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Peru Income Distribution
The distribution of income in Peru has been
exceptionally
unequal for a long time, but by some measures the degree
of
inequality apparently decreased between 1970 and 1985 (see
table 18, Appendix). The main causes of inequality have changed
as
well, in some ways for the better and in some for the
worse.
In the pre-World War II years, the dominant causes of
inequality were a very high concentration of ownership of
land
and access to capital and to education, along with a
sociopolitical structure that condemned the indigenous
rural
population to bare subsistence with little chance of
mobility. In
the post-World War II period, especially since the 1960s,
access
to education gradually has spread to rural areas, and
increased
migration to the cities has opened up new opportunities
for
people previously blocked in poverty-stricken rural
occupations.
The Agrarian Reform Law of 1969 wiped out large private
land
holdings and led in the 1980s to a vastly less unequal
distribution of individual ownership
(see the Velasco Government
, this ch.). The rise of production and export of coca
probably
also played a role in raising rural incomes in the 1980s.
More positively, if only for a brief period from 1985
to
1987, the agrarian policies of the García government
helped
stimulate agricultural markets and production, and
controls on
prices in the industrial sector served to raise greatly
the ratio
of agricultural to industrial prices. As has been noted,
the
proportion of the rural population below the poverty line
fell
from 68 percent in 1970 to 64 percent by 1986, while that
for
urban families was rising from 28 percent to 45 percent.
The
positive change for rural families was small, and the
negative
change for urban families was large, but because urban
poverty
was initially less the degree of inequality between the
rural and
urban sectors decreased.
Other changes in the post-World War II years worked in
the
opposite direction, toward greater inequality. The turn to
industrial protection raised profits of industrialists
relative
to other forms of income and also raised the prices of
their
products relative to those of the agricultural sector.
Wages for
organized workers in manufacturing rose relative to wages
of
lower-income rural and unorganized labor, as well. The
pressure
of a rapidly growing labor force against the society's
limited
openings for productive employment acted in general to
keep
downward pressure on labor income relative to property
income.
That imbalance worsened in the 1980s when the chaotic
conditions
of the economy as a whole made employment conditions more
difficult.
During the period of exceptional economic growth from
1961 to
1972, the incomes of the poorest 60 percent of Peruvian
families
increased at a rate of 2.3 percent a year, just matching
the rate
of growth of national income. As growth weakened from the
mid1970s , both average real wages and minimum real wages
began a
prolonged decline, and total wages fell relative to
incomes of
property owners. But earnings of the lowest income groups
in
agriculture went up, slightly reducing the percentage of
rural
families falling below the poverty line. A World Bank
study
concludes that these changes reduced the degree of
inequality
between 1972 and 1985: the share of the poorest 60 percent
increased from 18 to 27 percent of total income.
An alternative measure of inequality, the Gini index,
shows a
similar improvement. The higher the coefficient, the
higher the
degree of inequality. In the early 1960s and again in the
early
1970s, Peru had either the highest or the second highest
Gini
coefficient for all the Latin American countries measured,
at
0.61 for 1961 and 0.59 for 1972. By 1985 it had come down
to
0.47, far below Brazil and only slightly higher than
Colombia.
These countries all have high inequality by world
standards, but
in 1985 Peru no longer stood out as the worst.
The latest estimate available, for 1988, suggests that
inequality had increased slightly compared with 1985, with
the
Gini coefficient rising from 0.47 to 0.50. Although not a
drastic
change in itself, its connotations are worsened by the
simultaneous rise in poverty. The latter may well be
considered
to be the more important matter: it would not mean much to
reduce
inequality if that just meant more equal sharing of
greater
poverty. The one clearly positive combination of
indicators is
that for the period 1980-85 the incidence of poverty fell,
if
only slightly, for the rural households who have always
constituted the majority of Peru's poor.
Data as of September 1992
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