Public Disclosure Authorized Improving lives and livelihoods Poverty and Equity Assessment for Public Disclosure Authorized El Salvador 2024 Public Disclosure Authorized Public Disclosure Authorized A verified reproducibility package for this publication is available at http://reproducibility.worldbank.org, click here for direct access. 2 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 © 2024, International Bank for Reconstruction and Development World Bank 1818 H Street N.W. Washington D.C. 20433, United States of America Telephone: (202) 473-1000 Internet: www.worldbank.org In Spanish: www.bancomundial.org Email: feedback@worldbank.org Rights Reserved This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this publication. Rights and Permissions. The International Bank for Reconstruction and Development / The World Bank encourages the dissemination of its work and will normally grant permission to reproduce portions of this work promptly, provided the sources are acknowledged. Concept and Cover Design Luis Chumpitazi Llave - Lingo Interior Design and Typesetting Luis Chumpitazi Llave, Meyci Laurel - Lingo Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 A verified reproducibility package for this publication is available at http://reproducibility.worldbank.org, click here for direct access. 4 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 TABLE OF CONTENTS Gratitude 7 Acronyms 8 Executive summary 10 Chapter 1: Dimensions of poverty and equity in El Salvador 16 1.1 Two decades of poverty reduction, and new tendencies 1.2 The ticket out of poverty and hereditary opportunities 1.3 Poverty from a multidimensional perspective Chapter 2: Without work there is no prosperity 34 2.1 The importance and precariousness of labor 2.2 Low productivity, weak labor markets 2.3 The challenge with human capital for better jobs Chapter 3: Beyond work, what do Salvadorans live on? 46 3.1 The importance of private transfers on households’ budgets 3.2 Remittances and domestic transfers: a relief with a hidden side 3.3 Social protection with limited spending and targeting Chapter 4: Poverty and climate change 60 4.1 The poor as the most vulnerable 4.2 The poorest’ tables are lacking food and water 4.3 Improving the households’ resilience to natural disasters Chapter 5: How to improve well-being for all? 70 5.1 Income Generation 5.2 Access to quality services 5.3 Social protection to mitigate shocks and build resilience Appendix. Comparing international and official poverty in El Salvador 82 References 86 Chapter 1 5 Dimensions of poverty and equity in El Salvador Figures, Tables and Boxes Figure 1. Structure of policy options. 13 Figure 2. Trends in poverty headcount and official poverty lines, 2000-2023. 19 Figure 3. GDP per capita (constant 2021 PPP) and poverty US 6.85 2017 PPP evolution, 2000-2022. 20 Figure 4. Growth-Distribution decomposition of official poverty changes (2000-2023). 21 Figure 5. Growth incidence curve, 2000, 2009, 2019 & 2023. 22 Figure 6. Sources of monthly income (PPP 2017) for poorest households, 2019-2023. 23-24 Figure 7. Gender gap in official poverty, by age, 2000 and 2023. 25 Figure 8. Geographic distribution of poverty by municipality, 2019. 26 Figure 9. Inequality evolution. Latin America, 2000-2023 27 Figure 10. Structure of the Poverty Assessment for El Salvador 2024. 33 Figure 11. Sources of monthly household income, by area of residence and poverty status, 2023. 37 Figure 12. Characterization of the working-age population (thousands), 2023. 38 Figure 13. Labor stability, adequacy, and security along the income distribution, 2023. 39 Figure 14. Schooling premium by type of employment, 2009, 2019 and 2023. 44 Figure 15. Sources of non-labor monthly household income by area of residence and poverty status, 2023. 50 Figure 16. Public transfers as percentage of households’ income, 2000-2023. 51 Figure 17. Access to sources of non-labor income, by area of residence and poverty status, 2023. 52 Figure 18. Sources of non-labor monthly household income in 53 households that receive remittances, by poverty status, 2023. Figure 19. Demographics and migration in El Salvador 54 Figure 20. Sources of non-labor monthly household income in households that receive domestic transfers in El Salvador, by poverty status, 2023. 55 Figure 21. Extreme poverty in counterfactual scenarios with and without private transfers, 2023. 56 Figure 22. Social Spending as a Percentage of GDP in El Salvador and LAC countries, 2000-2021. 57 Figure 23. Vulnerability to poverty and number of disasters. 64 Figure 24. Extreme poverty in counterfactual scenarios in front of a severe climate shock, 2023. 65 Figure 25. Percentage of food insecurity by region, 2023. 68 Table 1. Multidimensional poverty: deprivations and gaps (2023). 30 Table 2. Lack of income for basic needs and relational deprivations, 2023. 32 Box 1 . The Dry Corridor in El Salvador 69 7 Acknowledgments The Poverty Assessment for El Salvador 2024 has been prepared by a team led by Hugo Ñopo Aguilar. The core team comprised Sofia Hidalgo Berrios and Gonzalo Aguilar Riva, with substantive contributions by María Cárdenas Mendoza, José Andrés Oliva, Ana Palacios Taboada, and Adriana Velásquez Morales. Felipe Balcázar Salazar, Cesar del Pozo Loayza, Wilson Jimenez, and Rodrigo Surraco Williman contributed to the preparation of background notes. The data support from Oficina Nacional de Estadística y Censos del Banco Central de Reserva (ONEC/BCR) is specially acknowledged. This work was carried out at the request and under the guidance of the World Bank leadership. The team is grateful for the support and guidance provided throughout the preparation of the report by Carlos Rodríguez Castelán (Practice Manager, ELCPV), Carine Clert (Country Manager for El Salvador and Costa Rica), Michel Kerf (Country Director, LCC2C), Oscar Calvo González (Regional Director, ELCDR), Pedro Luis Rodríguez (Lead Country Economist, ELCDR), and Luis-Felipe López-Calva (Global Director, EPVDR). The team is grateful for the valuable comments provided by the peer reviewers Aylin Isik-Dikmelik, Truman Packard, and Mónica Robayo. Detailed feedback, suggestions, and comments were received from Nancy Banegas, Miguel Castro, Ivette Contreras, Jaime Cordero, María Davalos, Malin Ed, Jose Larios, Daniela Maquera, Fausto Patiño, Viviana Perego, Lourdes Rodríguez, Carolina Rovira, Jaime Saavedra, and María Micaela Sviatschi. The team is also thankful to representatives from the various other government ministries and agencies that participated in the consultative process and to representatives from civil society, from various diplomatic services accredited in El Salvador, and from technical officials across the UN System in the country. The team is also grateful to representatives from other multilateral partners as well as academic specialists who also participated in different instances as part of the consultative process which has contributed to enrich this report. The team also counted on the invaluable support of Ana Leguizamo Baquero, Desirée Gonzalez, Cornelia Mirela Catuneanu and Andrea Ayala. 8 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Acronyms AI Artificial Intelligence ASP Adaptive Social Protection CELADE Latin American and Caribbean Demographic Centre CSA Climate-Smart Agriculture CGS Credit Guarantee Schemes CSR Comunidades Solidarias Rurales CSU Comunidades Solidarias Urbanas CONAMYPE Comisión Nacional de la Micro y Pequeña Empresa (National Commission for Micro and Small Enterprises) CUBO Urban Centers for Well-Being and Opportunities DIGESTYC Dirección General de Estadística y Censos (General Office of Statistics and Census) ECLAC Economic Commission for Latin America and the Caribbean EHPM Multipurpose Household Survey ELCSA Latin American and Caribbean Food Security Scale EWS Early Warning System FAO Food and Agriculture Organization FUSADES Fundación Salvadoreña para el Desarrollo Económico y Social (Salvadoran Foundation for Economic and Social Development) GDP Gross Domestic Product GHG Greenhouse Gas GIC Growth Incidence Curve GNI Gross National Income ILO International Labour Organization IOM International Organization for Migration ISSS Salvadorean Institute of Social Security IVACC Vulnerability Index to Climate Shocks LAPOP Latin American Public Opinion Project 9 LPG Liquefied Petroleum Gas MiCRO Microinsurance Catastrophe Risk Organisation MINSAL Ministry of Health MSME Micro, Small, and Medium Enterprises NDC Nationally Determined Contributions ONEC/BCR Oficina Nacional de Estadística y Censos del Banco Central de Reserva (National Statistics and Census Office) OCDE Organisation for Economic Co-operation and Development OEC Observatory of Economic Complexity PA Paquete Agrícola PBU Pensión Básica Universal PISA Programme for International Student Assessment PPP Purchasing power parity RUP Registro Único de Participantes (Unified Registry of Participants) SDG Sustainable Development Goal SEDLAC Socio-Economic Database for Latin America and the Caribbean (CEDLAS and World Bank) SIUBEN Single Beneficiary System SPSU Sistema de Protección Social Universal (Universal Social Protection System) UNDP United Nations Development Programme UNFPA United Nations Population Fund UNICEF United Nations Children’s Fund TVET Technical and Vocational Education and Training WFP World Food Programme 10 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Executive summary El Salvador faces an important opportunity whose incomes do not cover the cost of a basic for improving lives and livelihoods. The consumption basket (US$1.5 per person per recent commendable gains in reducing violence day in rural areas and US$2.3 in urban areas). and some improvements in the macroeconomic Furthermore, the income of the poorest has outlook that made the country reach the mark shrunk since 2019, and has not yet recovered. for being classified by the World Bank as an Poverty disproportionately affects children, upper-middle-income country signal a new limiting their future development, as well as opportunity. Building on the success story of women in their prime age, and in El Salvador it also poverty reduction during the past two decades, presents high territorial variation. This underlines El Salvador can improve livelihoods, reversing the need to address poverty considering the the recent poverty trends that appeared after the different segments of the population and pandemic. For this, it is necessary to strengthen where they are located. Insufficient income for the macro and business environment policy a segment of the population is associated with framework to attract larger investments that deprivation under a set of well-being dimensions would allow firms to create more and better (such as overcrowding and access to quality jobs. Along with this, it is essential to enhance basic services like water and sanitation) and the functioning of the labor markets and enable a lack of human capital development, which the poor to access quality jobs. Well-articulated constrain the country’s growth prospects. Such policies to foster rural development and increase income and material deprivation also affect how agricultural productivity will also be key. Bearing people interact with others, limiting the much- in mind existing fiscal capacity considerations, needed trust and reciprocity that builds a society. poverty alleviation also requires setting up Tackling poverty is thus a fundamental condition fiscal space for scaling up a well-targeted social to establish long-lasting peace and well-being protection program and enhancing key services and the construction of a more cohesive and for the urban and rural poor, such as housing, prosperous El Salvador. water, sanitation, and food security. Beginning now, but with a medium to long term outlook, it While there is recent stagnation in the is fundamental to continue working to improve reduction of monetary poverty, there have education outcomes for all. Moreover, it will be been improvements in non-monetary key to focus on skills development along the dimensions of poverty. The current panorama life cycle, beyond attendance and graduation in El Salvador, as in many of the small to medium targets. economies in Latin America, is one of stagnation in the goal of poverty elimination. Official figures El Salvador substantially reduced poverty of monetary poverty, both total and extreme, over the past two decades, although extreme have continued to rise and remain still above poverty remains a challenge. Between 2000 pre pandemic figures. Similarly, in the country, and 2023, official poverty rates dropped 14 the likelihood of escaping poverty has been percentage points (4 in relative poverty and the decreasing, while the likelihood of falling into other 10 in extreme poverty). However, in 2023, El poverty has been increasingly since 2018. Yet, Salvador had 600,000 people living in extremely at the same time other measures such as the poor households (9.3 percent of the population), official figures of multidimensional poverty Executive summary 11 and international poverty figures computed improvements in education quality throughout and compiled by the World Bank depict a more the lifecycle is key. The provision of childcare nuanced situation. Furthermore, beyond the and early childhood education can support not pandemic, a recent positive development is the only human capital accumulation, but also, when sharp reduction of gang related criminal activity. appropriately paired with the development of a It is early to assess its net impacts on economic regulatory framework that promotes equitable activity and poverty figures, but it opens an care responsibilities and the fostering of unprecedented opportunity for El Salvador. corresponding social norms, support greater Achieving the goal of eradicating extreme poverty labor market participation among women. and growing the middle classes will require inclusive growth and improvements in the labor One in four Salvadorans lives in households market. Non-poor households obtain 85 percent receiving remittances and one in five lives of their income from labor sources, while such in households receiving domestic transfers, proportion for extremely poor households is 75 which have a substantial role in poverty percent. Increasing labor income would thus be reduction. Although in most countries non- the main instrument for improving Salvadorans’ labor income for the poor is primarily public well-being. Nonetheless, non-labor income plays transfers, in El Salvador things are different. an important role in people’s well-being as well. A Public transfers are negligible (for those in the comprehensive poverty alleviation strategy must lowest per capita income quintile, they are less consider both. than 1 percent of total household income, while they are 8 percent in Central America and 13 Augmenting labor income requires improving percent in Latin America). Most non-labor income the dynamics of the labor market, including in El Salvador corresponds to international and improvements in its fundamental input: domestic private transfers. In this way, El Salvador human capital. Salvadoran labor markets are counts on a solidarity network that substantially characterized by high female inactivity, high contributes to improve households’ well-being. informality, and high underemployment—all While this happens in many economies around reflecting a problem of low productivity, sectoral the globe, in El Salvador the magnitude is composition of output and (dis)incentives to noteworthy as 24 percent of Salvadorans live formal work. Good quality jobs (stable, adequate, in households receiving remittances and 20 and secure) are not only scarce but also almost percent live in households receiving domestic non-existent among the poor. This scarcity transfers. On average, poor households receive reflects problems with low human capital around US$100 per month in remittances, accumulation among the poor and a long-term while non-poor households receive more than drop in the payout returns from schooling in US$200. Money transferred domestically is also the labor markets. A comprehensive solution sizable as, on average, these transfers are around for the labor market challenges requires: both half of what is received through remittances. In short-term and long-term interventions across all, the contribution of remittances to poverty different sectors, improving on productivity, job reduction is substantial. A sudden absence of creation, access to quality jobs (especially for these transfers could double extreme poverty in the poor), and human capital accumulation. On urban and rural areas, while rates for the elderly the latter point, beyond investments that ensure in rural areas would triple. sound early childhood development, prioritizing 12 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Salvadoran households are exposed to data. Additionally, digitalizing payment systems aggregate shocks, frequently climate- is essential for the swift and effective delivery related, that affect household welfare of emergency transfers, ensuring support and impact poverty reduction efforts. El reaches those in need more efficiently. Insurance Salvador is prone to climate shocks and natural should also be available at the macro and micro hazards. Storms, floods, droughts (particularly levels, aligned to fiscal capabilities and tied to given its location as part of the Central America personal policies like household and agricultural Dry Corridor), earthquakes, landslides, sea insurance and government-backed schemes level rises, and volcanoes pose important like catastrophe bonds and climate social safety risks that will become more prominent with nets. These products can provide immediate climate change. These events have cost the financial relief in the event of a disaster, reducing country approximately 0.75 percent of gross the time and economic strain associated with domestic product (GDP) per year during the the recovery process. past two decades, and this figure is expected to rise due to the increase in the number and Modern social protection systems with severity of events. Additionally, disaster losses better information, effective spending and fall disproportionately on the shoulders of poor robust support programs can play a key role households. Vulnerable (non-poor) households in improving human capital outcomes and may be pushed into poverty due to their lack of poverty alleviation. In its recent history, El capacity to prepare for, cope with, and adapt to Salvador has coupled low spending on the poor disasters. Natural disasters also disrupt the food with the use of energy and water subsidies to supply chain, either by eroding locally produced alleviate households’ budgets. While relatively goods or limiting the transportation of imported effective in directly reaching the budgets of ones. This affects prices and the availability of most households, their targeting could be basic inputs for the Salvadoran table. A severe improved gradually given that a large share of climate-related shock in the country could have the subsidies currently benefit the non-poor. similar impacts as those of a sudden absence of These expenditures could be redirected to help remittances, doubling extreme poverty. expand targeted transfers that build resilience for the poor, while protecting human capital, In this context, adaptive, well-designed and and improve poverty reduction. This would targeted social protection and insurance contribute not only to poverty reduction, under mechanisms, present an opportunity certain scenarios, but could also contribute for poverty alleviation and protecting to fiscal savings in the short run. Improving the vulnerable against the next shocks. social spending requires detailed information to Adaptive Social Protection (ASP) offers a improve targeting and careful analysis to identify valuable framework for reducing vulnerability the efficiency gains. This will require an active use by enhancing resilience to shocks. ASP helps of a strengthened social registry of Salvadoran households prepare, cope, and adapt to crises, households, that can enable integrating data preventing poverty traps through shock- from statistical and administrative sources, responsive transfers and improved efficiency with periodical updates. This improved social in the social protection delivery chain allowing registry could then inform policy makers about for rapid, flexible responses. El Salvador should the multidimensional needs across the territory, begin with a focus on enhancing data and to best focus scarce resources where they modernizing its information systems by investing are needed most. Furthermore, various social in its social registry and integrating it with risk programs would have to be redesigned to Executive summary 13 increase both effectiveness and efficiency and reduction: jobs, services, and social protection, improve their reach, magnitude and coverage. with a cross-cutting set of primary conditions Successful reforms to this effect would require that articulates this structure. a broad communication and consensus building engagement to facilitate societal buy-in where Enabling general conditions for combating all citizens feel included as part of the reform poverty. These conditions include the need for a process. national strategy against poverty with ambitious but achievable goals in the short, medium, and This report proposes an agenda for building long run. These goals need to be appropriately on gains to re-accelerate poverty reduction disseminated such that they become a shared among Salvadorans. The last World Bank Poverty national priority. The three pillars of actions Assessment for El Salvador, from 2015, proposed are interdependent and the success on any of two key policy recommendations: (a) effective them depends on the success on the others. pro-poor spending and (b) reduction of crime Thus, as outlined in chapter 5, consolidating the and violence through better access to jobs and actions of a national strategy is a step forward in education. Nine years later, the authorities have combatting poverty. This effort requires a clear managed to achieve a substantial reduction in mandate, an effective governance structure crime and violence and have indicated an intent and the necessary tools and instruments for its to build on such progress to establish a path implementation, monitoring and evaluation toward an El Salvador where shared prosperity is achievable. In this report, we propose a three- pillar structure to address poverty and inequality FIGURE 1. STRUCTURE OF POLICY OPTIONS 1 Enabling general conditions National strategy, with Enabling governance structure Stable Inclusion and short- and long-term objectives. and management tools for macro-fiscal Multidimensional approach effective implementation conditions gender equity 2 3 4 Income Generation Quality Services Social Protection More and better jobs for all Life-cycle approach Improving management, (encourage investment) Education, training, and coverage and targeting Digital skills training early childhood Adaptive and along the life Fostering rural incomes development cycle (agricultural and Accessible health coverage Climate risk prevention non-agricultural) Long term strategies Mitigating remittances Tailor-made environmental against criminality fluctuations and agricultural strategies Financial inclusion Use of insurance instruments Protecting vulnerable populations 14 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 First, more and better jobs. Building on the goal of improving learning and skills development commendable crime reduction efforts, it is (beyond an emphasis on enrollment and necessary to attract investments to create more attendance statistics). Investments on social and better jobs. As has been clearly established, integration and opportunities for youth should labor income generation constitutes the primary complement the strategies to be developed means to escape poverty, but quality jobs in the educational sector. The government is (stable, adequate, and secure) are elusive for the already working to develop and implement policy poor. An appropriate strategy against poverty initiatives in these areas. It is the coordination should ensure enhanced access for the poor of these initiatives across targeted groups and to those better jobs. Such a strategy needs territories however, that can contributeto make different approaches in rural and urban areas, a larger impact. These policies, when paired especially considering that labor incomes of with an effective social protection system will the rural poor have dropped the most since the contribute to the economic inclusion of the poor. pandemic. Improving labor income in rural areas requires interventions to improve agricultural Third, adaptive and targeted social productivity and the infrastructure that connects protection. This is necessary to mitigate rural households to the markets. Digital and shocks, build resilience, and ensure sustainable green strategies to face the emerging economic avenues to escape from poverty that are less challenges for households more broadly should dependent on external factors. The strategy will also be prioritized. need to focus on enhancing the adaptiveness of the current social protection system ensuring Second, improve access and quality of key that coverage can be scaled up or down as services for the poor. This entails setting needed locally. It must also focus on better goals with different time horizons: in the short targeting, through investment in improving the run, attending urgent needs including housing social registry, which would provide the basis improvements (tackling overcrowding) and food for ensuring resources are directed to those security; for the medium term, investments for most in need. This is particularly relevant taking the current generation such as education from into consideration the current context of fiscal the early years and training; and in the long run, restraint. Access to quality health services and investments for the forthcoming generation such insurance also need strengthening, with an as a battery of childcare services. Strengthening integrated framework linking social protection the education system requires investments in to labor productivity, avoiding disincentives teacher upskilling and infrastructure with a clear to labor formality. Chapter 1 17 1 Dimensions of poverty and equity in El Salvador CHAPTER Dimensions of poverty and equity in El Salvador 18 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Poverty in El Salvador has abated since 2000 but in 2023 has shown worrisome signs, including persistently high child poverty, new pockets of poverty among single women, and large geographical pockets of population in need. A large elasticity of poverty to growth has helped poverty reduction, even under a relatively weak long-term pace of growth. However, through 2019–23, the income of the poorest 10 percent of the population living in urban areas, and the poorest 20 percent in rural areas has fallen. For these poorest households, labor sources of income have fallen since 2019, and are still to recover. Through our analysis period, fiscal redistribution has slightly contributed to reducing poverty. Jobs, and especially formal jobs, are the ticket out of poverty in a society where access to those opportunities are strongly hereditary. Education, a source of mobility elsewhere in the world, does not seem to have been effective in sustainably lifting new generations out of poverty. Not surprisingly, the most salient dimensions of deprivation are education, employment, together with housing, food insecurity, and malnutrition. Chapter 1 19 Dimensions of poverty and equity in El Salvador 1.1 Two decades of poverty reduction, and new trends In the last two decades, El Salvador has made the same period, poverty reduction in rural areas outstanding progress in poverty alleviation. was higher than in urban areas (23 percentage According to official figures, in 2023, 1.9 million points higher). The departments with the largest people live in poor households (30.3 percent reductions were Cabañas, Chalatenango and of the total population) and 0.6 million of them Ahuachapán (around 30 percentage points); are in extremely poor households. In 2000, however, in these departments the poverty rate 2.7 million Salvadorans were poor (1.1 million of is still higher than the national rate. Poverty them extremely poor). Between 2000 and 2023, among children and older adults also showed poverty rates dropped 14 percentage points (4 in the largest reductions1. relative poverty and 10 in extreme poverty). During FIGURE 2. TRENDS IN POVERTY HEADCOUNT AND OFFICIAL POVERTY LINES, 2000–2023 A) Number of Salvadorans living in poverty B) Poverty rates 3.5 50 43.5 44.7 45 3.0 40 2.5 35 30.3 Percentage (%) 28.6 26.8 2.0 30 25.5 Millions 1.5 21.1 1.8 25 21.3 1.5 1.3 1.3 20 19.2 14.8 1.0 15 9.3 0.9 10 5.5 0.5 1.1 0.6 5 0.0 0.3 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Relative poverty (between 1 and 2 basic consumption baskets) Total poverty (aggregate of extreme and relative poverty) Extreme poverty (1 basic consumption basket) Relative poverty (between 1 and 2 basic consumption baskets) Extreme poverty (1 basic consumption basket) Source: EHPM (2023). _ Source: EHPM (2023). 20 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 A comparison with countries with similar signal about the links between macroeconomics development status reveals that there and poverty.2 Nonetheless, Salvadoran peers is room for improvement on poverty from Latin America (A) and the rest of the world alleviation. For cross-country comparisons, (B) show that further improvements in poverty beyond the official poverty statistics, we also use reduction, building on previous gains, are international measures of poverty computed by possible. Figure 3 also illustrates the high growth the World Bank. In the appendix we discuss a elasticity of poverty that El Salvador has shown methodological comparison of both. In 2023, the during the last two decades. With low but stable poverty rate in El Salvador is lower than that of its growth the country managed crucial poverty Latin American peers with similar gross domestic reduction. It will be important to maintain this product (GDP) per capita. Only Bolivia shows a strength of the country. combination of a lower poverty rate and lower GDP per capita than El Salvador. This is a good FIGURE 3. GDP PER CAPITA (CONSTANT 2021 PPP) AND POVERTY US$6.85 2017 PPP EVOLUTION, 2000–2022 A) Latin America and the Caribbean B) Rest of the world 90 90 2000 80 80 2000 Poverty (US$6.85 2017 PPP) Poverty (US$6.85 2017 PPP) 70 70 60 2000 60 50 2000 2000 50 2000 40 40 2022 30 30 2006 2012 2022 2000 2022 20 20 2022 10 10 2021 0 0 2021 2020 5 10 15 20 5 10 15 20 25 30 GDP per capita (thousands, US 2021 PPP) GDP per capita (thousands, US 2021 PPP) Dominican Republic Bulgaria Ecuador Bielorrusia Colombia Serbia El Salvador El Salvador Source: World Bank Databank (2024). Note: The peer countries have been chosen such that their GDP per capita in 2000 is similar to the one for El Salvador in 2022. Serbia and Bulgaria have poverty data only since 2012 and 2006. PPP: Purchasing Power Parity. _ 2. Aguilar et al. (2024). Chapter 1 21 Dimensions of poverty and equity in El Salvador During the past two decades, three periods While economic growth has boosted poverty stand out regarding poverty trends: a reduction, redistribution has not contributed moderate reduction, a more notable drop, much. Economic growth, moderate but stable, and a subsequent rise. In the trajectory of has been the main driver of poverty reduction poverty reduction during the past two decades in the past two decades. This has been the case in El Salvador, there are three distinctive periods: even before the period of analysis where El 2000–2009, 2009–2019, and 2019–2023. In the Salvador stands out as a country with higher- first one, which ended around the global financial than-expected growth elasticity of poverty.4 crisis of 2008, the progress in poverty reduction The role of economic growth, nonetheless, was moderate, mainly due to the decrease has evolved over time. In 2000–2009, growth in extreme poverty.3 The decade 2009–2019 was markedly pro-poor, even considering that shows a marked trend of poverty reduction of 17 redistribution counteracted poverty reduction. percentage points (extreme poverty decreased This role has continued, although less strongly, by 9 percentage points). In addition, rapid in 2009–2019 and 2019–2023. That is, the role for recovery processes were observed in the face income distribution is growing, especially after of setbacks linked to variations in the cost of the pandemic. The observed pattern highlights living and climate disasters, despite a moderate the need to simultaneously address the drivers GDP per capita growth rate of 1.7 percent. After for both income inequality and economic growth. 2019 extreme poverty increased, and after 2021 relative poverty also started to increase. At present, both the total and extreme poverty rates remain above pre-pandemic numbers despite the economic growth.5 FIGURE 4. GROWTH-DISTRIBUTION DECOMPOSITION OF OFFICIAL POVERTY CHANGES (2000–2023) A) Urban B) Rural 50 50 (percentage points) (percentage points) Change in poverty Change in poverty 30 30 10 10 -10 -10 -30 -30 -50 -50 2000-2009 2009-2019 2019-2023 2000-2009 2009-2019 2019-2023 Growth Distribution Total Growth Distribution Total Source: Aguilar et al. (2024). _ 3. Salvadoran Foundation for Economic and Social Development (FUSADES, 2009). 4. Marques (2004). 5. Aguilar et al. (2024). 22 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Before the pandemic, El Salvador showed percent in real terms. Between 2019 and 2023, higher income growth among the poor than the minimum wage had been adjusted only once the rich, but this has changed since then. (in 2021) and by 2023 grew at an average annual Growth incidence curves (GICs) are useful to rate of 1 percent in real terms. Second, between understand income changes along the income 2000 and 2019, the average real income from distribution. GICs across the three periods remittances grew at an average annual rate reveal higher income instability among lower of 4.5 percent in households in the lowest income groups. The first period (2000–2009) income quintile and 1.4 percent in the others, was clearly pro-poor, the second (2009–2019) but since then it fell at an annual average rate shows benefits for all income percentiles, and of 4.3 percent while for the others decreased to after the pandemic (2019–2023) a different 1.6 percent. Third, the social protection system pattern emerged as the incomes of those with has contracted between 2009 and 2019. The the lowest incomes dropped. There are three percentage of poor households benefiting from factors associated with this pattern: minimum social programs decreased from 8 percent to 3.7 wages, remittances, and social protection. First, percent and the amount of the average public during 2009–2019 minimum wages increased transfer grew from US$15 to US$30, but by 2023 five times, with the most common minimum both had decreased to 1.6 percent and US$19, wage growing at an average annual rate of 2.7 respectively. FIGURE 5. GROWTH INCIDENCE CURVE, 2000, 2009, 2019, AND 2023 A) Urban B) Rural 15 15 10 10 Per capita household Per capita household income growth (%) income growth (%) 5 5 0 0 10 20 30 40 50 60 70 80 90 10 20 30 40 50 60 70 80 90 -5 -5 -10 -10 -15 -15 2000-2009 2009-2019 2019-2023 2000-2009 2009-2019 2019-2023 Source: Aguilar et al. (2024). Chapter 1 23 Dimensions of poverty and equity in El Salvador In the aftermath of COVID-19, the poorest for households in the lowest 15 percentiles of households experienced marked declines per capita income and in urban areas it fell by in both labor and non-labor income, with around US$90 for households in the lowest 12 rural labor income being the hardest hit. For percentiles of per capita income. Non-labor households in the lowest percentiles of the per income fell by around US$45 in rural areas for capita income (we have chosen to show only households in the lowest 8 per capita income the first 30 percentiles, the poor population), percentiles. In urban areas, households’ non- both labor and non-labor incomes fell after 2019 labor income in the lowest 5 percentiles and have yet to recover in real terms. Labor dropped by US$40. For the upper percentiles, in income, which represents the largest amount of line with the GIC depicted above, income did not household income, has also shown the biggest deteriorate as much.6 drops. In rural areas it fell by around US$100 FIGURE 6. SOURCES OF REAL MONTHLY INCOME (PPP 2017) FOR POOREST HOUSEHOLDS, 2019–2023 A) Labor income Urban Rural 800 800 USD (PPP 2017) USD (PPP 2017) 600 600 400 400 200 200 0 0 5 10 15 20 25 30 5 10 15 20 25 30 Percentiles of household per capita income Percentiles of household per capita income 2019 2021 2022 2023 2019 2021 2022 2023 Source: EHPM (2023). _ 6. Aguilar et al. (2024). 24 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 B) Non-labor income Urban Rural 800 800 USD (PPA 2017) USD (PPA 2017) 600 600 400 400 200 200 0 0 5 10 15 20 25 30 5 10 15 20 25 30 Percentiles of household per capita income Percentiles of household per capita income 2019 2021 2022 2023 2019 2021 2022 2023 Source: EHPM (2023). The decline in household per capita real labor domestic work is not seen in any other quintile income of the poorest between 2019 and of the per capita income distribution. Second, in 2023 is linked to sectoral and demographic the years after the pandemic households have changes. Although it is hard to sharply changed in the country, but those in the poorest determine the causes of the real income drop for income quintile have changed more. There are the poor after the pandemic, with the available two important changes to highlight: a reduction data we identify two associated factors: (a) a shift in the number of household members and a in sectoral labor allocation and (b) a change in reduction in the number of household members household composition. First, among households who work. Both reductions have been more in the poorest quintile of per capita household pronounced among households in the poorest income, there has been a shift from agricultural income quintile in such a way that the earnings jobs to those in domestic service, with a capacity of the households deteriorated, both subsequent income drop. In 2023, 19 percent in aggregate and per capita terms.7 In addition of quintile 1 workers are in domestic service, 7 inflation eroded the purchasing power of the poor. percentage points higher than in 2019, while the During these four years the general consumer agricultural sector lost 9 percentage points in the price index increased by 15 percent, but the food same period. With such an inflow of domestic price index rose by 26 percent and the basic workers, average monthly labor earnings for food index by 30 percent. As those in the poorest workers within the first income quintile and within segments of the income distribution spend most this economic sector dropped 42 percent. Labor of their budget on food, the inflation they faced earnings in agriculture, in turn, increased slightly caused their purchasing power to drop. (5 percent). Such a labor shift from agricultural to _ 7. Aguilar et al. (2024). Chapter 1 25 Dimensions of poverty and equity in El Salvador Poverty is higher among children and a new 44, reaching a gap of about 9 percentage points phenomenon of higher female poverty during in the 25–29 age group, disproportionately prime age is emerging. The demographic affecting women. This is linked to the high footprint shows that poverty is more prominent female inactivity in the labor market and the among children and adolescents (42 percent). disproportionate burden of care responsibilities Compared to non-poor children and adolescents, for adult and younger females. This novel they have a higher incidence of food insecurity, phenomenon, however, is not exclusive to El illiteracy, and lower school attendance, among Salvador. Most Latin American countries are others that may affect their future development.8 facing similar patterns.9 Another key element of On the other hand, the evolution of poverty rates this emerging pattern is that in El Salvador, as for men and women differ along the life cycle, in much of the globe, the cost of motherhood in showing a ‘female penalty’ during the productive labor market outcomes is substantial.10 and fertile ages (Figure 7). In the last 20 years, the gap between poverty rates has increased for men and women between the ages of 20 and FIGURE 7. GENDER GAP IN OFFICIAL POVERTY, BY AGE, 2000 AND 2023 A) Year 2000 A) Year 2023 60 60 50 50 Poverty rate (%) Poverty rate (%) 40 40 30 30 20 20 10 10 0 0 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+ 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+ Age Age Females Males Females Males Source: EHPM (2000 and 2023 _ 8. Aguilar et al. (2024). 9. Buitrago-Hernández et al. (2024). 10. Balcázar y Ñopo (2024a). 26 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Territorial variations of poverty make the use stand out), and (c) the eastern zone (Morazán and of updated poverty maps necessary. Currently, La Unión). However, not all the poorest municipal rural poverty is two points higher than urban, but districts are in the departments with the highest there are more poor Salvadorans living in urban poverty rates.11 Thus, attending poverty requires areas (1.2 million) than in rural areas (0.8 million). some geographical targeting complemented Additionally, in 9 out of the 14 departments in with other tools, such as a dynamic social the country the percentage of poor population registry, to reach those most in need. The results exceeds the national figure. They are distributed of the new population and housing census that in three zones: (a) the southwestern border the country released in 2024 will be valuable in with Guatemala (Ahuachapán), (b) the central updating this poverty map, adapting it to the new corridor from the north border with Honduras to administrative division the country enacted in the territories on the Pacific coast (in which the March 2024. extreme poverty rate of Cabañas and Usulután FIGURE 8. GEOGRAPHIC DISTRIBUTION OF POVERTY BY MUNICIPALITY, 2019 (BEFORE THE ADMINISTRATIVE REFORM OF MAY 2024) Source: Rude and Robayo (2023). _ 11. Rude and Robayo (2023). Chapter 1 27 Dimensions of poverty and equity in El Salvador Although still high, income inequality in post-pandemic reduction in inequality, largely El Salvador is among the lowest in Latin due to decreasing incomes among the top America after a long-term reduction process. income quintiles,12 El Salvador has experienced El Salvador is one of the three countries of a slight increase with a decrease in bottom the region that has managed to go below the incomes. Before the pandemic, in 2019, the top threshold of high inequality (0.40 in the Gini income decile had 29.8 percent of the income coefficient) in Latin America. Although there has while the bottom two deciles had 6.3 percent. been a slight post-pandemic increase, it remains The most recent figures from the World Bank among the three lowest in the region (together Poverty and Inequality Platform indicate that with Uruguay and Dominican Republic). While these percentages were 28.7 and 5.6 in 2022. most Latin American countries have seen a FIGURE 9. INEQUALITY EVOLUTION, LATIN AMERICA, 2000–2023 65 60 55 Gini Index (%) 50 45 40.6 40 39.8 35 37.0 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 El Salvador Dominican Republic Uruguay Other LAC countries Source: Socio-Economic Database for Latin America and the Caribbean (CEDLAS and World Bank) (SEDLAC) and EHPM (2000-2023). Note: The dotted line indicates the Gini high inequality threshold. At the same time, El Salvador has sustainedly recovery. In 2022, the year on which the updates increased its average income. As of July 2024, for the 2024 classification are based, this figure El Salvador went from being classified by the was US$4,670, above pre-pandemic numbers World Bank Group as a lower-middle-income to (US$4,090). By 2023, it had risen further to an upper-middle-income country for the first US$4,920.13 This is good news. However, while time. That is, its gross national income (GNI) per GNI per capita has increased, extreme poverty capita in 2022 exceeded US$4,466, joining other has expanded. Income is increasing for the 18 Latin American and Caribbean economies average Salvadoran, but since 2019 not for the under this classification. El Salvador’s GNI per poor. This stresses the importance of an analysis capita has shown an upward trend since the that goes beyond averages and highlights the turn of the century, despite a slight decline due particularities of poor households, their lives, to the pandemic which has already shown a and livelihoods. _ 12. Maloney et al. (2024). 13. World Bank (2024a). 28 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 1.2 The ticket out of poverty and hereditary opportunities In El Salvador, it is increasingly likely to Economic opportunities are strongly fall into poverty and increasingly difficult hereditary, but long-run trends are changing. to escape from it. In the interannual periods This can be clearly seen in the analysis of between 2018 and 2022, the entry poverty rate educational attainment, the main predictor of grew from 14.4 percent to 20.0 percent, and the earnings which also affects health, mortality, exit poverty rate decreased from 48.2 percent to fertility, marriage, parenting, crime, and political 43.5 percent. This is explained by the increasing participation, among others.16 In El Salvador, likelihood, during the same period, of remaining in the educational outcomes of individuals are extreme poverty and falling into extreme poverty, strongly related to those of their parents.17 More either from relative poverty or from ‘non-poverty’. precisely, and comparatively, the probability of The likelihood of remaining in extreme poverty completing secondary school for individuals born increased during the COVID-19 pandemic, as did in the 1980s whose parents did not complete the probability of falling into extreme poverty. secondary education is 25 percent. This is one In the following years, these probabilities have of the lowest rates in Latin America, only slightly remained at the figure recorded during the better than Nicaragua and Honduras.18 While in El pandemic.14 Salvador there is a high correlation between the educational outcomes of young adults and those Employment is the key to leaving poverty, of their parents, this correlation is lower than the and the lack of it is the ticket for entry. In El one that existed in the educational outcomes Salvador, as in most of the world, an increase between their parents and grandparents.19 in the number of working members in the household is the most favorable change linked to In the short term, poverty is mostly escaping poverty. Things get even better if such transitory, but new dynamics of vulnerability a job is formal. The probability of leaving poverty are emerging. With peoples’ incomes changing increases by 27 percent if one individual in the from one year to the next, it is possible to household gets a formal job, and by 10 percent if distinguish three types of households for any the job is informal. Conversely, the primary driver pair of consecutive years: those who are poor in of falling into poverty is losing a job, especially both years (the chronically poor), those whose if it was a formal one, reducing the likelihood of are poor in one of the two years (the transitory escaping poverty by 10 percent. This negative poor), those who are out of poverty in both years effect is similar in impact to what happens when (the never poor). Between 2018 and 2022, almost a child is born into the household.15 two-thirds of poor households in El Salvador are transitory poor while the one-third is in a _ 14. Aguilar and Ñopo (2024). 15. Aguilar and Ñopo (2024). 16. Torche (2021). 17. Aguilar et al. (2024). 18. Neidöfer (2021). 19. Celhay and Gallegos (2024). Chapter 1 29 Dimensions of poverty and equity in El Salvador situation of chronic poverty. During this period, to 58 percent in 2021–2022. From one year to poverty had become an increasingly transitory another, between 44 percent and 55 percent of situation. In 2018–2019, 24 percent of the the poor exit poverty, while between 14 percent population was transient poor, but then rose to and 20 percent of the non-poor fall into poverty 26 percent in 2021–2022. This can be interpreted during the same period. The highest increases in as good news within the maladies of poverty. poverty were seen during the pandemic years. However, this is paired with another fact: the Female-headed households show higher entry percentage of population that remains as never and exit rates into and out of poverty.20 poor has reduced from 63 percent in 2018–2019 1.3 Poverty from a multidimensional perspective Beyond income, poverty means to have El Salvador has shown steady progress other material deprivations. While income reducing multidimensional poverty, although is a fundamental instrument for poverty there is still a sizable population that is both conceptualization and measurement, it is clearly income- and multidimensional-poor. In 2023, not the only one. Salvadorans perceive poverty as 25 percent of households were multidimensionally “having scarcity but of everything” or “living in the poor (that is, they had 7 or more deprivations), 9 worst situation there can be.” 21 Thus, aligned with percentage points below the statistic the country international practices, El Salvador also measures had in 2016 when multidimensional poverty was multidimensional poverty encompassing officially measured for the first time. Households 20 deprivations in five fundamental well- that are simultaneously income-poor and being dimensions: (a) education; (b) housing multidimensional-poor deserve special attention conditions; (c) employment and social security; as their condition may be chronic.24 In El Salvador, (d) health, basic services, and food security; and four out of every ten monetary poor households (e) habitat quality. A household is considered are also multidimensionally poor. This issue is multidimensionally poor if it lacks at least 7 of the even more pronounced among rural households: 20 deprivations. This way of measuring poverty half of rural households experiencing monetary by deprivations (multidimensional) complements poverty are simultaneously multidimensionally the traditional one based on income. This allows poor. The most salient dimensions of deprivations exploring the differences in well-being between and gaps are housing (overcrowding), education monetary poor and non-poor households, (low adult education), work (social security and suggesting priorities for policy action. underemployment), and health, services and _ 20. Aguilar and Ñopo (2024). 21. UNDP (2015). 22. General Office of Statistics and Census (DIGESTYC, 2017). 23. ONEC (2023b). 24. Bolch et al. (2023). 30 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 food insecurity (sanitation and food insecurity) provides extra evidence. By 2023, 72 percent (Table 1). As housing deprivation shows the of Salvadoran households were deprived, with biggest gap between monetary poor and non- a slight progress since the turn of the decade poor, it deserves further analysis. An index that (75 percent in 2010). Housing deprivation is explores further housing deprivation based on higher for female-headed households, single- (a) infrastructure (wall, roof, and floor materials); headed households, heads of household with no (b) access to services (sanitation, water, and education, and in metropolitan areas.26 electricity); (c) habitability (overcrowding); and (d) _ assets ownership (washing machine, refrigerator, 25. Balcázar and Redaelli (2017). cellphone, computer and internet access)25 26. Balcázar and Ñopo (2024b). TABLE 1. MULTIDIMENSIONAL POVERTY: DEPRIVATIONS AND GAPS (2023) Dimension Deprivation Description Deprivation Deprivation gap rate among between (official) the (official) monetary poor monetary poor and non-poor Education Low attainment At least one adult ages 18–64 lacks 87 16 secondary education or one adult ages 65+ lacks sixth grade of primary education. School At least one child ages 10–17 in school is 2 1 backwardness more than 2 years behind the normative age for their grade. Early care At least one child ages 1–3 does not attend 18 9 preschool. Non-attendance At least one child ages 4–17 does not attend 11 6 school. Housing Inadequate floor Dirt floor or walls that are in bad condition 32 14 and wall or made of sheet metal, wood, straw, palm, waste, cardboard, or plastic. Land tenure The land is occupied as a settler, as a 14 4 caretaker, or is owned by some other person or institution. Inadequate roof Roof is in bad condition or made of straw, 18 8 palm, cardboard, plastic, or waste. Overcrowding There are 3 or more people per room in the 52 20 house. Health, Food insecurity 15 questions about food availability for 25 14 services households with minors (if yes >6 = food and food insecure), and 8 questions for households security without minors (if yes >4 = food insecure) (ELCSA a/ methodology) Health access At least one person required medical 13 2 attention in the previous month but could not access public healthcare or did not seek it due to lack of access or cost. Source: EHPM (2023). Note: a/ ELCSA: Latin American and Caribbean Food Security Scale (ELCSA) Chapter 1 31 Dimensions of poverty and equity in El Salvador Health, Sanitation No access to a sanitary system connected 49 15 services to sewer or sanitation in the property or it is and food shared with another household. security Water No access to drinkable water in the 26 7 property or the connection is inactive for more than one month Habitat Crime In the past year, at least one household 7 -1 member experienced robbery, theft, injury, quality or assault. Insecurity Due to insecurity, at least one member 17 2 cannot go out at night, let children play, leave the house alone, start a business, or move freely in the community. Recreation The community lacks parks, sports 41 3 facilities, playgrounds, or community centers, or they are too far away or lack activities. Risks In the past year, the household has been 12 3 damaged or threatened by flooding, landslides, or mudslides. Work Child work At least one child or adolescent engages 5 2 in dangerous, excessive, or inappropriate work according to law. Social security At least one of the working members is not 74 7 a beneficiary or contributor to the health insurance or pension system. Underemployment At least one member of the household is 71 11 underemployed by hours (<40 hours per week), or by income (1 month per year). Unemployment At least one member of the household is or 18 7 has been unemployed for a month or more in the past 6 months. Source: EHPM (2023). Note: a/ ELCSA: Latin American and Caribbean Food Security Scale (ELCSA) 32 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Income and material deprivation affect perceive their income is not enough and live with how people interact with others, and this major difficulties, have higher distrust toward emphasizes the importance of the relational institutions, while those with enough income and dimensions of poverty. Those who express savings show major distrust toward other people that their income is not enough for satisfying in a polarized society (Table 2). The construction their basic needs tend to also perceive relational of a cohesive and prosperous El Salvador requires deprivations in how they participate in collective a renewed emphasis on attending to the needs actions for their welfare (lack of political of the less fortunate, a long-standing pending participation), how they feel about their life and issue.27 Additionally, international evidence has their future (higher negative aspirations), and served to establish the links between poverty how they feel as a part of a society with the and mental health.28 same rights and opportunities as others (higher perception of unfair income distribution and _ higher erosion of social contract). People that 27. Pleités (2022). 28. Chen (2022) ; Marbin et al. (2022) ; Ridley et al. (2020). TABLE 2. LACK OF INCOME FOR BASIC NEEDS AND RELATIONAL DEPRIVATIONS, 2023 Relational Description Perception of Perception of deprivations Income is not Income is enough enough and and can have live with major savings (%) difficulties (%) Social participation Lack of civil connections 13.9 17.7 Lack of political action 22.2 13.4 Social trust Lack of trust toward other people 71.3 75.2 Lack of trust toward political institutions 9.3 4.7 Lack of trust toward social institutions 2.8 1.3 Social distance Low satisfaction with life 25.2 4.1 tensions Low hope in the future 54.4 17.8 Low justice in income distribution 60.0 31.0 Intolerance toward inequality 36.7 31.3 Erosion of social Lack of respect to institutions 17.3 10.3 contract Deprotection of basic rights 30.6 16.0 No social guarantees for equity. 29.6 12.8 Source: Latin American Public Opinion Project (LAPOP)El Salvador 2023 Database and Latinobarometro 2023 Database. Chapter 1 33 Dimensions of poverty and equity in El Salvador To elaborate on the understanding of how inclusion. The third chapter explores the role households sustain themselves, this report of remittances, domestic transfers, and public investigates their income sources. This first transfers to Salvadoran households’ budgets. chapter, ending with this paragraph, presented The fourth chapter is devoted to climate-related a core diagnostic of the evolution of poverty, shocks and their impacts on moving households shared prosperity, and inequality. It also included into poverty. The fifth chapter provides a set of an analysis of the characteristics of the poor and recommendations for policy actions conducive the dynamics in-and-out of poverty. The second to poverty and inequality reduction. The chapter digs deeper into work and income architecture of this report, inspired by the asset- generation, emphasizing labor market dynamics based framework,29 is then conceptualized as (both from demand and supply perspectives), follows. informality, and opportunities for productive FIGURE 10. STRUCTURE OF THE POVERTY ASSESSMENT FOR EL SALVADOR 2024 Households Human capital Conditions Wellbeing Labor income Non labor income Salaried Public transfers Work Pensions + Shocks Remittances Independent Work Domestic private transfers Territorial Heterogeneities Gender Note: The asset-based framework considers as assets: human capital, physical and financial assets, social capital and natural capital. For further information see López-Calva and Rodríguez-Castelán (2016). _ 29. López-Calva and Rodríguez-Castelán (2016). CHAPTER 2 Without work there is no prosperity 36 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 As in most societies, labor is the most important income source for households, so a poverty alleviation strategy should make sure labor markets function well, jobs are created, and the poor have access to them. Salvadoran labor markets are characterized by high female inactivity and high informality, but beyond those aggregate figures, the poor lack access to good quality jobs (stability, adequacy, and security). The poor are more likely than the rest of the population to hold more than one job and complement their income sources, but low productivity and lack of opportunities prevent them from earning more. The low productivity is linked to the abundance of small firms, reduced investment, and lack of innovation, which translates into low demand for skilled labor. The latter is exemplified by a worrisome signal: the schooling premium has been dropping for more than a decade. Chapter 2 37 Without work there is no prosperity 2.1 The importance and precariousness of labor Out of every six dollars a Salvadoran equally on income from salaried work as from household has in its budget, almost five self-employment, in line with what happens come from labor. Among non-poor Salvadoran in most of Latin America. A key lesson that the households, 70 percent of their monthly income data reveals is that the poorer the household comes from salaried labor (that is, under the the bigger their reliance on income from self- direction/control of another person/entity), 14 employment and private transfers (for example, percent from self-employment, and the rest from remittances and domestic family transfers). non-labor sources. Relatively poor households, in Both are simultaneously a blessing and a curse. turn, rely less on salaried work and more on self- We will return to them in this and the following employment. For extremely poor households, chapters, but in this section let us focus on the the situation magnifies as they rely almost most important source of income: labor. FIGURE 11. SOURCES OF MONTHLY HOUSEHOLD INCOME, BY AREA OF RESIDENCE AND POVERTY STATUS, 2023 A) Urban B) Rural 100 100 14.8 7.5 13.1 21.6 2.1 6.7 23.5 21.0 2.3 80 1.9 14.3 80 2.5 14.5 Percentage (%) Percentage (%) 3.6 20.6 16.9 60 35.7 60 34.6 40 40 62.1 59.2 70.8 69.8 20 20 40.3 37.3 0 0 Extremely poor Relatively poor Non-poor Extremely poor Relatively poor Non-poor Salaried Labor Self-Employed labor Salaried Labor Self-Employed labor Retirement Pensions Public Transfers Retirement Pensions Public Transfers Private Transfers Capital & others Private Transfers Capital & others Source: EHPM (2023). Labor income disparities between the poor while relatively poor households manage to and non-poor are pronounced, both in rural gather US$145, and non-poor households in turn and urban areas. In rural areas, members of accumulate US$448 per month. In urban areas, extremely poor households scrape together a average earnings from salaried employment mere US$31 per month from salaried employment, are higher, but income disparities are equally 38 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 pronounced: extremely poor households earn The Salvadoran labor market is characterized US$55 per month, relatively poor households by low unemployment but high female US$234, and non-poor households US$710. inactivity and self-employment. In El Salvador, Earnings from self-employment are notably just over 4.8 million people make up the working- lower, both in rural and urban areas, but the gaps age population (16 years old and above), with 2.6 between poor and non-poor households are also million women and 2.2 million men. However, striking. Salaried and self-employment incomes out of the 2.9 million who are employed the tend to be higher in male-headed households in gender split reverses: 1.3 million are women and urban areas. In urban areas, both wage and self- 1.6 million are men. While unemployment is low, employment incomes rise with the age of the inactivity is high: 1.7 million Salvadorans do not household head but drop substantially after age have a job nor are actively seeking one, and most 65, falling below those with younger heads. In of them are women. Female inactivity rates in El rural areas, wage incomes remain almost constant Salvador are among the highest in Latin America across ages, except for seniors, whose incomes are and the Caribbean, together with Mexico, Chile, half those of other age groups. We will show next Honduras, and Costa Rica.30 Among those that such lower income generation among the poor who work, nearly 0.8 million workers are self- comes from a combination of inactivity and employed, with women comprising more than precarious jobs. half of this group. FIGURE 12. CHARACTERIZATION OF THE WORKING-AGE POPULATION (THOUSANDS), 2023 Working-age population: 4,801 Men: 2,154 (44.9%) Women: 2,649 (55.1%) Economically Active Population Economically Active Population Inactive Labor Force: 1,707 (35.6%) Employed: 2,933 (61.1%) Unemployed: 161 (3.4%) Men: 398 (18.5%) Men: 1,663 (77.2%) Men: 93 (4.3%) Women: 1,309 (49.4%) Women: 1,269 (48.0%) Women: 68 (2.6%) Public employees Private salaried employees Employers 259 (8.8%) 1,609 (54.9%) 142 (4.9%) Men: 144 (8.6%) Men: 1,001 (60.2%) Men: 101 (6.1%) Women: 116 (9.1%) Women: 608 (47.9%) Women: 41 (3.2%) Self-employed Not salaried workers 799 (27.2%) 123 (4.2%) Men: 365 ( 21.9%) Men: 53 (3.2%) Women: 434 (34.2%) Women: 70 (5.5%) Source: EHPM (2023). _ 30. International Labour Organization (ILO, 2023). Chapter 2 39 Without work there is no prosperity The gender gaps in inactivity and self- approximate evidence suggests that this does not employment are linked to the disproportionate seem to be the case.32 burden of caregiving responsibilities placed on women. In El Salvador, as in much of Latin In El Salvador’s workplace, access to America, women of working age dedicate three stability, adequacy, and security are almost times more hours to childcare and household inexistent among the poor. In contrast to the chores, a gap that prevails across educational idea of ‘decent work’, which is based on the pillars levels, area of residence, and socioeconomic of employment with fair wages, labor rights, status. When there is a child at home, female labor and social protection, labor precariousness participation tends to drop, dropping even more encompasses three key dimensions: (a) labor when the child is under five years of age. The peak instability, indicating the absence of long-term of the impacts of children’s presence on females’ employment; (b) labor inadequacy, characterized work is from pregnancy and up to six months by inadequate income or insufficient working after childbirth. On the other hand, the presence hours; and (c) labor insecurity, denoting the of kids at home does not affect male labor activity absence of social security coverage and the rates. This overload of domestic work among freedom to organize for the protection of labor women leads them to either withdraw from the rights.33 In Latin America, access to health paid labor market or to enter occupations that are insurance, retirement benefits, and secure compatible with caregiving responsibilities, with contracts has consistently shown strong links their subsequent earnings penalties. It has also with poverty avoidance. In El Salvador, access been hypothesized that the low female labor force to stability, adequacy, and security are almost participation is the result of higher reservation inexistent among the poor. In this regard, the wages for females because of the remittances. country fares well below their Latin American While appropriate tests for this hypothesis would peers, making the construction of pathways out require data that are not currently available, of poverty difficult.34 FIGURE 13. LABOR STABILITY, ADEQUACY, AND SECURITY ALONG THE INCOME DISTRIBUTION, 2023 100 80 Percentage (%) 60 40 20 0 1 2 3 4 5 6 7 8 9 10 Deciles of per capita household income Labor stability Labor adequacy Labor security (permanent employment rate) (full-time employment rate) (formality rate) Source: EHPM (2023). Notes: A permanent worker is someone who works for a salary without a specific end date of the employment relationship. A full-time worker is (a) someone who works 48 hours a week and earns an income equal to or greater than the legal minimum or (b) someone who works less than 48 hours a week but does not wish to work more. A formal worker is someone who contributes to social security. For more details on these definitions, see Lexartza and Grau.35 _ 31. United Nations Population Fund (UNFPA, 2024); Aguilar and Erazo (2023); Banegas and Winkler (2020); Isik-Dikmelik et al. (2023). 32. Souza and Garcia-Souza (2018). 33. Lexartza and Grau (2010). 34. Brummund et al. (2018) ; IADB (2024). 35. Lexartza and Grau (2010). 40 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Job instability is prevalent among the poor. than one job. The situation has barely changed One in every four salaried workers hold temporary during the past two decades. It dropped slightly positions. Only 2 percent of temporary workers during the pandemic, but it has returned to the have a signed employment contract, with the turn of the century figures. Holding multiple majority holding contracts lasting less than jobs appears to be a reaction to the inadequate three months. One in three permanent wage income earned from the primary job. This earners lacks a contract, a situation that affects underscores the economic hurdles confronting nearly all domestic workers. This instability in the most marginalized segments of society and salaried employment correlates with poverty: the imperative for targeted policies aimed at individuals employed on a wage basis without fostering sustainable employment opportunities signed contracts are three times more likely to to mitigate poverty. experience poverty. While there are no gender differences in labor instability, there are variations Informal work is widespread and a form of across residential areas, age, and education: labor insecurity in El Salvador. In 2023, 1.86 younger individuals and older adults residing in million Salvadorans (64 percent of total workers) rural areas with lower educational attainment had informal jobs, and informality rates have exhibit higher labor instability. increased considerably for women and the youth since 2000.36 Although an important share of labor Underemployment is a signal labor informality results from a lack of law compliance, inadequacy in El Salvador. Nearly half of a bigger share corresponds to self-employed urban Salvadoran workers are underemployed workers who do not participate in social security (official statistics do not account for rural because they are exempted. This constitutes an underemployment). This happens either because ‘informality within the law’ and in El Salvador it they would like to work more hours or because reaches 97 percent of self-employed workers. their income is insufficient. Underemployment It is fair to say that such an impressively high is closely correlated with poverty. In El Salvador, figure is at par with those of most Latin American the typical urban underemployed individual countries. On the other hand, ‘informality tends to be an older woman with low educational that breaks the law’ in El Salvador reaches 42 attainment. Underemployment could be even percent, a number below the one seen in Mexico, more challenging, but some supplement income Colombia, and Peru. Such informality in private with more than one job. salaried employment is higher for men (7 points higher than women), younger workers (10 points Salvadorans respond to labor inadequacy higher than those older than 25), and those who by holding more than one job. Nearly half did not attend school (40 points higher than of the extremely poor Salvadorans workers those who completed tertiary education).37 commit more than 40 hours per week to all their occupational endeavors, either in salaried Formal employment opportunities are not work or self-employment. The reference to ‘all equally distributed. In economic sectors such their occupations’ is deliberate as 6 percent of as agriculture and construction, the norm is to Salvadorans hold multiple jobs, a circumstance work without social protection; in others, such as more prevalent among the extremely poor with the manufacturing industry, formal and informal 8 percent engaged in multifaceted employment. job coexist in similar proportions; and in others, This is even higher among prime-age poor such as education, public administration, or workers: 10 percent of workers between ages 30 finance, informality is the exception. The size and 49 years living in poor households hold more of the company also matters: the larger the _ 36. Banegas and Winkler (2020). 37. World Bank (forthcoming). Chapter 2 41 Without work there is no prosperity company, the more likely it is to work in formal 10 percent income tax on the income exceeding conditions, regardless of the economic sector the limit, but also a fixed amount equivalent to in which it operates. Only 3 percent of workers 3.7 percent of the supposedly exempt amount. living in extreme poverty are engaged in formal Social security contributions are regressive: employment, a figure that is 5 and 14 times workers’ monthly contribution is 3 percent of higher among the relatively poor and non-poor, their net salary, but this is capped at US$30 per respectively. The causal relationship governing month. That is, workers earning above 2.7 times poverty and informality is most likely bidirectional, the most common minimum wage pay less constituting together an informality-poverty than the 3 percent required from others. These trap. Workers on informal jobs earn, on average, designs result in the tax and contribution burden 40 percent less per hour than their formal for lower-income workers being close to zero, counterparts, contributing to a fourfold increase growing up to 13 percent for those earning around in the likelihood of poverty among those engaged 3 minimum wages, but becoming progressively in informal employment. smaller for those with higher incomes. However, these non-linearities in the cost of formality The design of the income tax and labor are not reflected on formality rates (Figure 13), contributions generate disincentives to suggesting that the complexities of formality go formalize. The tax design is progressive in El beyond its costs. Most of the contributions paid Salvador, with a tax-exempt bracket for the lowest by lower-wage workers and their employers are labor incomes (currently at US$472 monthly, allocated to funding long-term direct benefits approximately 1.3 times the most common (through a retirement pension), a smaller portion minimum wage of US$365) and increasing to funding contingent benefits (through health rates as labor income rises. However, such fixed insurance), and nothing to funding short- exemption generates disincentives to formalize term direct benefits. This scheme, in which as those who earn salaries slightly exceeding the contributing does not translate into concrete exemption are worse off: they will have to pay a benefits, create disincentives for formality. 2.2 Low productivity, weak labor markets Total Factor Productivity has negatively increased within-sector productivity rather affected the economic growth in El Salvador. than labor reallocation. Labor productivity An analysis for the 2000–2017 reveals that capital measures the amount of output produced per (physical and human) and labor have positively unit of labor (per hour worked or per worker).40 contributed to the Salvadoran economic growth. Labor productivity growth was the main driver The Total Factor Productivity, however, has had behind GDP growth in the 1990s (76 percent) a negative impact.38 The negative role of the and during 2011–2017 period (61 percent), though Total Factor Productivity is a Central American its contribution was rather modest in the 2000s phenomenon, with the notable exceptions of (12 percent). Changes in labor productivity can Costa Rica and Panama.39 happen through within-sector productivity improvements or through the reallocation of Recent improvements in labor productivity labor across different sectors. The contribution in El Salvador have been mainly driven by of the reallocation component dropped from _ 38. Ulku and Zaourak (2021). 39. Moroz and Viollaz (2024). 40. ILO (2015). 42 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 over 1.5 percent in the 1990s to just 0.1 percent business creation per thousand inhabitants in El in the 2000s, largely explaining the slowdown Salvador is similar to that in Guatemala, but it is in labor productivity growth seen in the latter eight times smaller than in Costa Rica and four period. Labor productivity growth picked up in times smaller than the average in Latin America. recent years, reflecting an uptick in within-sector The number of new jobs created by businesses productivity and, to a lesser extent, a rebound entering the market is fewer than the number of in the reallocation component’s contribution.41 jobs lost due to business closures. This means This uptick is driven by the industry, as in 2017 that, on balance, the entry and exit of businesses the value added per worker in this sector was 25 lead to a net loss of jobs.45 Consequently, workers percent higher than in 2000, while in agriculture relocate to preexisting companies or become and services, labor productivity stagnated.42 self-employed, indicating constraints to new firms’ growth. Employment in El Salvador is concentrated in low labor productivity sectors, and firms The obstacles to growing firms have are predominantly small. In El Salvador, changed, with crime reducing. In 2023, sectors such as electricity, finance, rentals, Salvadoran firms report that their biggest and telecommunications boast above-average obstacles to operate and grow are the lack labor productivity, yet collectively they employ of access to financing, the practices of the only 2 percent of the workforce. Conversely, informal sector, the inadequate preparation of sectors like agriculture, commerce, and low- the workforce, and delays in granting licenses tech manufacturing, which exhibit below- and permits.46 This represents a change from average labor productivities, employ half of the 2016, when Salvadoran companies identified workforce. Between 2019 and 2021, sectors that crime as the biggest restriction to operating and have created most jobs are those with lower labor growing, followed by unfair competition from productivity, such as construction, and hotels and informal firms, political instability, and the tax restaurants. About 95 percent of businesses in El burden. However, the restrictions are not always Salvador are microenterprises and 92 percent are the same for all types of firms: the lack of credit subsistence firms, employing 3 out of 4 salaried and practices of the informal sector are problems workers in the country. Only 0.3 percent of firms more frequently seen among small and medium are large, but they concentrate 7.5 percent of enterprises, while licenses and permits tend to be salaried workers.43 Compared to more developed a more frequent barrier for large companies. The countries in the region, El Salvador’s business low quality of the workforce, however, affects all demographics exhibits a high concentration of companies equally 47 and poses a challenge for employment in small firms, precisely those with the new economy, based on digital technologies, the lowest labor productivity.44 innovation, and knowledge: digital startups in El Salvador report that poor quality training In El Salvador, few formal businesses are and education are significant barriers to hiring created, limiting new formal employment skilled talent.48 opportunities. Since 2011, the entry of new formal businesses in El Salvador had grown very Despite low job creation, the nature of jobs is slowly, but it appears to have started declining changing. Jobs now demand the development from 2020. Comparatively, the rate of new formal of both routine skills (cognitive and manual) _ 41. Ulku and Zaourak (2021). 46. World Bank (2023a). 42. Banegas and Winkler (2020). 47. Banegas and Winkler (2020). 43. CONAMYPE (2024). 48. Moroz and Viollaz (2024). 44. Banegas and Winkler (2020). 45. Banegas and Winkler (2020). Chapter 2 43 Without work there is no prosperity and non-routine skills (analytical, interpersonal, these roles may be supplemented by automated and manual). In El Salvador, jobs became more solutions in various instances, creating a positive intensive in the use of routine cognitive skills, impact on productivity. which are the most likely to be easily taken over by machines or artificial intelligence (AI), and The upcoming green economy changes will typically come with lower wages.49 However, new throw a wrench into job creation needs in El evidence shows that the routine work declined Salvador. Developing economies are expected to in El Salvador in the last decade, and knowledge see a bigger jump in greenhouse gas emissions tasks and person-oriented tasks grew.50 Despite down the line, and policies pushing for greener this, skills that require analytical thinking, growth might cause a shift in labor demand, which are more complex, not easily replaced causing problems for countries with fewer skilled by technology, and with the highest pay, have workers and less adaptability. The push for green lower demand.51 This could be the result of a growth will boost the demand for some existing combination of an economic structure that does jobs, change the tasks and skills required for not require workers with analytical skills and others, and create emerging occupations. an educational system that does not generate Currently, one out of five jobs in El Salvador them. Nonetheless, the country needs to quickly are green, in line with the Latin American and direct investments in the development of those Caribbean average. However, less than 1 percent skills that technology would hardly replace. of jobs are emerging green jobs.55 Employment faces a looming threat of The educational qualification of workers is automation, particularly affecting the rural a key element for the creation of more and poor. Jobs demanding skills and capabilities better jobs. One out of every ten companies susceptible to automation are at a heightened in El Salvador identifies inadequate worker risk, including those in construction and qualifications as their biggest obstacle to growth. extraction, farming, fishing, forestry, production, While this proportion is lower than the one a and transportation sectors.52 Excluding sectors decade ago and that of other countries in the with low rates of technology use, exposure to region, insufficient human capital remains an displacement by automation technologies affect obstacle.56 The changes in the immediate future 40 percent of the workforce (1.2 million people) could introduce some pressure: automation in El Salvador, around the Central American processes and the shift toward a greener average.53 Despite the percentage of workers economy pose challenges for employment, in jobs at risk of automation having decreased mainly because they will require the adoption since 2009, four out of ten workers are still of new skills and abilities. This highlights the employed in such jobs. The risk of automation importance of investing in education and training, disproportionately affects the rural poor: seven not only for individual career advancement but out of ten in poverty hold positions vulnerable also for overall economic development. to more efficient automation.54 However, it is important to note that occupations facing the _ highest risk of automation may not necessarily 49. Banegas and Winkler (2020). 50. Moroz and Viollaz (2024). vanish entirely. Rather than being replaced 51. Banegas and Winkler (2020). outright by robots or software, human labor in 52. Lassébie and Quintini (2022). 53. Moroz and Viollaz (2024). 54. ONEC (2023a). 55. Winkler et al. (2024). 56. Banegas and Winkler (2020). 44 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 2.3 The challenge with human capital for better jobs Graduates struggle in their school-to-work those who have completed tertiary education.58 transition and while education continues to This pattern observed comparing 2009, 2019, pay off, rewards have shrunk. Labor market and 2023 is the same as between 2007 and insertion for recent graduates is challenging in El 2017.59 This is a regional pattern that in El Salvador.57 Yet individuals with higher schooling Salvador acquires particular relevance as the receive a reward for their achievements as they lack of opportunities for more educated workers earn more. These rewards are smaller than they could incentivize migration to maximize returns used to be, a fact that is even more noteworthy for on skills.60 FIGURE 14. SCHOOLING PREMIUM BY TYPE OF EMPLOYMENT, 2009, 2019, AND 2023 Formal salaried Self employed 2 2 Schooling premium Schooling premium 1.5 1.5 1 1 5 5 0 0 -5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Years of schooling Years of schooling 2009 2019 2023 2009 2019 2023 Source: EHPM (2009, 2019, and 2023). Note: The dots correspond to coefficients of Mincer equations including sex, age, age squared, and a set of dummy variables (one per year of schooling, 0 being the base category). _ 59. Banegas and Winkler (2020). 60. sik-Dikmelik et al. (2023). Chapter 2 45 Without work there is no prosperity Behind the decline in returns to tertiary the situation is also serious as 91 percent of education there is a mismatch between the Salvadoran students are low performers in at least demand for and the supply of skilled labor, one subject on the Programme for International which affects different groups in varying Student Assessment (PISA) standardized ways. The drop in the returns to tertiary education test which covers mathematics, reading, and has been more pronounced among women and science. With such widespread low performance, out of the capital city of San Salvador. Between even the best Salvadoran students are short of 2009 and 2023, the number of individuals who the international standards: the average score completed tertiary education almost doubled: it of the top 10 percent of Salvadoran students is increased from 176,570 (3.1 percent) to 315,562 still lower than the average for all students in (5.0 percent) due to a rise in both enrollment countries of the Organisation for Economic Co- and graduation rates.61 The number of women operation and Development (OECD).65 with tertiary education has grown more than that of men, which might explain the larger drop Investing early in people’s life cycle has shown in returns for women. Since the increase in the progress but challenges remain. The earlier number of professionals is homogeneous across the investments in human capital, the higher the country, the larger decline in educational their benefits. Investing in young children is one returns for those living outside of San Salvador of the best investments for societies, providing a may reflect that the demand for skilled labor unique opportunity to tackle inequality, break the outside the capital grew at a pace below than cycle of poverty, and enhance future outcomes.66 that of the labor supply. To fully benefit from future opportunities in life and become productive members of society, Despite progress in secondary enrollment, by the end of early childhood, children must be there are still gaps and Salvadorans’ skills healthy and well-nourished, have strong bonds development deserves attention. Secondary with their caregivers, be capable of interacting school enrollment moved from 74 percent in positively with their families, teachers, and 2000 to 89 percent in 2023. This progress has peers, be able to communicate in their native been higher in rural areas, rising from 63 percent language, and be ready to learn throughout to 83 percent, compared with the 83 percent the primary school years.67 In El Salvador, early to 93 percent rise in urban areas.62 Enrollment childhood education has low coverage, although increased the most among the poorest. Reaching it increased over the past decade. In 2015 only 2 full enrollment, however, would require further percent of Salvadorans under 4 years attended improvements as out of ten adolescents dropping an early childhood education program; by 2023 out of school four report having no interest in it reached 5 percent. This coverage rate is nearly attending and others cite economic reasons one-fourth of the average recorded in Latin for dropping out.63 But beyond enrollment and American countries in 2019.68 attendance, skills development is a challenge. In El Salvador, 69 percent of 10-year-old children There is a clear need of more and better jobs for (late primary age) do not have basic proficient Salvadorans, supporting the poor with policies to in reading. This is 17 percentage points higher better facilitate accessing them: in the short run than the average for Latin America and the with labor market intermediation, in the medium Caribbean.64 Among 15-year-old students, run with training, and in the long run with quality education along the life cycle. _ 61. Mazariego (2022). 65. OECD (2023). 62. ONEC (2000, 2023a). 66. Cunha and Heckman (2010). 63. ONEC (2023a). 67. Denboba et al. (2014). 64. World Bank (2024b). 68. United Nations Children’s Fund (UNICEF, 2023). CHAPTER 3 Beyond work, what do Salvadorans live on? 48 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 El Salvador stands out among its peers for its high transfers among households, both international (remittances) and domestic. This substantially helps poverty reduction: in the hypothetical case of a sudden stop of those transfers, extreme poverty would double in both rural and urban areas. Moreover, poverty among the elderly in rural areas would triple if these transfers stop. Nonetheless, while remittances can be seen as one side of a coin, on the other side there is migration. High Salvadoran migration gets reflected in a mixture of social outcomes: population pyramid (missing prime-age males), incentives to study (higher school attendance), and incentives to work (high female inactivity and self-employment). While in peer countries household transfers are complemented with government transfers, in El Salvador things are different. Public transfers are low and subsidies, mostly on energy, lack effective targeting. Chapter 3 49 Beyond work, what do Salvadorans live on? 3.1 The importance of private transfers on households’ budgets Non-labor income is an important source for transfers and remittances) account for at least Salvadoran households, occupying a larger 8 out of every 10 dollars received as non-labor share of the poor’s income. Besides the labor income. Compared with other countries in the market, households can obtain resources from region, the reliance on private transfers in El different sources: (a) public transfers; (b) private Salvador is high. While in Latin American and transfers (domestic transfers and remittances); Central American countries private transfers (c) pensions (contributory and non-contributory); represent 5 percent and 7 percent of the total (d) returns to capital; and (e) others. In 2023, income of households, respectively, this reaches Salvadoran urban households earned a monthly 9 percent in El Salvador. In the lowest per capita average of US$125 from non-labor income, income quintile, private transfers represent while rural households earned US$85. This non- 15 out of every 100 dollars that Salvadoran labor income makes up about 16 percent of the households receive, almost double the average in total income in both rural and urban areas. For Latin American and Central American countries. poorer households, non-labor income is smaller Overall174, one in five households receive in absolute terms but higher as a percentage domestic private transfers, and this proportion is of their overall income. Among extremely poor even higher among poor households. Domestic households, 25 percent of their income comes private transfers account for about half of the from non-labor sources, compared to 15 percent non-labor income for extremely poor households, for non-poor households. Private transfers are both urban and rural, and they are even more the primary source of non-labor income for important in households headed by women. One Salvadoran households. They are received by in four households receive remittances, although households as domestic transfers (‘help from this proportion is lower among poor households. family or friends living in the country’ or ‘child Remittances are also crucial in the non-labor support’) or as remittances (‘help from family income structure: in rural areas, they make up or friends living abroad’), and both can be one-third of the non-labor income for extremely understood as forms of inter-household or intra- poor households and two-thirds for relatively household solidarity. poor and non-poor households, a figure higher in households headed by women. Private transfers Domestic private transfers and remittances play a role in reducing poverty, a point that will be are crucial income sources for the poor. discussed in more detail below, but before that Among the poor, both urban and rural, private we analyze public transfers. transfers (the combined total of domestic _ 174. World Bank (2024g). 50 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 FIGURE 15. SOURCES OF NON-LABOR MONTHLY HOUSEHOLD INCOME BY AREA OF RESIDENCE AND POVERTY STATUS, 2023 A) Urban B) Rural 100 0.6 1.9 100 2.2 5.8 4.6 1.0 6.9 90 7.3 90 10.7 6.5 9.6 7.8 80 80 38.0 36.8 37.0 70 70 Percentage (%) Percentage (%) 60 47.0 60 50 8.2 50 61.0 66.6 40 40 30 52.1 36.7 30 46.6 20 20 38.6 26.8 10 10 13.7 16.8 0 0 Extremely poor Relatively poor Non-poor Extremely poor Relatively poor Non-poor Public Transfers Domestic Private Transfers Public Transfers Domestic Private Transfers Remittances Non-contributory Pensions Remittances Non-contributory Pensions Contributory Pensions Capital & others Contributory Pensions Capital & others Source: EHPM (2023). Public transfers, a quintessential social 8 percent in other Central American countries protection tool, miss the mark when it comes and 13 percent in Latin America. In El Salvador, to reaching the poor. Non-pension cash public only 2 percent of rural households and 1 percent transfers are almost non-existent in El Salvador, of urban households receive public transfers. as only 0.2 percent of household total income A silver lining is that when a rural household in comes from this source, compared to 2.1 percent extreme poverty receives public transfers, which in Central American countries and 2.6 percent is a rare occurrence, these account for more than in Latin American countries. The gap is even 25 percent of their total income, and 17 percent more critical among households in the lowest if it is a rural household in relative poverty. per capita income quintile, less than 1 percent The corresponding urban poor figures pale in of total household income derive from public comparison. The situation is not new, it has been transfers in El Salvador, but this figure reaches in place for at least two decades. Chapter 3 51 Beyond work, what do Salvadorans live on? FIGURE 16. PUBLIC TRANSFERS AS PERCENTAGE OF HOUSEHOLDS’ INCOME, 2000–2022 6 % of household income 5 4 3 2.6 2 1.5 0.9 0.9 1.5 2.1 1 0.4 0.8 0.2 0 0.0 0.1 0.1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Central America Latin America and The Caribbean El Salvador Source: SEDLAC (2000–2022). Note: In cases where data are unavailable, values have been estimated using a combination of methods (interpolation, extrapolation, and microsimulations) and then pooled to create regional estimates. The low presence of public transfers in percent. The coverage of PBU fluctuated between households’ budgets goes together with 4 percent and 9 percent of poor households with institutional weaknesses, linked to issues in at least one elderly person over 65, reaching its targeting and provision. In 2009, to mitigate the lowest rate in 2023. Overall, CSR and CSU had effects of the global financial crisis, El Salvador few leakages, whereas PBU faced more targeting established the Sistema de Protección Social issues.70 A key challenge that SPSU faces pertains Universal (SPSU), but it was not institutionalized to Registro Único de Participantes (RUP), which is until 2014 with the Social Development and a registry covering the beneficiaries of the SPSU Protection Law. The main programs of the programs. RUP has limited coverage and its data system have been Comunidades Solidarias on beneficiaries is outdated. This is exacerbated Rurales (CSR), Comunidades Solidarias Urbanas by its complex institutionality and governance (CSU), Paquete Agrícola (PA), and Pensión Básica structure. Improving its updating mechanisms Universal (PBU).69 Between 2015 and 2023, the should furthermore contribute to enhancing a PA annually benefited around 46 percent of rural currently insufficient coverage. A solid mandate poor households. During the same period, CSR with the appropriate institutionality would be coverage among the rural poor dropped from valuable. 12 percent to less than 1 percent, while CSU coverage among the urban poor was around 1 _ 69. Rivera (2016). 70. Cerritos and Aguilar (2015). 52 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Pensions, both contributory and non- among households that receive pensions in rural contributory, have low coverage but are a areas, the pension amount is higher than labor lifeline for the recipients. Among the poor, income. The coverage of contributory pensions is pension income represents between 8 percent so low that it resembles that of non-contributory and 13 percent of household non-labor income. pensions, although these are indeed received by Only two out of ten men and one out of ten women the poor. Non-contributory pensions represent over 60 years old receive a retirement pension between 7 percent and 10 percent of non-labor from contributing to the pension system, and it is income for the poor, but the monthly amount is rare to find pensioners among the poor. This low around US$100, which for the extremely poor is coverage and relevance are a result of the long- more than double their labor income. standing high labor informality in El Salvador. Since the minimum pension is around US$300, FIGURE 17. ACCESS TO SOURCES OF NON-LABOR INCOME, BY AREA OF RESIDENCE AND POVERTY STATUS, 2023 A) Urban B) Rural 40 40 35 35 33 % of households % of households 30 27 28 30 28 24 24 25 25 23 21 19 20 17 20 15 14 15 14 10 9 10 10 5 5 3 5 3 5 2 2 01 1 1 3 1 5 3 3 1 1 2 0 1 2 2 0 0 Extremely poor Relatively poor Non-poor Extremely poor Relatively poor Non-poor Public Transfers Domestic Private Transfers Public Transfers Domestic Private Transfers Remittances Non-contributory Pensions Remittances Non-contributory Pensions Contributory Pensions Capital & others Contributory Pensions Capital & others Source: EHPM (2023). In the absence of government transfers and households after labor earnings. Among private pensions, private transfers (particularly transfers, remittances make up a substantial remittances) stand as a shadow protection portion of non-labor income for households, mechanism in El Salvador. Non-labor income both among the poor and non-poor. Remittances is significant for households in El Salvador, stand out as a distinct income source because where traditional social protection instruments they tend to be more stable and are often spent like government transfers and pensions have on durable goods or invested, but they also very low coverage. This is in stark contrast to influence household decisions regarding financial the importance of private transfers, which in inclusion, labor supply, and human capital El Salvador are the primary income source for accumulation.71 On a related issue, El Salvador _ 71. Acosta (2011); Anzoategui et al. (2014). Chapter 3 53 Beyond work, what do Salvadorans live on? stands out for its low financial inclusion. In 2021, 15 and older had borrowed in the past year from a only 36 percent of the Salvadoran population financial institution, either directly at their offices ages 15 and older had a bank account, half the or using a mobile money account, compared with rate for Latin America and the Caribbean (73 30 percent in the region. 72 percent). Moreover, only 1 in 10 Salvadorans ages 3.2 Remittances and domestic transfers: a relief with a hidden side Remittances are the most significant source remittances in the analysis. When focusing only of non-labor income for households that on households that receive remittances, they receive them, making El Salvador stand out account for 80 percent of non-labor income for globally. The macroeconomic relevance of extremely poor households in urban areas and family remittances income was boosted from 83 percent for those in rural areas. The relative 19 percent of GDP in 2009 to 24 percent in weight of remittances in non-labor income is 2023.73 In 2023, El Salvador was among the ten even more substantial among relatively poor countries in the world with the highest overall households that receive them: in urban areas, flow of remittances in their economies. 74 The im remittances represent 81 percent of non-labor portance of remittances in the non-labor income income, while in rural areas, they constitute 90 of Salvadoran households is underestimated percent. when including households that do not receive FIGURE 18. SOURCES OF NON-LABOR MONTHLY HOUSEHOLD INCOME IN HOUSEHOLDS THAT RECEIVE REMITTANCES, BY POVERTY STATUS, 2023 A) Urban B) Rural 350 350 300 47.8 300 250 250 200 200 USD ($) USD ($) 150 150 234.7 202.0 100 149.6 100 128.5 50 86.8 50 61.7 0 20.3 23.8 23.6 0 9.4 9.7 16.6 Extremely poor Relatively poor Non-poor Extremely poor Relatively poor Non-poor Public Transfers Domestic Private Transfers Public Transfers Domestic Private Transfers Remittances Non-contributory Pensions Remittances Non-contributory Pensions Contributory Pensions Capital & others Contributory Pensions Capital & others Source: EHPM (2023). _ 72. World Bank (2024c). 73. BCR (2024a, b). 74. World Bank – Global Knowledge Partnership on Migration and Development (KNOMAD, 2023). 54 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Remittances help disrupt intergenerational by providing greater access and continuity in transmission of poverty through the education and better jobs. However, the country promotion of school attendance. In Salvadoran faces the progressive emigration of these urban households, the median remittance reduces generations of productive age or close to it. El the hazard of a child leaving school by 54 percent Salvador has the highest proportion of emigrants during primary education and by 27 percent during in Latin America and the Caribbean, with 25 secondary education. In rural areas, the effect is percent of its population outside the country. around 14 percent regardless of the educational These migrants tend to be young adults in their attainment. These effects are notably higher early twenties and relatively well educated, than the impact of other income sources. These with more than half having some secondary or aggregate effects must be nuanced, nonetheless, tertiary education. Adult Salvadoran migrants in as remittances have heterogeneous effects: girls the United States are 20 percentage points more ages 11–17 and boys ages 11–14 are more likely to likely to have a high school diploma than those remain in school compared to their peers from living in El Salvador. As a flow of financing for non-recipient households, but this effect is not development, the remittances sent by migrants extended to boys ages 15–17. In 2023, differences have complemented the resources provided in access to education were mainly observed in by international trade and foreign investment, preschool education and tertiary education (only but they have installed a dependency on ‘the among women). export of people’ and the transformation of households into transnational productive units. The emigration of productive generations Over time, the aging process in the country and the return of an aging population can put could be accelerated by the return of aging El Salvador under a demographic imbalance. migrant generations. In 2022, the median age El Salvador currently has a demographic bonus of Salvadorans abroad was 44 years, while in El since its population mainly comprises young Salvador, it was 27 years. people. This can benefit its development potential through investment in human capital, FIGURE 19. DEMOGRAPHICS AND MIGRATION IN EL SALVADOR A) Population pyramid B) Emigrants as a percentage of population 80+ 30 70-74 25 60-64 Percentage (%) 50-54 20 40-44 15 Age 30-34 10 20-24 5 10-14 0-4 0 GTM MEX URY BRA CHL VEN BOL PAR PER SLV 400000 200000 0 200000 400000 HTI Females Males Source: KNOMAD (2023) and EHPM (2023) _ 75. Edwards and Ureta (2003). 79. Banegas and Winkler (2020). 76. Acosta (2011). 80. Velásquez (2021); United Nations Development Programme (UNDP, 2022a). 77. Hidalgo and Ñopo (2024). 81. Martinez (2008). 78. Robayo and Barroso (2022); World Bank (2022a). 82. Latin American and Caribbean Demographic Centre (CELADE, 2024). Chapter 3 55 Beyond work, what do Salvadorans live on? Remittances can inhibit labor activity Just like remittances, domestic transfers outside the household, especially for women, are the most important source of non-labor and promote self-employment. Remittances income for households that receive them. can influence various aspects of labor supply: The importance of domestic transfers in the (a) the extensive margin—how remittances non-labor income of Salvadoran households affect who is participating in the workforce is underestimated when households that do and (b) the intensive margin—how remittances not receive them are included in the analysis. affect the number of hours per week and Focusing solely on the 25 percent of Salvadoran weeks per year that people work. In El Salvador, households that receive domestic transfers— remittances do not affect unemployment, they make up 83 percent of non-labor income but they do impact the participation rates of for extremely poor urban households and people living in recipient households, especially 79 percent for their rural counterparts. The women, whose participation rates are 13 significance of domestic transfers is also percent lower. This evidence suggests that notable among relatively poor households that remittances serve as a financing mechanism receive them: in urban areas, they account that allows for the reassignment of household for 68.6 percent of non-labor income, while in care and reproductive work, disproportionately rural areas, they make up 74 percent. Among burdening women. Additionally, those receiving households receiving domestic transfers, the remittances, compared against a control group, average amount is US$108 in urban areas and are more likely to have informal jobs, primarily US$78 in rural areas, roughly 80 percent of the due to self-employment; thus, remittances per capita income needed to escape poverty. could be supporting employment with lower productivity. Recent data show that workers living in households with remittances have less full-time employment, less formality, and more vulnerable positions as self-employed workers or unpaid family members. FIGURE 20. SOURCES OF NON-LABOR MONTHLY HOUSEHOLD INCOME IN HOUSEHOLDS THAT RECEIVE DOMESTIC TRANSFERS IN EL SALVADOR, BY POVERTY STATUS, 2023 A) Urban B) Rural 250 250 200 23.8 200 20.2 USD ($) USD ($) 150 57.9 150 8.6 56.4 100 32.6 100 11.3 7.1 19.4 50 123.4 50 63.7 91.6 44.5 68.7 88.3 0 0 Extremely poor Relatively poor Non-poor Extremely poor Relatively poor Non-poor Public Transfers Domestic Private Transfers Public Transfers Domestic Private Transfers Remittances Non-contributory Pensions Remittances Non-contributory Pensions Contributory Pensions Capital & others Contributory Pensions Capital & others Source: EHPM (2023). _ 83. Souza and Garcia-Souza (2018). 56 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Remittances and domestic transfers help is consistent with the proportion of elderly reducing poverty to a half. Remittances individuals receiving these private transfers alleviate the worst forms of poverty by directly (36 percent of population over 60 years age injecting cash resources into households, receive remittances and 27 percent receive mitigating the strains of scarcity.84 In the domestic transfers). It should be noted that this hypothetical case that remittances were to is understood solely as an accounting exercise disappear from household income, extreme in the short term, if households do not change poverty would increase by 4 percentage points their income-generating decisions as they would in urban areas and by 8 percentage points in in a general equilibrium model. Thankfully this rural areas. Domestic transfers also contribute scenario remains just illustrative (‘what if’), but to poverty reduction. If both private transfers it highlights the heavy reliance on solidarity. (remittances and domestic) suddenly disappear Looking at it from a non-labor perspective, it is from household income, extreme poverty would crucial to explore other avenues, especially when double its value. The increase in extreme poverty it comes to providing social protection for the in this counterfactual situation of absence most vulnerable, as discussed in the following of private transfers and remittances would section. be greater in households with older adults, where extreme poverty would triple. The latter FIGURE 21. EXTREME POVERTY IN COUNTERFACTUAL SCENARIOS WITH AND WITHOUT PRIVATE TRANSFERS, 2023 A) Urban B) Rural 40 40 40 35 35 30 30 31 Poverty rate (%) Poverty rate (%) 23 24 25 25 25 23 21 17 21 23 19 20 20 20 17 14 15 19 12 17 17 15 15 15 12 10 15 11 12 11 16 10 10 14 9 9 12 12 12 13 5 10 5 10 9 7 8 7 6 6 0 0 Total Female Male 0-14 years 15-24 years 25-59 years 60+ yeas Total Female Male 0-14 years 15-24 years 25-59 years 60+ yeas Official extreme poverty rate Official extreme poverty rate Extreme poverty rate in the absence of remittances Extreme poverty rate in the absence of remittances Extreme poverty rate in the absence of remittances Extreme poverty rate in the absence of remittances and domestic transfers and domestic transfers Source: EHPM (2023). _ 83. Pleités (2022). Chapter 3 57 Beyond work, what do Salvadorans live on? 3.3 Social protection with limited spending and targeting The history of the past two decades in El year), while between 2019 and 2020 it grew by Salvador is one of slow growth in social 48 percent (and then grew by 6 percent the spending until a crisis hits. Public social following year) to finance temporary measures spending—the sum of expenditure on recreation because of the pandemic. 85Despite the upward and culture, environmental protection, housing, trend in public social spending, it has remained health, education, and social protection—grew by relatively constant in relation to GDP, except about 3.5 percent annually between 2000 and during crises. Between 2000 and 2008, social 2008 and by about 5.0 percent annually between spending averaged 7.7 percent of GDP, a figure 2010 and 2019. Between 2008 and 2009, in that reached 8 percent in the period from 2010 response to the impacts of the global financial to 2019. This indicator peaked at 9 percent during crisis, social spending grew by 31 percent the global financial crisis and 14 percent during (and decreased by 12 percent the following the COVID-19 pandemic, and is now falling again. FIGURE 22. SOCIAL SPENDING AS A PERCENTAGE OF GDP IN EL SALVADOR AND LAC COUNTRIES, 2000–2021 30 25 % of GDP 20 17.3 17.3 15.2 15 12.5 12.6 10 7.7 9.2 8.6 5 8.9 7.7 6.7 0 5.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 El Salvador Brazil Dominican Republic Other LAC countries Source: CEPALSTAT (ECLAC 2024a). _ 85. Economic Commission for Latin America and the Caribbean (ECLAC, 2024a). 86. ECLAC (2024b). 58 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Social spending in El Salvador has primarily adapted to the COVID-19 crisis with emergency been focused on education, but the social protection measures, including economic COVID-19 pandemic increased spending on relief and subsidies, although challenges remain social protection. Historically, education has in monitoring and evaluating the effectiveness of been the biggest component of social spending, these interventions. El Salvador faces challenges averaging 3.7 percent of GDP from 2000 to 2021. across the social protection delivery chain beyond In the same period, social protection averaged its coverage, and it includes the digitalization 2.0 percent of GDP, but in 2020, amidst the and flexibilization of the payment and delivery pandemic, it increased to 6.4 percent of GDP, systems; the institutionalization, expansion, surpassing education for the first time. This updating, and linking of the social registry with jump was primarily due to policies like direct other databases; the operationalization and cash transfers (a one-time US$300 payment per integration of disaster risk financial instruments family to the most vulnerable households) and with the social protection programs; and the in-kind transfers (packages of basic food and strengthening of the institutional framework and hygiene products to all households). Although capacity around key adaptive social protection social protection spending decreased in 2021, it issues.87 remained above the average recorded from 2000 to 2021.86 Cash transfers have very low coverage, although in-kind transfers for agriculture The existing social protection system has are important among the rural poor. By 2023, shown relative effectiveness in moments of hardly any household was receiving the cash crisis but requires further improvements of transfer under the Comunidades Solidarias its social registry and other key dimensions. program. Among extremely poor households The foundations for the creation of the SPSU in with at least one member over 65, 8 percent in El Salvador were established in 2009 as a central rural areas and 2 percent in urban areas received pillar within the Anti-Crisis Plan. This included the Pensión Básica Universal. These figures public policy actions in strategic areas such as show a drop in coverage with respect to 2019. education, health, violence prevention, income The Paquete Agrícola, a program that provides generation, productive development, basic seeds and fertilizers to small farmers, is the social infrastructure, and poverty eradication. most widespread transfer program, benefiting The SPSU was further developed and expanded 47 percent of extremely poor households and in subsequent plans, aimed at accelerating the 43 percent of relatively poor households living achievement of the Sustainable Development in rural areas. Other in-kind transfers, such as Goals (SDGs). The system was designed to act the milk program, the school feeding program, as an umbrella for various sectoral policies and the uniforms and school supplies program, and government programs, coordinated by are universally provided to all children and the Secretaría Técnica de la Presidencia. adolescents enrolled in the public system Despite recent administrative changes and the (78 percent of all students), but these are not elimination of certain secretariats, the system counted as part of household income. _ 87. EIsik-Dikmelik et al. (2023). Chapter 3 59 Beyond work, what do Salvadorans live on? Subsidies for residential electricity and is nearly double that of households in extreme liquefied petroleum gas (LPG) consumption poverty. Access to water and sanitation, are widespread but need better targeting nonetheless, deserves extra attention. As for the poor. Challenges also exist with the analysis on multidimensional deprivation water subsidies. While subsidies or direct cash highlights, among poor households one-half are transfers are not considered as part of household deprived sanitation and one-fourth are deprived income, they lower the cost of services, thereby drinkable water. It is crucial to improve access to increasing consumable income. Expenditure these basic needs. on electricity, gas, and water subsidies in 2019 was 40 times higher as a percentage of GDP The low coverage of transfers and poor than the expenditure on the conditional cash targeting of subsidies result in a modest transfer program.78 In 2023, 55 percent of urban impact on poverty, but both can be enhanced. households and 60 percent of rural households A microsimulation exercise shows that if received the LPG subsidy, while 43 percent residential electricity and LPG consumption and 46 percent received the electricity subsidy, subsidies were removed, the official poverty rate respectively. The LPG subsidy has a targeting would increase by almost 1 percentage point issue: both poor and non-poor households in 2023. However, if along with the elimination benefit almost equally from it. In urban areas, 56 of subsidies, the direct transfers to the same percent of extremely poor households receive beneficiary households were multiplied by 3, the LPG subsidy, but so do 54 percent of non- the net effect on poverty would only be a slight poor households; in rural areas, 57 percent of increase of 0.06 percentage points. In another extremely poor households and 61 percent of scenario we found that instead of eliminating non-poor households benefit from it. The same subsidies, if a better targeting of subsidies goes for the electricity subsidy: 45 percent of occurs, poverty would slightly increase (by some urban households in extreme poverty receive decimal points). However, if it is also accompanied it, but so do 43 percent of non-poor urban by an expansion of the coverage of transfers to households; in rural areas, 47.4 percent of households in the same communities or areas extremely poor households and 46 percent of where the transfers were delivered in 2023, it non-poor households receive it. Additionally, would imply a slight reduction in both relative non-poor households consume more energy and extreme poverty (also, by a few decimal than poor ones, making these subsidies points).89 Gains in poverty reduction can be regressive. The water subsidy is less widespread achieved by improving the targeting of spending. (about 21 percent of households receive it), but Nonetheless, the complexity of the political and it also has a targeting problem: the proportion economic context, and the need to develop of non-poor households receiving the subsidy strategies tailored to different income ranges, must be considered. _ 88. EIsik-Dikmelik et al. (2023). 89. Jiménez and Ñopo (2024). CHAPTER 4 Poverty and climate change 62 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Salvadorans are particularly exposed to a broad range of shocks. Climate-related shocks in particular are on the rise. Climate change will exacerbate droughts and floods, increasing vulnerability to shocks and exacerbating the burden of disaster-related losses. If a severe shock occurs, extreme poverty could double, but the impacts would extend also to those above the poverty threshold (they are the ‘climate risk induced poor’). As survival strategies among households are sometimes far from ideal, effective social assistance and investments in mitigation and adaptation policies are crucial policy instruments that can provide a safety net for the most vulnerable. Additionally, climate risk links to poverty involve agricultural vulnerability and food insecurity. This is particularly relevant because food prices have experienced until recently a substantial rise since 2021, and future natural disasters could potentially contribute to further increases. To face this, beyond working on improving households’ resilience against natural disasters, the authorities can work to facilitate an effective functioning of food markets. Chapter 4 63 Poverty and climate change 4.1 The poor as the most vulnerable Salvadorans are particularly exposed to a is quite unequal. While 33 percent of people broad range of shocks. Severe weather events from the poorest two income quintiles reported in the form of storms, floods, and droughts having suffered damages from landslides during affect the country, particularly in the Dry Corridor 2012–2017, only 5 percent of the wealthier group (Box 1). During the two most recent decades (quintile 5) experienced similar losses. Similarly (1999–2018), El Salvador was the second-most for floods, a lower share of the wealthier quintile affected country in Central America, with climate reported having damages.96 shocks costing the country approximately 0.75 percent of GDP per year.90 Similarly, earthquakes, Even those above the poverty threshold are at landslides, sea level rise, and volcanos also risk of being pushed into poverty by disasters; pose risks that will become more prominent they are called ‘climate risk induced poor’. In with climate change.91 These natural hazards, addition to the poorest population, some people combined with human hazards such as crime, in quintiles 2 and 3 of the income distribution violence, and accidents, put the country at high may be pushed into poverty due to their lack of risk exposure.92 As climate change worsens capacity to cope with a disaster. The specialized natural hazards, insecurity, conflict, and poverty literature defines them as ‘climate risk induced’— exposure increase, acting as a ‘risk multiplier’. 93 people who have an estimated income above the poverty line (like people in quintiles 2 and 3), Climate change will exacerbate droughts but with such a high estimated variance in their and floods, increasing vulnerability to income that they face an increased likelihood of shocks and exacerbating the burden of falling into poverty due to climate risks. In 2023, disaster-related losses, particularly on approximately 55,000 individuals in El Salvador the shoulders of the poorest households. are climate risk induced, and will fall into poverty With time, climate disasters are increasing in if shocked by a severe disaster.97 intensity and frequency across the country, with consequential economic impacts on the poorest Areas with high vulnerability to poverty and population. There were 39 hurricanes in Central high frequency of disasters concentrate the America during the 2000s, 2.5 times more than risk of being pushed into poverty. Vulnerability in the earlier decade.94 In addition, El Salvador’s to poverty is measured to include both groups: placement in the Dry Corridor, compounded by people below the poverty line (poverty induced), the presence of El Niño/Niña, creates extreme and people whose expected income is equal or events of flooding and droughts. Tropical above the poverty line but their likelihood to fall storms such as Amanda and Cristobal in 2020 into poverty is high due to climate shocks (climate created losses estimated at US$2.9 billion and risk induced) or other types of risks (idiosyncratic an economic impact estimated at 7.5 percent of risk induced). In 2023, 49 percent of total people GDP.95 However, the exposure to these disasters vulnerable to poverty were poverty induced, 49 _ 90. Eckstein et al. (2018); Eckstein et al. (2019). 91. Think Hazard (2024). 92. Rude and Robayo (2023); INFORM Risk (2020). 93. Laderach et al. (2021); Ruttinger et al. (2015). 94. Emergency Events Database (EM-DAT, 2023). 95. UNDP (2022b). 96. Hallegatte et al. (2017). 97. De la Fuente and Serio (2024). 64 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 percent were vulnerable because of other risks are those where more people could be poorer or such as accidents or a terminal disease, and pushed into poverty because climate risks would 2 percent were vulnerable because of climate exacerbate all types of vulnerabilities. These shocks. Figure 23 shows the distribution of the areas include the Santa Rosa de Lima district, number of disasters in the past two decades located in La Unión department; the district El according to EM-DAT and the vulnerability to Refugio, located in Ahuachapán; and San Juan poverty distribution. Highly vulnerable areas Tepezontes, located in La Paz. with the largest number of disasters (exposure) FIGURE 23. VULNERABILITY TO POVERTY AND NUMBER OF DISASTERS CHA 0.5 SAA Vulnerability 4.0 CAP AHU CUS 0.4 SAS MOR SON LAL SAV 0.2 SAM 0.0 2.0 4.0 6.0 8.0 LAP LAU USU Number of disasters EMDAT Source: De la Fuente and Serio (2024). Notes: AHU, Ahuachapán; SAA, Santa Ana; SON, Sonsonate; LAL, La Libertad; SAS, San Salvador; CHA, Chalatenango; CUS, Cuscatlán; CAB, Cabañas; LAP, La Paz; SAV, San Vicente; USU, Usulután; SAM, San Miguel; MOR, Morazán; LAU, La Unión. If a severe shock occurs, extreme poverty increase by 7 percentage points in urban areas could double. By 2023, 12.4 percent of total and 10 points in rural areas, meaning that it population are vulnerable to extreme poverty would almost double its value. This hypothetical (4.1 percent poverty induced and 8.3 percent scenario also suggests stronger consequences risk induced). This value is higher in rural for children and adolescents up to 14 years old, areas and for people at the early stages of life and among women. These results underpin the (children and adolescents ages 0 to 14 years). relevance of addressing vulnerability in efforts In the hypothetical case of a severe shock, the to reduce extreme poverty. This would require population considered vulnerable would become important investment as it has been estimated extremely poor. Under this scenario, as shown that it would cost between 3 and 4 GDP points.98 in Figure 24, the extreme poverty rate would _ 98. De la Fuente and Serio (2024). Chapter 4 65 Poverty and climate change FIGURE 24. EXTREME POVERTY IN COUNTERFACTUAL SCENARIOS IN FRONT OF A SEVERE A) Urban B) Rural 35 35 31 28 30 30 Poverty rate (%) Poverty rate (%) 25 22 25 23 17 18 20 20 20 20 17 14 13 15 12 12 12 15 16 10 10 14 10 12 12 12 11 5 5 9 7 7 8 6 6 9 0 0 Total Mujeres Hombres 0-14 years 15-24 years 25-59 years 60+ years Total Female Male 0-14 years 15-24 years 25-59 years 60+ years Official extreme poverty rate Official extreme poverty rate Extreme poverty rate after a severe shock Extreme poverty rate after a severe shock Source: EHPM (2023) and De la Fuente and Serio (2024 Heat and anomalous precipitation will also formal jobs). An increased demand for health affect labor productivity and public health, services among the poor will likely increase the worsening poverty. Total working hours lost imbalances between these two types of public to heat stress in 2030 for El Salvador will be services. equivalent to 32.3 thousand full-time jobs.99 Even though El Salvador is a malaria-free country, the Similarly, intense floods and extended increasing heat stress altered the seasonality droughts affecting food security could of other mosquito-related illnesses such as exacerbate conflict and migration issues. dengue, zika, and chikungunya, affecting the Extended periods of drought, followed by labor supply, productivity, as well as demand for intense rains, affect Dry Corridor planting and health services. Beyond the present, this poses crops harvesting, threatening income and food challenges for the future as the disease vectors security.101 As food production is disrupted in may mutate generating new maladies. In addition, many regions, it increases not only prices and higher temperature impacts on public health market volatility, but also the loss of income for through labor are likely to include a reduction 13 percent of rural households,102 whose labor in food production and food access, especially income predominantly depends on agricultural for poorer households, and an increase in key production, heightening the risk of protests, conditions for respiratory and cardiovascular riots, and other conflict related variables.103 diseases.100 In this regard, the stratified access These destabilizations have further encouraged to health services in the Salvadoran population the ongoing migration of young and productive becomes particularly relevant. The poor mostly people from these territories, whose remittances use services provided by the Ministry of Health play an important role in El Salvador, but at (MINSAL). They may also have limited access a social and economic cost. Subsistence to the Salvadoran Institute of Social Security farmers and their families are also particularly (ISSS) facilities (due to their lack of access to vulnerable to extreme weather disruptions. _ 99. ILO (2019). 102. ONEC (2023a). 100. D’Amato et al. (2014); Kephart et al. (2022); Kwak (2022). 103. Laderach et al. (2021). 101. World Food Programme (WFP, 2024). 66 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Harvest destruction leaves thousands without Effective social assistance and investments crops to eat or sell, as it compromises food in mitigation and adaptation policies are reserve availability, the main source of food for crucial policy instruments that can provide subsistence farming families. With no food or a safety net for the most vulnerable. In 2011, work nearby, many families are hence forced to only around 8 percent of total vulnerable people migrate to survive.104 and risk-induced vulnerable individuals reported at least one member of their household being The survival strategies that households a beneficiary of a social assistance program.107 adopt to cope with climate disruptions are This percentage was smaller in 2023, where sometimes far from ideal. Climate disruptions less than 1 percent of vulnerable people report are forcing households with limited resources having social assistance. Currents effort need to adopt negative survival strategies such as to be strengthened. The government is already selling assets, defaulting on loans, withdrawing implementing adaptation and mitigation children from school, skipping meals, and eating policies, according to its Nationally Determined less nutritious food. These can undermine their Contributions (NDC) Action Plan 2022–2030. already frail food security and nutrition, leading Similarly, projects to strengthen the government to a decrease in their productivity and the capacity to manage climate migration are already possibilities to obtain income in the long term, in place108 In addition, policy documents such as and even exacerbate intergenerational poverty.105 the country strategic plan 2017–2021 indicate When households suddenly face immediate there have already been efforts aimed at shifting crises (such as those caused by climate hazards) the strategic focus from short-term disaster or when they are constantly subjected to stress emergency responses to a more comprehensive (for example, due to prolonged droughts, water approach to address disaster recovery and the issues), their capacity to address the underlying roots of vulnerability109 which could be leveraged causes of climate vulnerability or to implement to this effect. lasting mitigation and adaptation solutions becomes even more limited.106 4.2 The poorest’ tables are lacking food and water Climate risk links to poverty involve supply system also affects food prices and agricultural vulnerability and food insecurity. availability. The change in climate is affecting Low-income households often depend on the climate suitability for crops, as stronger dry economic activities closely linked to water seasons (lower water availability) and higher availability, such as agriculture. Therefore, they temperatures are expected. This damages are more sensitive to variations in precipitation the expected harvest, makes producing patterns and extreme events like floods and food more costly, and increases food prices. droughts. For instance, during the 2015 droughts, Concurrently, climate pressures increase the 60 percent of the corn production in El Salvador demand for agricultural inputs, such as fertilizers was destroyed.110 But the disruption in the food and pesticides, increasing their prices and _ 104. WFP (2024). 108. International Organization for Migration (IOM, 2023). 105. Rodriguez (2023). 109. WFP (2022). 106. Mullainathan and Shafir (2023). 110. Food and Agriculture Organization (FAO, 2016). 107. De la Fuente and Serio (2024). Chapter 4 67 Poverty and climate change aggravating the effect on food prices.111 Beyond the corresponding percentages for them are 33 productive access to water, domestic access to percent, 28 percent, and 23 percent respectively. 118 water and sanitation for the poor require extra attention as one-fourth do not have access to The most at risk of food insecurity are rural drinkable water and one-half do not have access populations, especially in the departments to in-premises sanitation. of La Paz, Usulután, and Morazan. These regions have the biggest shares of population Food prices saw a substantial increase since whose food intake, diversity, and quality were 2021, and, despite some recent stabilization reduced, and are classified with the highest future natural disasters could contribute to share of food insecurity in the country. In these further increases. The price of food and non- regions, moderate and severe insecurity appears alcoholic beverages increased 22.5 percent more frequently in rural areas. This might be between March 2021 and March 2023, and related to vulnerability of both areas to landslides increased 2.2 percent more between March 2023 and poverty. When disasters occur, they can be and March 2024,112 likely related to the absence disconnected from the main markets, making of massive disasters that year (Storm Pilar was it difficult to transport food to the rural areas of the only storm reported by EM-DAT in 2023, these provinces as well as to the cities. affecting 500 people). If any new climate disaster occurs in the country, food prices could go up To increase the amount of food produced even further due to the lack of locally produced each year nationally, the country faces goods and the difficulty in transporting imported several challenges, such as the decrease products. Climate shocks are proven to cause an in climate suitability for certain crops and inflation rise in El Salvador, with a peak impact of water stress. For El Salvador, coffee has been two to five months post-shock, consistent with a historically important crop and continues to the destruction of agricultural production and be the leading export in the vegetable products reduced transportation of imported products.113 category.119 Coffee combined with beans and As salaries have not risen,114 people can only maize constitute the most important crops in afford less food every year. Higher prices mainly the country. In that regard, more than 40 percent affect households at the bottom of the income of El Salvador’s land will also be affected by a distribution rather than those at the top.115 For decrease in climate suitability for Arabica coffee the poor, a marginal increase in prices often leads production by 2050, while the suitability for to a decrease in daily food consumption (food beans and plantains will be strongly affected.120 access) and substitutions that affect food quality This situation opens the door to diverge into other (food use). In El Salvador, living in extreme poverty crops such as variations of maize, cassava, rice, conditions negatively affects the household and sorghum, which will gain climate suitability. budget allocated to dairy, vegetables, and The dissemination of this type of information to meats.116 Substituting proteins and vegetables farmers is crucial, as they could evaluate and with cheaper foods like carbohydrates fails compare the costs of adapting to the new crops to meet their nutritional needs.117 In 2023, 61 suitable for their region or maintaining the same percent of the extremely poor said that they were crop selection, with the extra costs it would entail worried in the previous quarter about running to protect the plants. out of food, 59 percent had a diet based on little variety of food, and 56 percent stopped having a healthy diet during the same period of reference. Food insecurity also reaches the non-poor as _ 111. World Bank (2022b); Perego et al. (2024). 116. Sandoval and Carpio (2016). 112. BCR (2024c). 117. Martin (2010). 113. Kim et al. (2022). 118. ONEC (2023a). 114. Consumer Defense Center (CDC, 2024). 119. Observatory of Economic Complexity (OEC, 2024). 115. Olivieri et al. (2023). 120. Baca et al. (2014); Bouroncle et al. (2017). 68 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 FIGURE 25. PERCENTAGE OF FOOD INSECURITY BY REGION, 2023 SAA CHA 12.2 13.5 % 21.2 AHU CUS CAP 17.4 SAS16.2 16.1 MOR SON LAL 10.4 19.2 17.1 14.4 SAV LAP 17.5 SAM LAU 16.2 15.6 16.6 10.4 USU 21.2 Source: EHPM (2023). Notes: AHU, Ahuachapán; SAA, Santa Ana; SON, Sonsonate; LAL, La Libertad; SAS, San Salvador; CHA, Chalatenango; CUS, Cuscatlán; CAB, Cabañas; LAP, La Paz; SAV, San Vicente; USU, Usulután; SAM, San Miguel; MOR, Morazán; LAU, La Unión. 4.3 Improving the households’ resilience to natural disasters Fostering resilience among the poorest the ability to pinpoint localities most at risk, against climate-related disasters requires thereby reducing the effectiveness of targeted targeted, heterogeneous responses interventions and ultimately failing to enhance specific to local environmental challenges. the resilience of vulnerable communities. Different regions in El Salvador face unique Unfortunately, currently available data have climatic risks, requiring customized strategies coverage and accuracy limitations.121 that integrate local knowledge and resources. Coastal areas prone to hurricanes need distinct Despite the potential of existing economic preparedness measures compared to inland tools to offset the burden of disasters and regions susceptible to droughts or landslides. aid in swift recovery, their implementation Similarly, among similar geographic areas, urban often falls short. Economic responses are zones require a different set of policies compared crucial in mitigating the impact of climate- to rural areas. Vulnerability is multidimensional, related natural disasters. These responses can involving climate, conflict, food insecurity, and include timely reconstruction efforts, insurance other drivers. The absence of spatial overlays payouts, family transfers, and government that identify where these factors co-occur limits support to affected households and businesses. _ 121. ECLAC (2021). Chapter 4 69 Poverty and climate change Measures, such as temporary emergency cash Risk Organisation (MiCRO), a subsidiary of transfers, like the Bono US$300 implemented Swiss Reinsurance Company in Guatemala during the pandemic, highlight the potential and El Salvador, which promotes parametric mitigation effects for such initiatives. In addition, microinsurance against the risks of earthquake, there is a growing support to the development drought, and excessive rainfall. However, of innovative insurance products and services there are several challenges in the effective for vulnerable individuals and communities. For implementation of economic responses, such as instance, initiatives to reduce the vulnerability effective targeting, so that when a disaster hits and improve the socioeconomic inclusion of transfers can be successfully distributed (that small-scale producers in rural areas have been is, mobile targeting, vulnerability maps specific launched by public institutions, international to disaster at the municipality level or district, organizations, and national and foreign private among others). Stress tests for the system will insurance companies. Some of them include therefore be important in providing valuable for instance the Microinsurance Catastrophe information for improving these mechanisms. BOX 1. The Dry Corridor in El Salvador El Salvador is located within the Dry Corridor, a region in Central America deeply affected by climatic shocks with alternate severe periods of droughts and intense precipitation. This dry tropical forest area occupies one-third of Central America and is characterized by long periods of torrential rains followed by prolonged periods of droughts. Unlike other countries, where only part of their area lies within the corridor, the entire geographic area of El Salvador is part of the corridor. In El Salvador, 73 percent of districts (193/262 of the previous municipalities) are in high-drought zones (orange in the figure), the highest exposure areas within the Dry Corridor. This constitutes 62 percent of the Dry Corridor in Central America. In addition, these communities are concentrated in the departments of Usulatán, Ahuachapán, Cabañas, and La Unión, departments which face the highest poverty rates in the country. This position within the Dry Corridor constitutes a concerning factor of climate exposure, as it makes it even more susceptible to climate change and poverty. Source: FAO (2012). CHAPTER 5 How to improve well-being for all? 72 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Building on gains. The previous World Bank Poverty reduction can work most effectively poverty assessment for El Salvador122 proposed when guided by an overall national strategy two key sets of policy recommendations: (a) and with an adequate governance structure effective pro-poor spending and (b) reduction that effectively coordinates a multisectoral of crime and violence through better access to approach. A national strategy for combating jobs and education. The substantial reduction poverty, establishing ambitious but achievable in crime and violence the country has recently short-, medium-, and long-term goals, with high- accomplished is an important step. It will be level stakeholder buy in, is essential. The evidence necessary to complement it, building on this from more than 70 countries is clear: establishing progress, to continue the path toward an El long-term policy frameworks, adopting Salvador where prosperity can be shared by most evidence-based policies, implementing results- households. based management, and ensuring a meritocratic civil service can improve the effectiveness Violence reduction is likely to positively of service delivery for poverty reduction.125 affect neighborhoods and municipalities. Clearly adopting a multidimensional (and hence With gang-related violence reaching new lows, multisectoral) approach is fundamental. The more economic development is possible. The objective of building a more cohesive society mobility restrictions and geographic segregation must be approached in conjunction with a vision imposed by gangs had detrimental impacts on of inclusion and equity. Additionally, community labor, educational, and social outcomes: gang- engagement and open government policies can controlled neighborhoods had lower incomes, lower contribute to promote accountability for such a probability of owning durable goods, and higher strategy. Empowerment of citizens is also pivotal probability of dropping out of school compared to ensure the state is able to adequately meet to those just outside these territories. Also, their the infrastructure needs of the poor 126 . Effective communities suffered more from stigma in the governance mechanisms for successfully labor markets and social interactions.123 Gangs also implementing the poverty reduction strategy affected economic development at the municipal are key. These can have at least two key positive administration levels. The higher presence of impacts on poverty reduction: enhancing ‘public gangs reduced municipalities’ fiscal revenues, administration procedures’ and ‘public services especially for those the mid-size ones, thereby delivery’. Furthermore, transparency in policy increasing their dependence on transfers from making and planning, vertical accountability, central government. Additionally, municipalities and effective corruption oversight and mitigation with higher gang presence were less likely to spend mechanisms in the public sector has also been their budgets (capital spending) and to provide shown to align with reduced poverty rates.127 basic services. Moreover, it has been found that the reduced revenues, lower capital spending, and Stable macro-fiscal conditions are key for lower service provision had spillover effects on implementing public policies that drive neighboring jurisdictions.124 It is still early to fully development and reduce poverty. Effective discern the impacts of gang violence reductions fiscal management, encompassing sustainable on poverty rates, but future public access to debt strategies and enabling price stability is relevant data could enable proper modelling and essential. Structuring social security funding measurement of the impacts. Despite this, existing efficiently, to promote incentives for both analysis, already points to some key actions the _ government could take for synergetic impacts. 122. Rounseville et al. (2015). 125. Hassan et al. (2020). 123. Melnikov et al. (2023). 126. Page and Pande (2018). 124. Eaton et al. (2024). 127. Nguyen et al. (2019). Chapter 5 73 How to improve well-being for all? workers and employers to contribute and We propose a strategy based on a three-pillar increase labor formality, will support long-term structure as a comprehensive approach to financial health and stability, laying a solid address poverty for El Salvador. Beyond the foundation to build sustainable development strategic considerations, an effective governance policies. Acknowledging El Salvador’s current structure, and the strengthened macroeconomic limited fiscal capacity and the corresponding conditions, and fiscal foundations needed for challenges that lie ahead, the detailed successfully implementing a poverty reduction recommendations that follow should not be seen strategy, we propose a set of recommendations as quick or easy solutions but as opportunities anchored around three basic pillars. First, labor to sustainably enhance Salvadorans’ well-being income generation, which constitutes the over time. Improving income generation, while primary means to escape poverty. Second, ensuring public engagement and enhancing access to high-quality services, essential for resilience against shocks, as well as providing enabling well-being and building of human access to quality services can, when coupled capital. Third, social protection to mitigate shocks simultaneously with efforts to strengthen the and build resilience, ensuring that escaping fiscal framework and the accountability in poverty is sustainable. Figure 1 in the Executive public service delivery, create a promising path Summary provides an overview of this structure. toward effectively reducing poverty and income It is worth emphasizing the three pillars are not inequality. independent. The success on any of them will depend on the success on the others, both in the Better functioning markets can also improve short and the long run. It is important to stress households’ food security. As this report the point about the relevance of a broad national shows, price changes have accounted for an strategy that consolidate these elements, and important share of some of the most recent the key actions covered under each pillar under a increases to poverty rates in El Salvador. Price clear mandate, in coordination with the relevant changes, especially those of food items, have actors and effective governance mechanisms for been found to be responsible for between 2 and implementing it. This wills also require appropriate 3 percentage points increase in poverty across monitoring and evaluation tools, control panels, Latin America.128 Price changes can depend not and all the necessary instruments for modern only on general demand and supply factors for public policy management. In this regard, the (domestic and imported) goods and production experiences of the Centers of Government with inputs, but can also depend on a market structure two-tier approaches (that is, a performance where intermediators can also play a role. Well- framework supplemented by a more selective functioning markets, that adequately integrate set of priority goals) as in Colombia, Pernambuco their intermediate links, can also contribute (Brazil), and Buenos Aires (Argentina) could be to improving households’ food security. This relevant.130 Also, the experience with poverty entails promoting competition through lower alleviation in Peru reveals that performance- barriers to entry and better logistical networks based stimuli could be effective to drive allowing for more frequent and enhanced performance at the local levels.131 interactions among producers, intermediaries, and wholesalers. Better information flows about prices and produce availability could also _ make markets work better more effectively and 128. Olivieri et al. (2023). 129. Perego et al. (2024). mitigate the impact of adverse price movements 130. Shostak et al. (2023). for consumers.129 131. Macroconsult (2023). 74 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 5.1 Income Generation More and better jobs are needed. Chapters 1 markets intermediations should be strengthened and 2 highlighted the central role of labor income and, as we discuss below, directing more in poverty reduction, so it is necessary to create investments to human capital formation. more and better jobs, while supporting the poor’s ability to accessing them. For this, it is relevant to New and better jobs need to reach the poor highlight three i’s that are fundamental to escape and vulnerable, including women, to foster form the middle-income trap: “First invest, then sustainable poverty reduction and inclusive infuse foreign technology and then innovate.”132 economic growth. Chapter 2 highlighted the The key policies to facilitate job creation by firms pronounced job disparities between the poor include attracting and promoting investment, and non-poor to access stable (long-term while reducing barriers to formal job creation employment), adequate (income), and secure jobs and maintaining a reasonable predictability of (with social security) as well as the high female the regulatory framework. The recent B-Ready inactivity linked to the disproportionate burden report by the World Bank highlights that there of caregiving responsibilities. Furthermore, the is room for improvement.133 Initiatives such as recent World Bank report ‘Women, Business and ‘Invest in El Salvador’134 and the One Stop Shop the Law’ highlights the importance of working for businesses (Miempresa)135 aim to attract towards an improved regulatory framework to more foreign investments and streamline firm promote gender equality in El Salvador.136 In creation. These are steps in the right direction the short term, employment policies could be and could be further improved aiming for a strengthened through a multipronged approach. continued reduction of the cost and time This includes promoting private sector driven required for permits and licenses. Having tackled training to ensure relevant skills and better job gang related criminal activity as a key barrier matches and employing integrated interventions to business creation, fostering formalization is such as targeted wage subsidies with training to fundamental in improving job quality. Firms need support vulnerable groups and new entrants to to enhance their capacity to be more productive the labor market. Additionally, job search support and create jobs. Key policies include improving and labor market prospective intelligence are access to credit with stronger support for micro essential to understand employment trends and small enterprises by introducing Credit and demands.137 These policies have been Guarantee Schemes (CGS) to reduce the credit integrated as part of the World Bank financed risk and contribute to diversifying their access to project to improve access to jobs and skills targeted financial products. In order to improve development for vulnerable youth and young access by the poor to quality jobs, efforts on job adults, which will soon begin implementation. 138 _ 132. World Bank (2024d). 133. World Bank (2024f). 134. See https://investinelsalvador.gob.sv/ 135. See https://www.miempresa.gob.sv/ 136. World Bank (2024e). 137. Isik-Dikmleik et al. (2023). 138. https://www.worldbank.org/en/news/press-release/2023/11/28/banco-mundial-facilitar-oportunidades-empleo-y- desarrollo-habilidades-para-jovenes-el-salvador Chapter 5 75 How to improve well-being for all? Low human capital is a key barrier to find better benefit from its use. For green transitions, jobs, as we discuss below, and more long-term trainings should be designed based on green investments in human capital formation are skills, that is, the specific skills related to the needed. Continuing to work on providing quality evolution of green technologies, to properly early childhood care can secure good care integrate them with existing training policies practices for the most vulnerable that contribute or in the long run create new educational and to increasing labor participation by freeing up training programs.144 time for caretakers to engage in employment.139 Accessible childcare can expand the range It is necessary to foster rural income of employment opportunities available to through improved agricultural practices caregivers, enabling them to pursue more stable and market access. Labor income reductions and lucrative positions. 140 in rural areas have been among the main drivers of the increasing poverty (Chapter Training for digital skills, artificial intelligence, 1), so working on this should be priority. and green transitions is essential for future Mainstreaming of climate-smart agriculture readiness. Offering upskilling and reskilling (CSA), a set of practices and technologies which opportunities and coordinating with tertiary simultaneously boost productivity, enhance education institutions to supply workers for climate resilience, and reduce greenhouse high-demand areas will create a workforce gas (GHG) emissions will be key. This includes prepared for emerging economic sectors. greater organic input use, soil conservation Upskilling and reskilling programs must address measures, the adoption of irrigation systems the needs of both current and future labor and water- and energy-saving technologies, market participants. Trainings will need to be greenhouse production, agroforestry, and the targeted to workers who face greater challenges adoption of drought- and flood-resistant crops recovering from displacement by technology. and varieties. Better management of shade, The most vulnerable to disruption are generally fertility, crop residues, pests, and diseases are the less educated, younger, and rural workers.141 also needed to counteract the high variability It is important to involve the productive sector of annual crop productivity in the Dry Corridor. to identify their short- and long-term needs These practices not only improve efficiency in and ensure high-quality capacity building to the use of natural resources but also improve effectively enhance employability prospects and productivity and reduce vulnerability to climate improve wages.142 For example, through its ETRI- shocks. In the short run, existing subsidies and VET143 initiative, the World Bank is working with support to farmers or agribusinesses could countries to develop a tool (global public good) be leveraged to support the adoption of CSA that assesses readiness of formal Technical and technologies and practices, coupled with a Vocational Education and Training (TVET) and strengthened provision of technical assistance higher education entities to reskill youth amidst to small producers to enhance CSA uptake (this digital transformation. El Salvador could directly is the case for instance for the Costa Viva145 _ 139. Mateo-Díaz and Rodriguez-Chamussy (2016). 140. Alfers (2016). 141. Moroz and Viollaz (2024). 142. Ripani et al. (2020). 143. https://www.worldbank.org/en/topic/education/brief/edtech-readiness-index 144. Vona (2021). 145. See: https://projects.bancomundial.org/es/projects-operations/procurement-detail/OP00319829? 76 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 initiative, funded by the Japan International Detailed tailor-made strategies for Cooperation Agency -JICA- and implemented addressing specific environmental and by the World Bank in partnership with Catholic agricultural challenges in rural areas of El Relief Services, to improve CSA adoption and Salvador are essential. Promoting agriculture link in-land agricultural communities with productivity and resilience and sustainable coastal markets). In the long term, subsidies and landscape practices calls for a cross sectoral support to individual farmers should be shifted to and territory based approach. Restoration of finance public goods and services that can build forest systems at the upper and middle parts up resilience and productivity. These actions of watersheds is recommended to enhance will need to be supported by improvements in water infiltration toward aquifers and reduce agrologistics infrastructure and services as well the runoff (the ‘flush’ effect), which is important as investments in digital connectivity, which can for facing extreme precipitation caused by El enhance resilience and facilitate better market Niño. Reforested areas can also contribute access. Improving rural infrastructure (access to decreasing landslides. Improving irrigation to drinking water and drainage, expansion of the technologies, such as drip irrigation, and using rural road network) will also provide improved water harvesting solutions such as AGRI,147 a opportunities for the rural poor to access non- publicly available tool that helps farmers locate agricultural employment as well.146 nearby watersheds and identify the best time to harvest, address the high risk of drought events in the Dry Corridor. Adapting to a lower suitability for crops such as Coffee Arabica due to climate events requires diversification through better agrological management or different crops.148 5.2 Access to quality services ‘Growing Together’,149 which came into effect in January 2023, aims at ensuring early childhood development through a multisectoral policy with Ensuring sound early childhood development a focus on health and education. In support of the is foundational for reducing poverty and education component, the World Bank is financing income inequality in the long term. Prioritizing teacher training, curriculum modernization, and improvements in education quality from the early improved learning environments, with these years improves children’s school readiness and efforts targeted toward supporting children’s lifelong learning and equips individuals with skills life trajectories through age-appropriate, high- that will potentially enhance their productivity quality, and nurturing services. These programs and therefore their economic returns. As will set a solid foundation for lifelong learning, addressed in Chapter 2, this is an important improving cognitive and social skills.150 challenge in El Salvador. The national strategy _ 146. Marques (2004). 147. See https://alliancebioversityciat.org/stories/agri-tool-charts-better-way-forward-farmers 148. Baca et al. (2014). 149. See https://crecerjuntos.gob.sv/ 150. Bendini and Devercelli (2022). Chapter 5 77 How to improve well-being for all? Improving high-quality education along from a life-cycle approach to address the risks the life cycle. The next step in the national and vulnerabilities in each life stage.153 As strategy for human capital formation needs to outlined earlier in these recommendations, address elementary and secondary schooling this starts with investments in early childhood on the one hand and tertiary education on the development. Improving links to labor markets other, within a life-cycle approach that secures and livelihoods support for youth and for the minimum dropouts and maximum learning adult poor and vulnerable not only enhances across all stages. As emphasized in Chapter 2, resilience but stimulates their recovery in the there are pending academic challenges tied aftermath of shocks. On the other side of the to enrollment and attendance as well as with life cycle, establishing the basis for a broader learning. The drop in schooling premium that pension system to ensure financial security for El Salvador is experiencing (along with other the elderly is also relevant, especially given high Latin American countries) should also be noted. informality rates and accelerated aging due to Strengthening the teaching career throughout high youth migration, as discussed in Chapter 3. the education system and building quality While some households benefit from pensions, infrastructure are key elements necessary to the poor barely receive any, whether from generate improvements in the education system contributory or non-contributory funds. Creating that can address student needs across the life mixed contributory systems, where families— cycle. These should be complemented with including the use of their remittances—and the a clear emphasis on the need for improving government jointly fund pensions, can foster foundational skills (mathematics and reading) a sustainable and inclusive pension system, at all educational stages.151 Experiences such as without disincentivizing formal work.154 the one in Ceara (Brazil) show that substantial improvements are possible when resources, Quality and accessible health services monitoring, and political will converge within an are foundational for reducing poverty and evidence-framework for decision-making.152 inequality, but the design of incentives is extremely important. The segmentation of Leveraging existing poverty mitigation the health system (composed by MINSAL, ISSS, programs in the country with revamped and private sector) can reinforce socioeconomic designs can play an important role in poverty inequalities, especially if the quality of the reduction, human capital development, and public services provided by MINSAL is limited. economic inclusion for higher resilience. Well- The poor often have limited access to formal targeted programs with expanded coverage have jobs and, therefore, to the quality standards of been shown to play an important role on poverty ISSS services. An improved quality of services reduction. Countries such as Argentina, Brazil, provided by MINSAL would improve general and Uruguay have demonstrated the importance wellbeing of the most vulnerable, favoring a of investing in routine social protection programs more equitable and efficient health system. At with high coverage and scalability protocols the same time, nonetheless, improvements in for times of shock. Building resilience ahead of the health system should be carefully designed shocks involves articulating social protection to avoid disincentives to formality in the labor _ 151. World Bank (2018). 152. Raiser (2018). 153. Tisei and Ed (2024). 154. Levy (2017). 78 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 markets and, in turn, on human capital formation. Chapter 3. CGS, accompanied by other measures A forthcoming World Bank report provides such as enhancing the regulatory framework, analysis and proposes plausible paths for reforms can increase credit access for micro, small and in such direction in the medium run.155 medium enterprises (MSMEs) and provide an incentive for formalization while increasing Some strategies could help build on the reduced financial inclusion for firms.158 Equally critical gang-related criminal activity and help sustain is the provision of financial literacy programs to these gains. Developing services to engage Salvadorans, allowing them to effectively use youth, preventing their involvement in criminal these services and enhance their economic activities by offering attractive and viable paths opportunities. Sustainable expansion of digital to a productive life, and integrating them into financial services relies on the availability of the formal economy is essential. The Urban effective digital infrastructure as well as on Centers for Well-Being and Opportunities user capability and connectivity. Developing (CUBO), community centers designed to engage a modern legal and regulatory framework is residents, particularly youth, in productive and important to address risks and create trust in educational activities in vulnerable communities digital transactions.159 could provide an example of ongoing efforts that could be leveraged to this effect and contribute Facilitating the reception of remittances to improving community cohesion.156 Evidence and promoting certain uses can increase indicates these mechanisms have the potential earnings potential and reduce vulnerability. to promote improved educational outcomes Remittances in El Salvador are the main source and reduce stigma, particularly among youth in of non-labor income for households that affected areas. 157 receive them, and offer both challenges and opportunities, as analyzed in Chapter 3. Policies Providing financial inclusion enhances that reduce transaction costs and incentivize economic integration. Promoting digital the use of remittances for education, training, financial services from diverse suppliers on and asset acquisition can boost their economic common platforms, leveraging remittances impact. In a randomized field experiment, to foster financial inclusion, and utilizing the ‘EduRemesa’ fund-matching program for government-to-citizen payments through Salvadoran migrants offered a 3-to-1 match and digital channels are all steps the government increased educational expenditures for students is already implementing to promote inclusion. in secondary or tertiary education in El Salvador An action with the potential to increase the by US$3.72 for each US$1 matched, plus an scope and impact of those investments could additional US$0.33 sent by the migrant.160 This be structured around improving El Salvador’s suggest, Salvadorans can be encouraged to low degree of financial inclusion, as shown in use remittances for investments conducive for development. _ 155. World Bank (forthcoming). 156. CUBO (2024). 157. Jaitman (2019); Sviatschi (2019). 158. Banegas and Winkler (2020). 159. World Bank (2022c). 160. Ambler et al. (2015). Chapter 5 79 How to improve well-being for all? 5.3 Social protection to mitigate shocks and build resilience Information for better management and Indonesia could be a relevant benchmark for El expenditure efficiency. It is necessary to Salvador. 162 redesign and improve social programs to increase both effectiveness and efficiency. Adaptive social protection is key to Coverage, targeting, and size of the transfers supporting families in poverty and need improvements that also take into reducing vulnerability to shocks. Adaptive consideration the country’s fiscal capacity. This social protection helps build the resilience of requires improving the quality of information households that are vulnerable to shocks through and widening the reach of the RUP, currently direct investments that support their capacity just covering one-quarter of the population, to to prepare for, cope with, and adapt to shocks identify beneficiaries and prevent duplicates that protecting their well-being and ensuring that can enhance the efficiency of these expenditures. they do not fall into poverty or become trapped in Improving integration of different sources of poverty because of the impacts. Linking poverty administrative data and updating the information data with climate risk information allows for of registered individuals to improve targeting quicker responses to climate shocks, enabling also can help in this endeavor. Additionally, horizontal or vertical expansion to protect both implementing effective targeting tools ensures the currently poor and the vulnerable populations that support reaches those most in need. In El who are at risk of falling into poverty due to these Salvador, one of the best targeted programs is shocks. Promoting resilient infrastructure and considered to be the Conditional Cash transfer services, implementing resilient urban planning, Bono Primera Infancia y Educación, but it has building capacity locally, and adaptive social a low coverage and requires a higher budget protection measures to respond promptly to allocation to increase its reach. Currently, the disasters can mitigate their adverse effect and highest budgeted social public interventions are protect Salvadorans from falling into poverty subsidies to energy, water and LPG consumption, due to these events. Effective implementation yet about 74 percent of their beneficiaries are non- of these economic measures is key to building poor. Gradual retargeting of these consumption- a resilient economic framework that can adapt based subsidies can improve the quality of these to the increasing frequency of climate-related expenditures key to enhancing impact under tight challenges. A solid adaptive social protection fiscal contexts—which can help expand targeted system can be achieved through (a) a stronger, transfers to build resilience for the poor, protect more comprehensive social protection system human capital, and improve poverty reduction. composed of multiple programs with high The changes needed to improve expenditure coverage and adequate benefit amounts; (b) efficiency, nonetheless, require a carefully better data and information on risks and people’s designed communication and dissemination needs and better management of socials registries strategy to avoid misinformation and mistrust and early warning systems (EWS) to allow a faster which was at the core of previous unsuccessful shock response through forecasting and impact attempts in the country.161 Elements of a similar projections; (c) improved risk financing strategies experience regarding energy subsidies reform in and sufficient financial resources that enable _ 161. Calvo-Gonzalez et al. (2017). 162. Calvo-Gonzalez et al. (2017).World Bank (2023b); Ihsan et al. (2024) 80 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 funding to flow in the event of a shock and thus with financial inclusion initiatives, requiring enable a faster response to disasters; (d) better beneficiaries to open bank accounts tied to institutional arrangements and partnerships that their national ID numbers, making the payout of anchor the planning, coordination management, transfers during shocks faster. 165 and delivery of Adaptive Social Protection (ASP), including delivery and payment systems. The Strong data and information architectures increasing frequency and severity of disasters have the potential to identify beneficiaries to as well as the high share of vulnerable people in shock-responsive programs based on their El Salvador present compelling reasons to vulnerability and exposure to disasters. El invest in ASP. Salvador has in place a robust functioning multi- hazard EWS but with poor links to the social A system of temporary emergency cash protection sector to provide safety net support transfers to alleviate the impact of climate for effected populations. Data and information change shocks. As addressed in Chapter 4, the can be collected through EWS and social poor are the most vulnerable to climate shocks. registries. With this information, it is possible to Carefully designed transfers in the face of shocks understand the extent of the shock and how are a viable instrument. These transfers can many people are in need of assistance. There is be designed to scale up and down, depending potential to combine risk data (for instance, from on predefined ‘automatic stabilizers’ that EWS) with data in the social registry to inform trigger the emergency response. This involves shock response through the social protection selecting risks to trigger an automatic response, system. In the Dominican Republic this has been operationalizing the architecture of triggers and done by combining a risk index: Vulnerability protocols for scaling, and calibrating benefits Index to Climate Shocks (IVACC) and the Single regarding coverage, size, duration, and pre- Beneficiary System (SIUBEN). IVACC is a tool event financing.163 Examples of these programs’ that calculates the probability of a household implementation include those of Peru, Chile, and being vulnerable to climate-related events. It is the Dominican Republic. Anticipatory transfers, based on the socioeconomic and geographic which deliver support before the shock, can help characteristics of a household from SIUBEN. buffer impacts and prepare for the aftermath. This Because of IVACC, it is possible to understand the strategy, in the advent of a flooding event, has vulnerability of each household in SIUBEN and been found to reduce food insecurity, increase to implement policies for prevention, mitigation, the likelihood of effective evacuations, reduce and response to shocks before they happen.166 asset losses, and a decrease in the likelihood of borrowing money at high interest rates. In Insurance, particularly climate insurance contexts of crisis response, it is important to products, is central to economic resilience take early and speedy action, analyze deeper against climate impacts. Remittances often the ideal size and frequency of transfers, and surge in response to natural disasters in low- use geographical variables to target beneficiaries and middle-income countries, acting as a private of emergency response interventions.164 For insurance that mitigates these events’ impacts. this, it would also be important to improve on It has been found that remittances increase the low financial inclusion the country exhibits by more than 3 percentage points in countries and make more intense use of digital payment like Nicaragua and Honduras following climate methods. In Peru, for example, the traditional method of distributing physical cash has largely _ been replaced by digital payment methods, 163. Gentilini (2022). 164. Pople et al. (2021). such as mobile banking and e-wallets. This shift 165. Tisei and Ed (2024). toward digitalization has also been integrated 166. Tisei and Ed (2024). Chapter 5 81 How to improve well-being for all? events.167 However, the scenario in El Salvador is economic advancement.171 This is particularly less clear-cut, revealing a need for robust social relevant in El Salvador given the low female labor protection and climate insurance products to participation, as shown in Chapter 2. On the better support vulnerable populations during other hand, establishing the basis for a broader extreme climate events. Insurance should be pension system to ensure financial security for at the macro168 and micro levels, aligned to the elderly is also necessary, especially with high fiscal capabilities and tied to personal policies informality and accelerated aging due to high like household and agricultural insurance and youth migration, as discussed in Chapter 3. While government-backed schemes like catastrophe some households benefit 172 . Informality not only bonds and climate social safety nets. These deprives workers of social security protection products can provide immediate financial relief but also affects their future retirement benefits in the event of a disaster, reducing the time and their labor income in the present. Reducing and economic strain associated with recovery. labor informality would require likely changes not By spreading the financial risk among a larger only in employment legislation, but also in the pool over time, climate insurance can offer a productivity and social norms such that the (dis) sustainable model for economic stability in the incentives toward (in)formality are worth it for face of environmental unpredictability. Access most workers and employers 173 . to affordable and context-specific climate insurance could serve as a critical buffer for the Improving human capital outcomes for the poorest in El Salvador, safeguarding them against lower-income population is critical. Chapters potentially devastating economic impacts. 1 and 2 noted the link between low human capital Developing the markets for those instruments and poverty. To break such link, social protection would also be valuable, especially aligning them interventions have a transformative potential to the country’s Estrategia de Gestion Financiera in addressing human capital gaps. Continued ante el Riesgo de Desastres, which represents investment in well-targeted social protection a key set of policies and instruments to foster programs (safeguarding the fiscal space)—such climate resilience. Developing sector-specific as conditional and unconditional cash transfers, approaches (for example, for agriculture) under along with productive inclusion initiatives— this policy, as well as ensuring that disaster risk remains essential. These programs not only finance instruments channel some resources provide direct support to vulnerable populations directly to the most vulnerable households can but also help alleviate poverty and foster human also strengthen the strategy.169 capital development. Incorporating behavioral approaches and nudges into social assistance Social protection and labor market policies programs can incentivize individuals to access should be addressed with an integral critical services, including healthcare, nutrition, approach. In chapters 1 and 4 we show that education, and ECD thereby promoting human poor households have more young children, capital accumulation and improving overall well- and children are the most vulnerable to shocks. being. Additionally, social assistance programs Early childhood care interventions offer dual should incorporate well-designed graduation socioeconomic benefits: they ensure high- strategies to ensure smooth, sustainable quality care for vulnerable populations while transitions from benefits to labor market simultaneously enhancing women’s economic integration. participation by reducing childcare constraints. _ By providing accessible childcare services, 167. G Babii et al. (2022); Kim et al. (2022); Balli and Balli (2011). women can liberate time previously dedicated to 168. Cebotari and Youssef (2020). 169. Gobierno de El Salvador (2021). caregiving, enabling them to enter, remain, and 171. Mateo-Días and Rodriguez-Chamussy (2016). advance in labor markets170 , thereby expanding 170. Alfers (2016). 172. Levy (2017). their professional opportunities and potential for 173. World Bank (forthcoming). 82 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Appendix 5 83 Comparing international and official poverty in El Salvador Appendix. Comparing international and official poverty in El Salvador 84 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 In their daily life, Salvadorans refer to poverty as For international comparisons, the World Bank “not having the resources to be able to buy and uses two international poverty lines, one at satisfy the needs we have.”174 Accordingly, and US$2.15 and the other at US$6.85 per person per following international standards, the National day (measured in 2017 PPP). These are the median Statistics and Census Office (ONEC) measures official poverty lines of low-income and middle- two types of monetary poverty: extreme and income countries in the world, respectively. relative. Being extremely poor means not having The World Bank uses a single measure for the enough to cover the cost of a basic consumption whole country without distinguishing between basket (with a nominal value in 2023 of US$1.5 rural and urban areas, as the official figures do. per person per day in rural areas and US$2.3 Qualitatively, they are comparable to the extreme in urban areas). Being relatively poor means and total official poverty statistics. The qualitative not being extremely poor, but also not having similarities among poverty indicators, however, enough income to cover the cost of an expanded does not constitute any sort of formal statistical basic consumption basket, valued at twice the property. They are clearly different statistical cost of the extreme poverty basket. Total poverty objects, obtained with methodologically different is then measured as the aggregate of extreme procedures, that behave qualitatively similar poverty and relative poverty. Note that the official (Figure A.1). These methodological differences statistics use different incomes (‘poverty lines’) may lead to diverging trends between both for rural and urban areas. types of poverty rates. Between 2021 and 2023 official and international poverty measures show opposite trends, while the official statistics indicate an increasing tendency, the international ones show a decreasing one. FIGURE A.1. POVERTY TRENDS IN EL SALVADOR AT OFFICIAL AND INTERNATIONAL POVERTY LINES, 2000–2023. A) Urban B) Rural 80 80 Poverty rate (%) Poverty rate (%) 60 60 40 40 20 20 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Official poverty Official poverty Official extreme poverty Official extreme poverty Low income poverty (US $2.15 in 2017 PPP) Low income poverty (US $2.15 in 2017 PPP) Middle income poverty (US $6.85 in 2017 PPP) Middle income poverty (US $6.85 in 2017 PPP) Source: SEDLAC. (2023). Note: There are no international poverty lines for 2020 due to methodological limitations. _ 174. UNDP (2015). Appendix 5 85 Comparing international and official poverty in El Salvador There are four key differences between the The first methodological difference does not official poverty figures and the international ones seem to be the culprit of the diverging trends computed by the World Bank, three of them between 2021 and 2023 as those are seen related to the computation of household income within both rural and urban areas. The next and one to income indexation (and, hence, the two methodological differences also seem to role of inflation). First, the World Bank imputes have little role, especially for those in the lower an income increase in rural households by 15 income deciles. In urban areas, within the first percent to reflect cost of living differences with decile of per capita household income, nominal respect to those in urban settings, computing per capita household income increased by 9 then a single poverty line for the country. ONEC/ percent between 2021 and 2023 according to BCR, the agency computing the official statistics, official figures and 6 percent according to the does not impute rural incomes, they address international ones. Within the second decile the rural-urban differences in cost of living by the income increased 7 percent and 6 percent setting different poverty lines by urban and respectively, and within the third decile both rural areas. Second, the World Bank imputes increased 6 percent and 5 percent. In rural areas rent for those households who do not declare both incomes increased by 13 percent and 11 it. ONEC/BCR in turn does not. Third, there are percent respectively within the first decile and 12 income items that the World Bank does not percent and 11 percent within the second decile, consider for the computation of household and by 14 percent and 12 percent within the third income, but the official figures do include them decile respectively. (car depreciation, savings disposal, inheritances, lotteries, severance payments, and sporadic To analyze the fourth methodological difference, incomes). Fourth, the official poverty lines are we resort to a decomposition exercise. We updated annually to reflect changes in food decompose changes in poverty into three parts: prices within the basic food basket. Conversely, one due to overall income growth, one due to international poverty lines are expressed in 2017 changes in the distribution of income, and one PPP to account for differences in real prices due to changes in nominal prices (and hence, the between countries (and it is assumed that these poverty line). Both, in rural and urban areas, the lines change at the same rate as the consumer growth effect is similar in sign and magnitude, price index). but the redistribution effect show different signs. As the international poverty line is fixed in real terms, the poverty line component in the poverty change decomposition is by construction equal to zero. Then the sign and magnitude of the poverty line effect (inflation) strongly influence the differences in sign of the changes in poverty between the official and the international measurements. The recent discrepancy in trends is mostly explained by price changes. 86 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 FIGURE A.2. COMPARATIVE DECOMPOSITION OF POVERTY CHANGES (GROWTH, REDISTRIBUTION, AND POVERTY LINE), 2021–2023 A) Urban B) Rural 8 8 Change in poverty (%) Change in poverty (%) 6 6 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6 Official poverty Middle income poverty Official poverty Middle income poverty (US$6.85 in 2017 PPP) (US$6.85 in 2017 PPP) Poverty line effect Redistribution effect Poverty line effect Redistribution effect Growth effect Total Growth effect Total Source: EHPM (2021–2023). Although for this report we will mainly use the official poverty statistics, the international poverty computed by the World Bank allows informative cross-country comparisons. Appendix 5 87 Comparing international and official poverty in El Salvador References Acosta, Pablo. 2011. “School Attendance, Child Babii, Aleksandra, Alina Carare, Dmitry Vasilyev, Labor, and Remittances from International and Yorbol Yakhshilikov. 2022. “Evolution of Migration in El Salvador.” The Journal of Remittances to CAPDR Countries and Mexico Development Studies 47 (6): 913–936. https://doi.or During the COVID-19 Pandemic.” Working Paper g/10.1080/00220388.2011.563298. No. 2022/09. International Monetary Fund. https://www.imf.org/en/Publications/WP/ Aguilar, Gonzalo, and Hugo Ñopo. 2024. “Poverty Issues/2022/05/13/Evolution-of-Remittances- and Labor Transitions in El Salvador 2018-2022.” to-CAPDR-Countries-and-Mexico-During-the- COVID-19-Pandemic-517872 Aguilar, Gonzalo, María Cárdenas, Sofia Hidalgo, and Hugo Ñopo. 2024. “Poverty and Inequality in El Baca, María, Peter Läderach, Jeremy Haggar, Götz Salvador: A Snapshot of Current Trends.” Schroth, and Oriana Ovalle. 2014. “An Integrated Framework for Assessing Vulnerability to Climate Aguilar, Gonzalo and María José Erazo. 2023. Change and Developing Adaptation Strategies for Dinámica de las brechas de género en el mercado Coffee Growing Families in Mesoamerica.” PLOS de trabajo remunerado en El Salvador : ¿Cómo ONE 9 (2): e88463. cambian según la edad de los hijos?. CLACSO. https://biblioteca-repositorio.clacso.edu.ar/ Balcázar, Carlos, and Hugo Ñopo. 2024a. “Non- handle/CLACSO/171464 Parametric Pseudo-Event Study Designs: Estimating the Motherhood Earnings Penalty in El Alfers, Laura. 2016. “Our Children Do Not Get Salvador.” the Attention They Deserve.” WEIGO Child Care Initiative Research Report. Cambridge, MA: WEIGO. Balcázar, Carlos, and Hugo Ñopo. 2024b. “Measuring Housing Deprivation: An Application to Ambler, Kate, Diego Aycinena, and Dean Yang. El Salvador.” 2015. “Channeling Remittances to Education: A Field Experiment among Migrants from El Balcázar, Carlos, and Silvia Redaelli. 2017. Salvador.” American Economic Journal: Applied “Measuring Housing Deprivation: Methodology and Economics 7 (2): 207–32. https://doi.org/10.1257/ an Application to Afghanistan.” https://cfbalcazar. app.20140010. github.io/files/pdf/research/Measuring_Housing_ Deprivation_Afghanistan.pdf? Anzoategui, David, Asli Demirgüç-Kunt, and María Balli, Fazile, and Hakan O. Balli. 2011. “Income and Soledad Pería. 2014. “Remittances and Financial Consumption Smoothing and Welfare Gains Across Inclusion: Evidence from El Salvador.” World Pacific Island Countries: The Role of Remittances Development 54: 338–349. and Foreign Aid.” Economic Modelling 28 (4): 1642–1649. Banegas, Nancy, and Hernan Winkler. 2020. “El Salvador Diagnóstico del Trabajo: Comprendiendo los Desafíos para Lograr Más y Mejores Trabajos en El Salvador - Un Enfoque Integrado.” Job Series No. 24. Washington, DC: World Bank. http://hdl. handle.net/10986/34699 License: CC BY 3.0 IGO. 88 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 BCR (Banco Central de Reserva). 2024a. “Ingresos Buitrago-Hernandez, Paola, Jacobus Hoops, mensuales de remesas familiars.” https:// Phoebe Ishak, Raquel Melgar, and Hugo Ñopo. estadisticas.bcr.gob.sv/serie/ingresos-mensuales- 2024. “Poverty is Not Gender Neutral in Latin de-remesas-familiares? America and the Caribbean.” World Bank Blogs. https://blogs.worldbank.org/en/latinamerica/ BCR. 2024b. “Producto Interno Bruto: Producción, poverty-not-gender-neutral-latin-america-and- Gasto e Ingreso. A precios Corrientes.” https:// caribbean estadisticas.bcr.gob.sv/serie/producto-interno- bruto-produccion-gasto-e-ingreso-a-precios- Calvo-Gonzalez, Oscar, Barbara Cunha, and corrientes? Riccardo Trezzi. 2017. “When Winners Feel Like Losers: Evidence from an Energy Subsidy BCR. 2024c. “Índices de precios al consumidor.” Reform.” Policy Research Working Paper No. 7265. https://estadisticas.bcr.gob.sv/serie/indice-de- World Bank, Washington, DC. http://hdl.handle. precios-al-consumidor-ipc? net/10986/21998 License: CC BY 3.0 IGO Bendini, Magdalena, and Amanda Devercelli. CDC (Centro de defensa al consumidor). 2024. 2022. “Quality Early Learning: Nurturing Children’s “Urge aliviar el costo de vida.” CDC. https://www. Potential.” Washington, DC: World Bank. http://hdl. cdc.org.sv/index.php/noticias/nacionales/789- handle.net/10986/37371 License: CC BY 3.0 IGO. conferencia-8-5-2024? Bolch, Kimberly, Luis F. Lopez-Calva, and Eduardo Cebotari, Aliona, and Karim Youssef. 2020. Ortiz-Juarez. 2023. “’When Life Gives You Lemons’: “Natural Disaster Insurance for Sovereigns: Issues, Using Cross-Sectional Surveys to Identify Chronic Challenges and Optimality.” International Monetary Poverty in the Absence of Panel Data.” Review Fund. https://www.imf.org/en/Publications/WP/ of Income and Wealth 69: 474–503. https://doi. Issues/2020/01/17/Natural-Disaster-Insurance- org/10.1111/roiw.12566 for-Sovereigns-Issues-Challenges-and- Bouroncle, Claudia, Pablo Imbach, Beatriz Optimality-48925 Rodríguez-Sánchez, Claudia Medellín, Armando CELADE (Latin American and Caribbean Martinez-Valle, and Peter Läderach. 2017. Demographic Centre). 2024. “Long Term “Mapping Climate Change Adaptive Capacity and Population Estimates and Projections: 1950-2100.” Vulnerability of Smallholder Agricultural Livelihoods https://nam11.safelinks.protection.outlook.com. in Central America: Ranking and Descriptive mcas.ms/GetUrlReputation?McasTsid=15600& Approaches to Support Adaptation Strategies.” MdcaOrigin=https%3A%2F%2Fusc-word-edit. Climatic Change, Springer 141 (1): 123–137. officeapps.live.com.mcas.ms&McasCtx=4 Brummund, Peter, Christopher Mann, and Carlos Celhay, Pablo, and Sebastian Gallegos. 2024. Rodríguez-Castelán. 2018. “Job Quality and “Schooling Mobility across Three Generations in Six Poverty in Latin America.” Poverty and Equity Latin American Countries.” IZA Discussion Paper Notes number 9. World Bank. https://documents1. No. 17072. http://dx.doi.org/10.2139/ssrn.4871144 worldbank.org/curated/en/825891536180050395/ pdf/Job-Quality-and-Poverty-in-Latin- Cerritos, Monica, and Gonzalo Aguilar. 2015. America.pdf?_gl=1*1ek4q60*_gcl_ “Efectos de las transferencias y los subsidios au*MTYwNzI3MDQ1OS4xNzI0NDIyNDc4 sobre la pobreza y la distribución del ingreso en El Salvador.” Fundación Nacional para el Desarrollo, San Salvador, El Salvador. https://repo.funde.org/997/1/Efectos%20 transferencias%20y%20subsidios.pdf Appendix 5 89 Comparing international and official poverty in El Salvador Chen, Li-Yu. 2022. “Literature Review on Eaton, Kent, Silvana Huanqui, and Jose Larios. Poverty and Mental Health: Casual Relationship 2024. “Decentralization and Criminal Gangs in and Their Measurement.” Utrech University. El Salvador: Impacts on Municipal Finances and https://studenttheses.uu.nl/bitstream/ Local Economic Development.” The Journal of handle/20.500.12932/43307/A%20Literature%20 Development Studies, April 1–22. doi:10.1080/0022 Review%20on%20Poverty%20and%20Mental%20 0388.2024.2339932. Health.pdf?sequence=1 Eckstein, David, Marie-Lena Hutfils and Maik Winges. 2018. “Global Climate Risk Index 2020 CONAMYPE (National Commission for Micro Who Suffers Most from Extreme Weather Events? and Small Enterprises). 2024. “Caracterización Weather-Related Loss Events in 2018 and 1999 detallada de la Microempresa.” https://www. to 2018.” Berlin: Germanwatch. Briefing paper. conamype.gob.sv/ https://www.germanwatch.org/sites/default/files/ Cunha, Flavio, and James Heckman. 2009. Global%20Climate%20Risk%20Index%202019_2. “Investing in our Young People.” Rivista pdf Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell’Universita’ Cattolica del Sacro Eckstein, David, Vera Künzel, Laura Schäfer, and Cuore 117 (3): 387–418. Maik Winges. 2019. “Global Climate Risk Index 2020 Who Suffers Most from Extreme Weather CUBO (the Urban Centers for Well-Being and Events? Weather-Related Loss Events in 2018 and Opportunities). 2024. “Informe completo de 1999 to 2018.” Berlin: Germanwathc. https://www. encuesta CUBO – Kantar Mercaplan.” CUBO. germanwatch.org/sites/default/files/20-2-01e%20 https://cubo.gob.sv/download/informe-final- Global%20Climate%20Risk%20Index%202020_14. encuesta-cubo-kantar-mercaplan/? pdf? D’Amato, Gennaro, Lorenzo Cecchi, Mariella ECLAC (Economic Commission for Latin America D’Amato, and Isabella Annesi-Maesano. 2014. and the Caribbean). 2021. “Comprehensive “Climate Change and Respiratory Diseases.” Eur Development Plan for El Salvador, Guatemala, Respir Rev 161-9. doi: 10.1183/09059180.00001714. Honduras and south-southeast Mexico.” Santiago, vol. 2 (LC/TS.2021/8). https://repositorio.cepal.org/ Denboba, Amina, Leslie Elder Joan Lombardi, server/api/core/bitstreams/65caf5dc-e882-4d96- Laura Rawlings, Rebecca Sayre, and Quentin afd6-966bec9d0162/content Wodon. 2014. “Stepping Up Early Childhood Development: Investing in Young Children for High ECLAC. 2024a. “Cepalstat: Gasto público social Returns: Intensificar el desarrollo en la primera según la clasificación por funciones del gobierno infancia: invertir en los ninos de corta edad (en moneda nacional a precios corrientes).”. https:// reporta grandes beneficios.” Washington, DC: World statistics.cepal.org/portal/cepalstat/dashboard. Bank Group. http://documents.worldbank.org/ html?area_id=411&indicator_id=3126&lang=es curated/en/752621468125700582/Intensificar-el- desarrollo-en-la-primera-infancia-invertir-en-los- ECLAC. 2024b. “Cepalstat: Gasto público social ninos-de-corta-edad-reporta-grandes-beneficios según la clasificación por funciones del gobierno (en moneda nacional a precios corrientes)”. https:// DYGESTYC. 2017. “Medición multidimensional statistics.cepal.org/portal/cepalstat/dashboard. de la pobreza: Informe de avance.” https:// html?indicator_id=3126&area_id=882&lang=es www.transparencia.gob.sv/institutions/capres/ documents/292084/download#:~:text=Para%20 2017%2C%20la%20tasa%20de,y%20el%20 resto%20del%20territorio. 90 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Edwards, Alejandra, and Manuelita Ureta. 2003. Gentilini, Ugo. 2022. “Cash Transfers in Pandemic “International Migration, Remittances, And Times: Evidence, Practices, and Implications Schooling: Evidence From El Salvador.” Journal of from the Largest Scale Up in History.” World Development Economics 72: 429–461. Bank Group, Washington, DC. http://documents. worldbank.org/curated/en/099800007112236655/ EM-DAT (Emergency Events Database). 2023. “EM- P17658505ca3820930a254018e229a30bf8 DAT: Global Database for Comprehensive Disaster Gmyreck, Pawel, Hernan Winkler, and Santiago Data.” https://public.emdat.be/ Garganta. 2024. “Buffer or Bottleneck? Generative AI, Employment Exposure and the Esponda, Kahterine, Gonzalo Aguilar, Andrea digital divide in Latin America.” Policy Research Artavia, Diana Blanco, Debie Buelto, Alba Carosio, Paper. World Bank Group. https://documents. María José Erazo, Lirio Gutiérrez, Tito Mitjans, Ana worldbank.org/pt/publication/documents- Carolina Moura, Denise Ocampo, Viviana Parody, reports/documentdetail/099826507262419608/ Marisa Ruiz, Graziela Tavares, Liliana Trejo, and idu197096bf316be814a251b452145b5f0fd5aca Vivian Urquidi. 2023. “Desigualdades y violencias de género en América Latina y el Caribe.” Ciudad Gobierno de El Salvador. 2021. “Estrategia de Autónoma de Buenos Aires: CLACSO, 2023. gestión financiera ante el riesgo de desastres.” https://biblioteca-repositorio.clacso.edu.ar/ https://www.mh.gob.sv/wp-content/ bitstream/CLACSO/249244/1/Desigualdades- uploads/2021/07/Estrategia-de-Gesti%C3%B3n- violencias.pdf? Financiera-ante-el-Riesgo-de-Desastres.pdf FAO (Food and Agriculture Organization). Hallegatte, Stephane, Adrien Vogt-Schilb, 2012. “Estudio de caracterización del Corredor and Julie Rozenberg. 2016. “Unbreakable: Seco Centroaméricano (Países CA-4).” Tomo Building the Resilience of the Poor in the Face I. Organización de las Naciones Unidas para of Natural Disasters.” Climate Change and la Alimentación y la Agricultura. https:// Development. Washington, D.C.: World Bank bibliotecaambiental.ambiente.gob.sv/documentos/ Group. http://documents.worldbank.org/curated/ estudio-de-caracterizacion-del-corredor-seco- en/512241480487839624/Unbreakable-building- centroamericano-paises-ca-4-tomo-i/? the-resilience-of-the-poor-in-the-face-of- natural-disasters FAO. 2016. “Corredor Seco América Central.” Informe de situación. Organización de las Naciones Hassan, Muhammad, Samra Bukhari, and Normad Unidas para la Alimentación y la Agricultura. Arshed. 2020. “Competitiveness, Governance https://openknowledge.fao.org/server/api/ and Globalization: What Matters for Poverty core/bitstreams/95a51695-2856-4f89-8bf1- Alleviation?” Environ Dev Sustain 22: 3491–3518. 5b1182e1932d/content? https://doi.org/10.1007/s10668-019-00355-y Fusades (Salvadoran Foundation for Economic Hidalgo, Sofia, and Hugo Ñopo. 2024. “Conditions and Social Development). 2009. “¿Cómo está El of Youth in El Salvador.” Salvador?” Departamento de Desarrollo Económico y Social. ISSN 275-5716. https://fusades.org/ IADB (Inter-American Development Bank). 2024. publicaciones/documento_completo__como_ “Better Jobs Index 2024. Quality of employment in esta_el_salvador.pdf? Latin America: Between Informality and Insufficient Wages.” Labor Observatory: IADB. http://dx.doi. org/10.18235/0012926 Ihsan,Ahya,Dwi Endah Abriningrum, Bambang Suharnoko, Anissa Rahmawati, Sara Francesca Giannozzi. 2024. Appendix 5 91 Comparing international and official poverty in El Salvador “Indonesia’s Fuel Subsidies Reforms”. Isik-Dikmelik, Aylin, Ana Sofia Martinez, Maria Equitable Growth, Finance and Institutions Rodriguez, Nancy Banegas, Asta Zviniene, and Insight Washington, D.C. : World Bank Theresa Jones. 2023. “Stronger Social Protection Group. http://documents.worldbank. and Labor Systems in Central America for Appendix a 5 org/curated/en/099748505212431959/ Resilient and Inclusive Recovery.” Washington, Comparing international and official poverty in El Salvador IDU1e31e5e531f16114baa1b62c1b3201c9c2e68 D.C.: World Bank Group. http://documents. worldbank.org/curated/en/099210501252312637/ ILO (International Labour Organization). 2015. “Key P175631148c308a7188e414cbd1a53910f01b6def796 Indicators of the Labour Market (KILM) 2015: User Guide.” https://www.ilo.org/publications/key- Jaitman, Laura. 2019. “Frontiers in the Economics of indicators-labour-market-kilm-2015-user-guide Crime: Lessons for Latin America and the Caribbean.” ILO. 2019.” Working on a Warmer Planet: The Impact Lat Am Econ Rev 28: 19. https://doi.org/10.1186/ of Heat Stress on Labour Productivity and Decent s40503-019-0081-5 Work.” ILO Office – Geneva, ILO. https://www.ilo. org/publications/major-publications/working- Jiménez, Wilson, and Hugo Ñopo. 2024. “A Note on warmer-planet-effect-heat-stress-productivity- Distributive Effects of Fiscal Policy in El Salvador – and-decent-work 2023.” ILO. 2023. “ILOSTAT: Inactivity Rate.” https://rshiny. Kephart, Josiah, Brisa Sánchez, Jeffrey Moore, Leah ilo.org/dataexplorer59/?id=EIP_DWAP_SEX_ Schinasi, Maryia Bakhtsiyarava, Yang Ju, Nelson AGE_RT_A&lang=en®ion=AMERICAS Gouveia, Waleska Caiaffa, Iryna Dronova, Saravanan Arunachalam, Ana Diez, and Daniel Rodriguez. 2022. INFORM (Index for Risk Management). 2020. “City-Level Impact of Extreme Temperatures and “INFORM Risk: Contributing to More Effective Mortality in Latin America.” Nat Med 28: 1700–1705. Risk Management of Crises and Disasters in https://doi.org/10.1038/s41591-022-01872-6 Latin America and the Caribbean.” https:// drmkc.jrc.ec.europa.eu/inform-index/Portals/0/ Kim, Hee Soo, Carlos Chaverri, Emilio Fernandez-Corugedo InfoRM/2020/Subnational/LAC/LAC_ and Pedro Juarros. 2022. “On the Macro Impact of Extreme INFORM_2020_v007_MainResults_Eng.pdf? Climate Events in Central America: A Higher Frequency Investigation.” WP/22/237. International Monetary Fund. IOM (International Organization for Migration). https://www.imf.org/en/Publications/Publications-By- 2023. “Strengthening the Government of El Author?author=Hee+Soo+Kim&name=Hee%20Soo%20Kim Salvador’s Capacity to Manage Information and Evidence on Human Mobility related to KNOMAD (Global Knowledge Partnership on Migration Disasters, Climate Change and Environmental and Development). 2023. “Remittances Inflows.” Degradation for the Development of Public https://www.knomad.org/data/remittances Policies.” Project: Enviroment and Climate Change. El Salvador. https://www.iom.int/project/ Kwak, Leena. 2022. “Getting Warmer: The Impact of strengthening-government-el-salvadors- Extreme Temperatures on Health in Latin American capacity-manage-information-and-evidence- Cities.” SALURBAL. https://drexel.edu/lac/media/ human-mobility-related-disasters-climate- blog/2022/June/climate-brief-post/? change-and-environmental-degradation- development-public-policies De la Fuente, A., and Monserrat Serio. 2024. “Notes on Vulnerability to Climate Risk Induced Poverty in El Salvador.” World Bank. 92 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Lassébie, Julie and Glenda Quintini. 2022. “What Marques, José. 2004. “Operationalizing skills and abilities can automation technologies Pro-poor Growth: the Case of El Salvador.” World replicate and what does it mean for workers?: New Bank Group, Washington, DC. http://documents. evidence.” OECD Social, Employment and Migration worldbank.org/curated/en/717531468023458135/ Working Papers, No. 282, OECD Publishing, Paris, Operationalizing-pro-poor-growth-the-case-of- https://doi.org/10.1787/646aad77-en. El-Salvador Levy, Santiago. 2017. “The Great Failure: Retirement Martin, Will. 2010. “Food Security and Poverty—A Pensions in Latin America. ” Brookings Institution. Precarious Balance.” World Bank Blogs. https:// https://www.brookings.edu/articles/the-great- blogs.worldbank.org/en/developmenttalk/food- failure-retirement-pensions-in-latin-america/? security-and-poverty-a-precarious-balance? Lexartza, Larraitz, and Arianne Grau. 2010. Martinez, Juliana. 2008. “¿Arañando bienestar? “Precariedad laboral en Centroamérica: impacto Trabajo remunerado, protección social y familias en para las mujeres.” San José, Costa Rica: Fundación América Central.” ISBN 978-987-1183-93-7 Buenos Friederich Ebert. https://library.fes.de/pdf-files/ Aires: CLACSO. https://biblioteca-repositorio. bueros/fesamcentral/07793.pdf clacso.edu.ar/bitstream/CLACSO/13350/1/ bienestar.pdf? López-Calva, Luis Felipe, and Carlos Rodriguez- Castelán. 2016. “Pro-growth Equity: A Policy Mateo-Díaz, Mercedes, and Lourdes Rodriguez- Framework for the Twin Goals.” Policy Research Chamussy. 2016. “Cashing in on Education: Working Paper no. WPS 7897. World Bank Group, Women, Childcare, and Prosperity in Latin America Washington, DC. http://documents.worldbank.org/ and the Caribbean.” Latin American Development curated/en/911711479931074058/Pro-growth- Forum. doi:10.1596/978-1-4648-0902-6. License: equity-a-policy-framework-for-the-twin-goals Creative Commons Attribution CC BY 3.0 IGO. Macroconsult. 2023. “Evaluación de la efectividad Mazariego, Edwin. 2022. “La legislación de la de los compromisos de gestión del Fondo de educación superior y la formación de profesionales Estímulo al Desempeño (FED) del MIDIS.” Ministerio en El Salvador.” La Universidad 2 (1): 50–83. de Desarrollo e Inclusión Social. http://evidencia. Recuperado a partir de https://revistas.ues.edu.sv/ midis.gob.pe/evaluacion-fed-2023-ife index.php/launiversidad/article/view/2221 Maloney, William, Pablo Garriga, Marcela Meléndez, Melnikov, Nikita, Carlos Schmidt-Padilla, and Raul Morales, Charl Jooste, James Sampi, Jorge Maria Sviatschi. 2020. Gangs, Labor Mobility Araujo, and Ekaterina Vostroknutova. 2024. “Latin and Development. National Bureau of Economic America and the Caribbean Economic Review: Research. DOI: 10.3386/w27832. Competition: The Missing Ingredient for Growth?” World Bank, Washington, DC. doi: 10.1596/978- Moroz, Harry, and Mariana Viollaz. 2024. 1-4648-2111-0. License: Creative Commons “The Future of Work in Central America and Attribution CC BY 3.0 IGO the Dominican Republic.” World Bank Group, Washington, DC. http://documents.worldbank. Marbin, Derin, Stefan Gutwinski, Stefanie org/curated/en/099050624121033690/ Schreiter, and Andreas Heinz. 2022.“Perspectives P18001211dc88000f19cfe1e75dadacd3e4 in Poverty and Mental Health.” Frontiers in Public Health, Experts’ Opinions in Public Mental Health: Emerging Issues in the Field 10: 975482. Appendix 5 93 Comparing international and official poverty in El Salvador Ministerio de Justicia y Seguridad Pública. 2023. ONEC. 2023b. “Encuesta de Hogares de “62,975 capturas en régimen de excepción.” El Propósitos múltiples 2023.” https://www. Salvador. https://www.seguridad.gob.sv/62975- bcr.gob.sv/documental/Inicio/vista/ capturas-en-regimen-de-excepcion/? f568bebf960fc21745da7377b0c75068.pdf Mullainathan, Sendhil, and Eldar Shafir. 2013. Page, Lucy, and Rohini Pande. 2018. “Ending Global Scarcity: Why Having Too Little Means So Much. Poverty: Why Money Isn’t Enough.” The Journal of Macmillan. Economic Perspectives 32 (4): 173–200. https:// www.jstor.org/stable/26513501 Nguyen, Cuong Viet, Long Thanh Giang, Anh Ngoc Tran, and Huyen Thanh Do. 2019. “Do Good Perego, Vivian, Melissa Brown, Francisco Ceballos, Governance and Public Administration Improve Manuel Hernandez, Maria Lucia Berrospi, Luis Flores, Economic Growth and Poverty Reduction? Salomon Salcedo, McDonald P. Benjamin, Luis The Case of Vietnam.” International Public Flores, and Elena Mora. 2024. “International Prices Management Journal 24 (1): 131–61. doi:10.1080/10 and Food Security: An Analysis of Food and Fertilizer 967494.2019.1592793. Price Transmission in Central America.” World Bank, Washington, DC. http://hdl.handle.net/10986/41665 Neidhöfer, Guido. 2021. Longer-run Perspectives License: CC BY-NC 3.0 IGO. on Intergenerational Mobility in Latin America: 1933-1992. UNDP LAC Working Paper No. 03. Pleités, William. 2022. “La economía salvadoreña Background Paper for the UNDP LAC Regional después de la independencia: Por qué estamos Human Development Report 2021. como estamos.” http://hdl.handle.net/11298/1257 OEC (Observatory of Economic Complexity). 2024. Pople, Ashley, Ruth Hill, Stefan Dercon, and “El Salvador.” Country profiles. https://oec.world/ Ben Brunckhorst. 2021. “Anticipatory Cash en/profile/country/slv Transfers in Climate Disaster Response.” Anticipation Hub. https://static1.squarespace. Olivieri, Sergio, Ivan Gachet, Diana Sanchez, com/static/61542ee0a87a394f7bc17b3a/t/6 Jaime Fernandez, Kelly Montoya, Karen Barreto, 16ad24fdbfca62188f8e614/1634390614711/ Cicero Silveira, and Hernan Winkler-Seales. 2023. FINAL%2BAnticipatory_Cash_ “From Infection to Inflation - Global Crises Hit Transfers_in_Climate_Disaster_ Hard Poor and Vulnerable Households in Latin Response%2B%28for%2BWP%29%2BF3.pdf? America and the Caribbean.” World Bank Group, Washington, DC. http://documents.worldbank. Raiser, Martin. 2018. “Brazil Can Improve Education org/curated/en/099051023085511851/ by Copying Its Own Successes.” The Brookings P1775290e5f78f0e60b2860466e45a038ad Institution. https://www.brookings.edu/articles/ brazil-can-improve-education-by-copying-its- ONEC. 2020. Encuesta de Hogares de Propósitos own-successes/ múltiples 2023 [Data set]. Oficina Nacional de Estadística y Censos, El Salvador. Ridley, Matthew, Gautam Rao, Frank Schilbach, and Vikram Patel. 2020. “Poverty, Depression, and ONEC. 2023a. Encuesta de Hogares de Propósitos Anxiety: Causal Evidence and Mechanisms.” Science múltiples 2023 [Data set]. Oficina Nacional de 370. DOI:10.1126/science.aay0214 Estadística y Censos, El Salvador. 94 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 Ripani, Laura, Monserrat Bustelo, Pablo Egana, Rüttinger, Lukas, Dan Smith, Gerald Stang, Dennis Nicolas Soler and Mariana Viollaz. 2020. Tänzler, and Janani Vivekananda. 2021. “A New “Automation in Latin America: are women at higher Climate for Peace: Taking Action on Climate risk of losing their jobs?.” Working Paper Series ; and Fragility Risks.” Wilson Center. https://www. 1137. Inter-American Development Bank. wilsoncenter.org/publication/new-climate-for- peace-taking-action-climate-and-fragility-risks? Rivera, Roberto. 2016. “El Sistema de Protección Social Universal de El Salvador Posibilidades Sandoval, Luis, and Carlos Carpio. 2016. para la articulación de sus componentes.” “Food Demand and Food Security in El CEPAL. https://repositorio.cepal.org/server/api/ Salvador.” Conference Southern Agricultural core/bitstreams/6b843811-2cd1-4d56-9459- Economics Association’s 2016 Annual Meeting. 59734415b29c/content? Texas, USA. https://www.researchgate.net/ publication/312490562_Food_Demand_and_ Robayo, Monica, and Rafael Barroso. 2022. “El Food_Security_in_El_Salvador? Salvador – Diagnóstico Sistemático de País: Abordando las Vulnerabilidades para Continuar Shostak, Ray, Martín Alessandro, Patrick Diamond, con la Reducción de la Pobreza y el Crecimiento Edgardo Mosqueira, and Mariano Lafuente. Inclusivo.” World Bank: Washington, DC. http://hdl. 2023. “The Center of Government, Revisited: handle.net/10986/37269 License: CC BY 3.0 IGO. A Decade of Global Reforms.” Inter-American Development Bank, Washington, DC. http://dx.doi. Rovira, Carolina. 2018. “¿Y si termino la escuela? org/10.18235/0004994 Un análisis de la inserción laboral de la juventud salvadoreña.” Cuaderno FES 03. Santa Tecla, Souza, Liliana, and Felipe Garcia-Souza. 2018. El Salvador. http://www.redicces.org.sv/jspui/ “Remittances and Labor Supply in the Northern bitstream/10972/3686/1/Y%20si%20termino%20 Triangle.” Poverty and Equity Global Practice la%20escuela.pdf Working Paper 172. https://documents1.worldbank. org/curated/pt/946781540836424906/ Rounseville, Megan, Mateo Salazar, and Kinnon pdf/131471-NWP-172-Remittances-and-Labor- Scott. 2015. “Shared Prosperity and Opportunities Supply.pdf in El Salvador in Shared Prosperity and Poverty Eradication in Latin America and the Caribbean.” Sviatschi, Maria. 2019. “US Criminal Deportations World Bank. Chapter 5. https://openknowledge. and Human Capital in Central America.” AEA worldbank.org/entities/publication/5d70e8fa- Papers and Proceedings 109: 239–42. DOI: 10.1257/ 8a97-51b3-a900-5aaf29a8ccd8 pandp.20191061 Rude, Britta, and Monica Robayo. 2023. Tisei, Francesco, and Malin Ed. 2024. “Unleashing “Quantifying Vulnerability to Poverty in Adaptive Potential for Social Protection: Good El Salvador.” Policy Research working Adaptive Social Protection Practices in Latin paper no. WPS 10289. World Bank Group, America and the Caribbean.” World Bank Group, Washington, D.C. http://documents.worldbank. Washington, DC. http://documents.worldbank. org/curated/en/099642102012330604/ org/curated/en/099032624235534457/ IDU0a3d39af50f12704d0d0889c0f48b6edbbeddç P179137151c0b302018b201e171ee1a7b5a Appendix 5 95 Comparing international and official poverty in El Salvador Torche, Florencia. 2021. “Intergenerational Mobility in UNFPA. 2024. “Dime quién eres y te diré cuánto Latin America in Comparative Perspective.” UNDP LAC te toca cuidar.” Cuadernos sobre población. El Working Paper No. 02. Background Paper for the UNDP Salvador. https://elsalvador.unfpa.org/sites/ LAC 2021 Regional Human Development Report. default/files/pub-pdf/cuaderno_poblacion5_ abril2024_0.pdf? Ulku, Hulya, and Gabriel Zaourak. 2021. “Unleashing Central America’s Growth Potential.” World Bank Group, Velásquez, Adriana. 2021. “El modelo de , Washington, DC. desarrollo subyacente a la profundidad http://documents.worldbank.org/curated/ prolongada de la emigración internacional de en/782621618992892153/Synthesis-Report El Salvador en el siglo XXI.” II Informe Regional del Sistema FLACSO. Una mirada sistemática UNICEF (United Nations Children’s Fund). 2023. sobre las migraciones en América Latina “Reescribiendo el futuro de la educación en América y el Caribe: el Estado y la economía como Latina y el Caribe: Educación de la primera infancia factores de influencia. Pp. 101-118. Facultad para todas y todos.” https://www.unicef.org/lac/ Latinoamericana de Ciencias Sociales P.101- sites/unicef.org.lac/files/2023-08/28_08_23_%20 118. San José Costa Rica, FLACSO, https:// Educacion%20para%20la%20primera%20infancia%20 www.flacso.org/sites/default/files/2022-03/ FINAL.pdf? Segundo%20Informe%20Regional%20-%20 Completo.pdf. UNDP (United Nations Development Programme). 2015. “La pobreza en El Salvador. Desde la mirada de Vona, Francesco. 2021. “Labour Markets and the sus protagonistas.” San Salvador. https://www.undp. Green Transition: A Practitioner’s Guide to the org/es/el-salvador/publicaciones/la-pobreza-en-el- Task Based Approach.” Publications Office of the salvador-desde-la-mirada-de-sus-protagonistas European Union, Luxembourg, 2021, ISBN 978- 92-76-42260-0, doi:10.2760/65924, JRC126681. UNDP. 2022a. “Desarrollo Humano en el Bicentenarioa” Reporte Especial. El Salvador, 2021. https://www.undp. WFP (World Food Programme). 2022. “Summary org/sites/g/files/zskgke326/files/migration/sv/UNDP_ Report on the Evaluation of the Country SV_ReporteEspecialDH_versionweb.pdf? Strategic Plan for El Salvador (2017–2021).” https://executiveboard.wfp.org/document_ UNDP. 2022b. “Contributions of the PDNA and DRF to download/WFP-0000135908 Post-Disaster Recovery: El Salvador. Case of Study.” https://www.undp.org/sites/g/files/zskgke326/ WFP. 2024. “The Dry Corridor in Central America.” files/2022-11/Case%20Study%20El%20Salvador%20 World Food Program USA. https://www.wfpusa. ingles.pdf? org/countries/dry-corridor/? UNFPA (United Nations Population Fund). 2023. Winkler, Hernan, Vincenzo Di Maro, Kelly “Transformar el futuro conociendo el presente: Montoya, Sergio Olivieri, and Emanuel Vazquez. situación de la población adulta mayor en el salvador.” 2024. “Measuring Green Jobs: A New Database Ministerio de Desarrollo Local. Fondo de Población for Latin America and Other Regions.” Policy de las Naciones Unidas El Salvador (UNFPA). https:// Research Working Paper no. WPS 10794; elsalvador.unfpa.org/sites/default/files/pub-pdf/ RRR; PROSPERITY. World Bank Group, personaadultamayor_2023unfpasv2.pdf? Washington, DC. http://documents.worldbank. org/curated/en/099456306062431847/ IDU10c3127b01781214cff1b0ce15131c0460cdb 96 Improving lives and livelihoods Poverty and Equity Assessment for El Salvador 2024 World Bank. 2005. “El Salvador: Poverty Assessment, World Bank. 2024b. “El Salvador Learning Strengthening Social Policy.” Report No. 29594-SV. Poverty Brief.” https://documents1.worldbank. Washington, DC. http://hdl.handle.net/10986/8427 org/curated/en/099060124163630082/pdf/ License: CC BY 3.0 IGO. P17920913c140c08219bb71429cc7ddaaf9.pdf. World Bank. 2018. “World Development Report 2018: World Bank. 2024c. “Feasibility Study - Disaster Learning to Realize Education’s Promise.” World Bank, Risk Finance and Insurance (DRFI) Solutions for Washington, DC. doi:10.1596/978-1-4648-1096-1. Family Farmers in El Salvador, Guatemala, and License: Creative Commons Attribution CC BY 3.0 Honduras.” World Bank, Washington, DC. http:// IGO. hdl.handle.net/10986/40964 License: CC BY- NC 3.0 IGO. World Bank. 2022a. “Understanding Migration in North Central America Countries: El World Bank. 2024d. World Development Report Salvador, Guatemala, Honduras and 2024: The Middle-Income Trap. World Bank, Nicaragua.” https://documentos.bancomundial. Washington, DC. doi:10.1596/978-1-4648-2078- org/es/publication/documents-reports/ 6. License: Creative Commons Attribution CC BY documentdetail/099062223110539421/ 3.0 IGO. p178344152de73c21007a1412919fe71d87c5dc97bb7 World Bank. 2022b. “Agrifood Systems in Northern World Bank. 2024e. Women, Business and Central America: Agrologistics for Modern Family the Law 2024. World Bank, Washington, DC. Farms.” World Bank, Washington, DC. http://hdl. doi:10.1596/978-1-4648-2063-2. handle.net/10986/38156 License: CC BY 3.0 IGO World Bank. 2024f. Business Ready 2024. World World Bank. 2022c. Digital Economy for Bank, Washington, DC. doi:10.1596/978-1-4648- Latin America and the Caribbean Country 2021-2 Diagnostic: El Salvador. World Bank Group, Washington, DC. http://documents.worldbank. World Bank. Forthcoming. Taxes, Benefits and org/curated/en/099945008102219116/ the (Dis)Incentives to (In)Formalize. A Latin P1759850c6336c0c50a9b50a7202639fc0d America and Caribbean Regional Policy Report. Washington. World Bank. 2023a. Enterprises survey country profile “El Salvador”. https://www.enterprisesurveys.org/en/ data/exploreeconomies/2023/el-salvador#2 World Bank. 2023b. “Indonesia Poverty Assessment - Pathways towards Economic Security”. Washington, DC. https://documents1.worldbank. org/curated/en/099041923101015385/pdf/ P17567409bd69f01809b940840b40608e56.pdf? World Bank. 2024a. “Data Bank: GNI Per Capita” https://data.worldbank.org/indicator/NY.GNP.PCAP. CD?end=2023&locations=SV&start=2000