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Poverty Status in Montevideo (Uruguay) in the 1980s

Although there were external shocks and changes in macroeconomic and income policies, the poverty indexes did not register important variations in Uruguay (1980-1990). But the fluctuations in average income suggest that the levels of absolute poverty could have been affected. Anyway, the decomposition of the indexes using a relative poverty line permits to measure the short-term differences of impacts among occupations during the decade. Thus, in spite of the fact that the regional environment affects all the economy, the informal sector appears to be particularly sensitive to its changes but in the opposite direction. When relative prices in the region induce a high demand for Uruguayan goods, smuggling decreases and so self-employment without establishment activity. As formal sector has the most important weight in national income, the positive external shocks allowed a decline of global poverty indexes. But the adjustment to the deterioration of regional environment in 1987-88 affected public and private employees situation. Meanwhile changes for public employees depended on the timing of fiscal adjustments, swings on private sector agents depended on their bargaining strengths and the wage policy. With high poverty indexes, the contribution to poverty of self-employed workers without establishment grew up during the decade, as a consequence of a structural trend of both increasing participation and poverty of informal sector. On the other hand, other structural changes characterize those whose main source of income comes from the public sector. Given the financial problems of the social security system and the link between public wages and pensions adjustments, another expected trend for the future is an increase of poverty of public employees. The decomposition of poverty indexes also permits a study of the structural links between head of household characteristics and poverty. The relation between education and poverty status shows that low schooling of the household head is associated with low household income. A trend of increasing schooling in population is changing the structure of household head education. A more homogenous labor force suggests that the contribution of higher educated to poverty could increase in the future. On the other hand, the different quality between private and public education could be useful to explain poverty status in the future: the restrain of investment in public education will affect its quality and therefore the education of the poorest, who are outside the private system.