Latin America’s middle class sees rapid expansion

New data suggests that Latin America’s middle class is one of the fastest growing among developing areas worldwide.

The International Labor Organization released a report last week showing that throughout the world’s developing countries, recent years had seen significant swaths of workers moving toward better jobs and wages. The largest increases in movement toward the middle class were in Latin American countries.

Data from The World Bank pertaining to middle class growth between 2000 and 2010 shows that this trend has been building for a while. Additionally, recent reports from General Electric show increased demand for electricity and clean water services in Latin American countries, services that often correlate with middle class wages.

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ILO report

The ILO analysis tracked workers in 140 developing countries worldwide in an attempt to quantify the “developing middle class.”

That class, which now represents over 40 percent of the labor force in developing countries, consists of workers who earn $4-13 per day. While that seems low by U.S. standards, in many places it’s enough to maintain middle class status. The World Bank converts those wages in developing countries to $10-50 per day in the U.S.

As explained by the ILO, it’s the first time in history that “most new jobs in the developing world are likely to be of sufficient quality to allow workers and their families to live above the equivalent of the poverty line in the United States.” In addition, over the next five years the ILO expects that the middle class will continue expanding, especially in Latin America, cutting down on the number of people in the “extremely poor” class, which includes those make less than $1.25 per day.

The organization stated that many Latin American countries were spurring upward movement by way of social protections, tackling inequality, and improving job qualities. On the other hand, the ILO noted that some advanced economies in Europe “seem to be going in the opposite direction.”

Growing demand for infrastructure

One of the indicators of a developing middle class is the demand for clean water and electricity.

Just this week, GE released numbers showing that between 2013 and 2014, its Latin American orders increased steadily. They predict that in 2014, they’ll get approximately $10 billion in orders from the region, marking 10 to 15 percent growth.

Though orders from Brazil and Mexico—historically bigger GE customers—have slowed slightly, that has been offset by clamor for services in Argentina, Peru, Colombia and Chile, according to GE Vice Chairman John Rice.

Tempering optimism

Despite positive data, ILO cautions that there’s plenty of work to be done.

Unemployment in developing countries still sits at an average of 8.5 percent, though that excludes anyone not actively seeking employment, which would greatly increase the number of jobless individuals.

On top of that, being part of the developing middle class doesn’t mean that workers will be rich or even rise above the U.S. poverty line: ILO predicts that a full 85 percent of the workforce in developing countries worldwide will still make wages below our poverty line as of 2018.

Both the ILO and World Bank suggest that to continue and improve the trend of upward mobility, developing countries—and especially those in Latin America—need to focus on policy reforms in employment, tax codes and social security.

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