growing demands of its middle class, the African continent has been becoming wealthier since the start of the 2000s at an average annual rhythm of 5.1%. This is double the rate of the previous decade and three times greater than in the countries of the Organisation for Economic Co-operation and Development (OECD) over the last 10 years.

The oil-producing nations are the first to benefit from this favourable context: forty years after becoming independent, Angola is thus in a position to propose aid to its former colonial power, Portugal, which has been weakened by the economic crisis. But other countries less rich in raw materials, like Ethiopia, are also seeing their situations improve. The continent’s new fortune is largely due to the re-emergence of China over the last three decades, which has carried 83 developing countries to per capita growth rates at least two times superior to those of the OECD countries.

Still, even if we can salute Africa’s improved performance, we would be wrong to be satisfied: it needs stronger, more inclusive and more durable growth. With very low income levels as a starting point, most African economies are progressing at a rhythm that lags far behind the 30 years of 10% growth that China has just experienced. Their savings rates remain far below those of Asia’s economies at the time when they took off, and the economies of many African countries are still dependent on external financial flows.

Furthermore, growth in Africa is still creating too few jobs. On the eve of the Tunisian revolution of January 2011, all of the economic indicators were very strong; none managed to tap into the frustration of a population lusting for freedom, and especially of young, educated people without jobs, excluded from the benefits of growth. On the continent as a whole, fewer than 10% of young people have decent jobs, the rest working either in the so-called informal sector or without pay on family farms.

The continent’s institutions, first and foremost the African Union, have made the correct diagnosis: current growth is not sufficient; what Africa needs is economic and social transformation. This will not flow naturally from the current episode of growth. Public strategies and policies will be necessary to encourage economic diversification, enhance competitiveness and promote activities that are better able to create jobs and value on African soil.


Governments are gradually putting in place these strategies, in which the considerable natural resources of the continent have an essential role to play. But there is still much to be done: on average, spending on exploration for these African mining resources is 13 times less per square kilometre than in Canada, Australia or Chile.

Moreover, the exploitation of these resources and the revenues they generate should serve to trigger a diversification of African industry and exports. Here again, the challenges are considerable, notably due to the small size and fragmentation of the internal markets of numerous African countries.

We can applaud the surge in African trade – which has increased more than fourfold over 10 years – but African participation in the global trade in intermediate goods, a good indicator of the ability of countries to reap the benefits of international trade and global value chains, is barely more than 2%. Africa remains largely a provider of raw materials, which will go on to gain added value in Asia or the countries of the OECD.

Finally, nascent economic wealth does not automatically translate into well-being for the population. The establishment of stable and efficient institutions that can guarantee peace and prosperity is a long-term process. Thus public services on offer – in health, education, security, justice, etc. – do not follow growth curves, in Africa or elsewhere. An illustration is the inability of the countries affected by Ebola to respond to the health crisis – including Sierra Leone, which according to recent predictions should experience double-digit growth in 2015. It would be wrong to view this as merely the effect of poor governance and misappropriation of funds. These phenomena exist, but even when efforts are sincere, progress takes place only slowly.

The taxes collected by African states, which must finance these public services, are in many cases derived mainly from royalties paid by multinational companies in the energy, agriculture or mining sectors. As for the taxation of local business, all too often it strangles small and medium-sized enterprises, while too many ‘informal’ transactions, including large ones, go untaxed. This is not a solid foundation for a social contract between a state and its citizens.

The economic transformation should enrich African businesses, workers and consumers so that they become, through fair taxation and efficient public policies, the first providers of their own well-being.

Europe cannot be content merely to hope for these changes. It must dig into its financial, human and technological resources to adapt its capacity for co-operation to Africa’s new strategic and economic circumstances. More than financial aid, what is needed is the sharing of experience, technology and knowledge. Europe must assume its solidarity with the project of transforming the continent: Africa is far too close to us to be considered a foreign affair.

This article first appeared in Le Monde on October 14, 2014. Read it anew here in French and above in English.