A recent report from the World Bank, titled "Panama: From Growth to Prosperity," has identified key challenges in Panama's efforts to reduce poverty and inequality. The report highlights issues related to job quality and human capital that hinder progress.
According to the findings, Panama struggles with improving its human capital and job quality. The country's position on the Human Capital Index (HCI) has not improved over the past decade, placing it among the most unequal nations globally when compared with countries of similar income levels. The index indicates that future generations may achieve only half of their current potential labor productivity, equating to a 50 percent reduction in future income. This situation emphasizes the need for investments in education and job quality to enhance long-term economic growth.
While there have been advancements in expanding educational access, challenges persist, particularly for low-income households, limiting their opportunities for better employment. Higher education offers limited pathways to improved jobs as only 20 percent of young people obtain higher education degrees. Additionally, educational programs require updates to align with labor market demands.
The report also reveals significant disparities within the labor market. In 2023, low-skilled workers earned up to 74 percent less than those with tertiary education. Indigenous populations face particular challenges, earning incomes 36 percent lower than non-indigenous groups.
"Panama has experienced rapid economic growth in recent years. However, improving job quality and addressing labor market inequalities are key to expanding opportunities for people to escape poverty," said Oscar Calvo-Gonzalez, Director for Equitable Growth, Finance, and Institutions for the Latin America and Caribbean Region of the World Bank.
The data show that technology-intensive jobs are predominantly occupied by high-income workers, potentially restricting equitable access to quality employment opportunities. Meanwhile, low-skilled workers remain primarily engaged in informal sectors with low productivity.
Despite a steady annual increase of 2.2 percent in labor income between 2001 and 2023, Panama's Job Quality Index declined more rapidly than other regional countries over the last decade—mainly impacting low-income households. In 2023, most of the poorest 40 percent were employed informally. According to Ministry of Economy and Finance data from 2023, poverty stood at 21.7 percent while extreme poverty was at 9.6 percent.
To foster sustainable and inclusive growth that mitigates poverty and inequality, Panama is encouraged to focus on three policy areas: closing territorial and ethnic gaps through infrastructure access; promoting human capital accumulation via enhanced education and training aligned with market needs; strengthening household resilience against natural hazards through adaptive social protection policies.