Self-Employment and Income Level

The following is my submission to the LACfeaturegraph Blog Contest Competition and all data and visualizations come from the LAC Equity Lab.

Different income groups across Latin America have consistently different rates of self-employment.  In most countries from 2004 to 2014, the poorest had the highest self-employment rates and middle income workers the lowest.

Across most income groups in most countries, the rate of self-employment has fallen slightly, a few points, over the last decade.  Major exceptions include Mexico, which between 2004 and 2009 saw an average of 9% growth in self-employment across income groups, with the extreme poor and poor experiencing increases of more than 11% before slight declines going into 2014.  Chile, on the other hand, saw 26 and 20% declines in self-employment among the extreme poor and poor between 2009 and 2014, and is the only country in which the middle class did not have the smallest rate of self-employment across all years.  These outliers, with further study, could prove useful to a better understanding of the connection between income level and self-employment, or even be policy case studies.

For almost all the countries, the rate difference between income groups is sizable, averaging 7-8%.  The largest gaps are between the poor and vulnerable rates- that is, the rate of self-employment decreases the most between those income levels, as opposed to between “extreme poor” vs. “poor” and “vulnerable” vs. “middle class” (with the previously mentioned exception of Chile).  The differences between classes are often much larger than year to year changes within them.  On average, the gap between poor and vulnerable self-employment was about 10 points in 2004 and almost 12 points in 2009 and 2014.

To sum up: in Latin America, more of the extreme poor are self-employed than any other income group, and the average gap between self-employment rates at different income levels has been increasing.  If a greater percentage of the poor are self-employed, and this is increasingly true, then policies specifically addressing self-employed workers and their businesses will target the worst off and contribute to their economic advancement.

Policy choices should support the poor by promoting their businesses.  It would empower those communities and give the poor the opportunity to support themselves and those communities outside social welfare programs.  Tax benefits specifically for the self-employed and their businesses, free business training for the poor, and encouraging both domestic and foreign start up and microfinancing investment may be effective policies to promote the businesses of the poorest, and in turn provide opportunities out of poverty.

Labor status- all years, minus regions

For more Latin American employment data fun:


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