Poverty continues to affect millions in Central America and the Dominican Republic, with significant challenges remaining in reducing inequality and improving living standards. In the region, one in three people lives on less than $8.30 per day (2021 PPP), higher than the Latin American average of one in four. For many households, poverty is persistent rather than temporary, perpetuating cycles that span generations.
Poverty levels vary widely across countries. Honduras and Guatemala have the highest rates at 49.8% and 47%, respectively, while the Dominican Republic and Costa Rica have the lowest at 14% and 12.6%. The Dominican Republic has achieved significant progress, reducing poverty from 33.5% in 2014 to 14% in 2024. Panama, despite being the wealthiest country in Central America, faces high inequality, with one in five people living in poverty. Factors contributing to poverty include low-quality education, limited infrastructure, exposure to climate shocks, high violence, and a lack of quality jobs.
Labor market dynamism has been a key driver of poverty reduction in the region. Between 2016 and 2024, employment and income growth accounted for 37% of poverty reduction in Latin America and the Caribbean. In El Salvador and the Dominican Republic, increasing employment rates and labor income have been central to progress, explaining about 74% and 62% of poverty reduction over the last decade, respectively. Employment not only reduces poverty but also enhances social mobility; in the Dominican Republic, having a job increases the probability of leaving poverty by 13.5 percentage points and joining the middle class by 21 points, while in El Salvador, the figures are 9.5 and 8.8 percentage points.
However, not all countries benefit equally from labor market improvements. In Guatemala, stagnant productivity has led to falling real incomes, while Panama struggles to create quality jobs for its population, particularly affecting the poorest families. Addressing these gaps requires targeted social policies that expand access to basic services and economic opportunities, especially in disadvantaged areas. Investments in education, health, training, infrastructure, and sectors that generate quality employment are essential, alongside measures to strengthen household resilience to climate and other shocks.
The evidence underscores that quality job creation is the most effective pathway to reducing poverty and promoting social mobility. Achieving long-term poverty reduction, however, requires coordinated efforts across public and private sectors, academia, civil society, and international organizations. Poverty cannot be solved through isolated actions; sustained collaboration is essential to transform lives and promote inclusive development across the region.
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