Thanks to rising commodity prices and the economy recovering from the pandemic, income and expenditure in Latin America are set to increase significantly over 2020-2040. The income gap between rural and urban households is expected to shrink due to increasing FDI flows dedicated to rural development; however, many challenges remain, including poor infrastructure, as well as limited labour market opportunities in rural areas. Income inequality will remain the highest globally.
Total disposable income is set to rise by nearly 80% in real terms over 2020-2040, as the regional economy recovers from the impact of COVID-19. However, average consumer income will remain among the lowest globally, due to the prevalence of sectors with low profitability, and a large informal labour makret.
Owing to rising unemployment and elevated poverty, seven out of 17 Latin American countries are expected to see their lowest earners (social class E) expand at the fastest pace. Most of the other countries are, however, set to witness the middle class grow most rapidly.
Even though the rising middle class is expected to help mitigate inequality in Latin America to some extent, the lowest income band is set to remain dominant, indicating that substantial income inequality will persist over the forecast period. As a result, companies will need to tailor their approaches to an increasingly polarised consumer marker.
Despite large-scale efforts in women’s empowerment from Latin American governments and businesses, the gender income gap is expected to increase over 2020-2040. Labour market informality, the negative affects of the pandemic, and persisting cultural stereotypes will continue to hamper female incomes.
Even though the number of single-person households is growing rapidly, families and extended households are expected to remain the most prevalent type by 2040.
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