The jobs challenge: why better work means better lives in Latin America and the Caribbean

Poverty in Latin America and the Caribbean (LAC) is expected to fall to its lowest level on record in 2025. Yet one in four people in the region remains poor, and the reduction has been slow amid weak economic growth. The East Asia and Pacific region is expected to reach nearly the same poverty rate by 2025, but starting from a much higher baseline of 45.4 percent in 2016, compared to LAC's 32.8 percent.

The difference? Economic growth. EAP averaged 5.3 percent annual growth during this period, while LAC managed just 1.6 percent, the weakest performance among developing regions and well below the 2.7 percent global average.  LAC's poverty declined over time, but faster growth could have accelerated progress further. The path forward is clear: accelerating growth and creating quality jobs at scale are essential to moving more people out of poverty and into the middle class. 

The 2025 edition of the World Bank's Regional Poverty and Inequality Update for Latin America and the Caribbean shows that by 2025, the middle class —those living on more than $17 per day per capita—will become LAC's largest economic group at 42.8 percent of the population. Yet the poor and those vulnerable to falling into poverty will still represent the remaining 57.2 percent.

The power of work: Driving poverty reduction

The data from 2022 to 2024 is unmistakable: jobs and higher earnings delivered more than half of all poverty reduction in Latin America and the Caribbean. Countries achieving the most substantial poverty declines were those where the labor market improvements led the way. When a household head transitions from unemployment to employment, the family's probability of escaping poverty increases by nearly 26.5 percentage points. The message is clear: the surest path out of poverty runs through the workplace.

While recent job creation has lifted many out of poverty, this progress is built on fragile foundations. The core issue isn’t the quantity of jobs, but their quality. Labor productivity has stagnated for a decade, while wages have grown slowly despite rising educational levels. Eight in ten poor workers in Latin America and the Caribbean remain trapped in informal jobs, lacking benefits, security, and opportunities for advancement . 

Jobs lift people out of poverty, but poor-quality work keeps them insecure. Too many workers cycle between low-quality positions, gaining employment but not prosperity. When workers move up the occupational ladder into higher-skilled roles, their chances of escaping poverty increase significantly. However, structural barriers prevent most workers from advancing: inadequate education systems that fail to meet labor market needs, rigid regulations that discourage hiring, and weak capital markets that deprive productive firms of investment.

These barriers create a poverty trap. In Latin America, the persistence of poverty is alarming: over half of poor households remain poor year after year, with persistence rates reaching 76 percent in Brazil and 74 percent in Peru. Informality perpetuates this cycle. Between 2016 and 2024, informal employment (measured by the share of workers without pension contributions) either increased or remained stable across all socioeconomic groups. This status traps workers in lower-productivity jobs that offer limited benefits and weak social protection, reinforcing the cycle of poverty and poor-quality work. 

The World Bank aims to break this cycle by making job creation an explicit target. The goal is to foster dynamic private sectors that unlock opportunities where people already live. 

In LAC, three priorities stand out:

• First, unlocking investment in strategic sectors where the region holds competitive advantages: agribusiness, tourism, and renewable energy. These sectors can generate quality jobs, including for lower-skilled workers, but require infrastructure, stable regulatory frameworks, and access to finance that many countries lack.
• Second, forging stronger links between education systems and labor markets. Rising school enrollment means little if graduates cannot find productive work; skills development must connect to employer needs.
• Third, reducing the friction that traps workers in low-productivity jobs: rigid labor regulations, limited credit for small enterprises, and weak competition frameworks that entrench incumbents.

LAC’s recent progress confirms that job creation is essential for poverty reduction. However, sustaining this progress and building a thriving middle class requires higher productivity and better jobs. 

The World Bank's role is to help make that transition possible, combining financial resources with technical expertise and convening power to break down the barriers holding the region back. The alternative is sluggish socioeconomic progress, and the region cannot afford it.