PANAMA CITY, February 13th, 2025 - A new World Bank report titled "Panama: From Growth to Prosperity" finds that the quality of jobs and human capital is hampering progress in reducing poverty and inequality, thereby highlighting the challenges concerning the productivity and training of Panamanian youth.
According to the report, Panama is grappling with challenges in improving the country's human capital and the quality of jobs. Panama's ranking on the Human Capital Index (HCI) did not improve in the last decade, making the country one of the most unequal in the world compared to countries with similar incomes. The index shows that future generations could achieve just half of their current potential labor productivity, representing a 50 percent cost in future income. This underscores the importance of investing in education and job quality to boost long-term economic growth.
Although Panama has made progress in expanding access to education, challenges in education coverage among low-income households remain, limiting access to better job opportunities. The report also notes that higher education offers limited prospects as a pathway to better jobs. Only 20 percent of young people earn a higher education degree, and current educational offerings need to be updated to ensure alignment with labor market demands.
However, the data reveal significant inequalities in the labor market. In 2023, low-skilled workers earned up to 74 percent less than workers with a tertiary education. These inequalities affect indigenous populations in particular, as their incomes were 36 percent lower than those of non-indigenous populations.
"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. If it hopes to address these challenges, the country must continue investing in quality education and training aligned with labor market demands and promote policies that will reduce territorial and ethnic gaps to achieve sustained growth that will benefit all Panamanians," said Oscar Calvo-Gonzalez, Director for Equitable Growth, Finance, and Institutions for the Latin America and Caribbean Region of the World Bank.
The report also notes that new technology-intensive jobs are mostly held by high-income workers, which can hinder more equitable access to quality jobs. At the same time, low-skilled workers continue to work primarily in informal, low-productivity jobs, limiting their opportunities to increase their incomes and access formal jobs.
Despite steady growth in labor income of 2.2 percent per year between 2001 and 2023, the report indicates that the Job Quality Index declined at a faster rate in the last decade than in other countries in the region, mainly affecting low-income households. In 2023, the poorest 40 percent were mostly employed in the informal sector. According to data from the Ministry of Economy and Finance, in 2023, poverty reached 21.7 percent, while extreme poverty stood at 9.6 percent.
To achieve sustainable and inclusive growth that will reduce poverty and inequality, Panama can prioritize three key policy areas: close territorial and ethnic gaps through access to infrastructure and basic services in rural areas and comarcas (indigenous regions); promote the accumulation of human capital and productive job creation through improvements in education, health, and training programs aligned with labor market demands; and strengthen household resilience to natural hazards through adaptive social protection policies and resilient critical infrastructure, especially in the most vulnerable areas.
Download the full report here.
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