Technical Note on Labor Market : Panama Poverty and Equity Assessment 2024

Overview & Synopsis

Panama has experienced significant economic growth over the past three decades, but labor market inequalities have prevented the equitable distribution of benefits. Over the last 30 years, remarkable economic expansion, coupled with substantial increases in employment, has contributed to significant progress in poverty reduction and the consolidation of one of the largest middle classes in the region. However, gains from economic growth have not benefited all population groups equally, and Panama remains among the countries with the highest levels of income inequality in the world. This disparity is closely linked to uneven productivity growth across sectors and limited reallocation of workers to more productive sectors, which likely perpetuates labor market inequalities. This technical note provides a comprehensive overview of Panama’s labor market, highlighting key constraints and opportunities to foster more inclusive economic development. It presents an analysis of the landscape and evolution of Panama’s labor market over recent decades, focusing on both labor supply and demand dynamics, as well as cross-cutting reforms such as regulatory frameworks and demographic trends. The objective of this analysis is to contribute to evidence-based policymaking that promotes inclusive economic growth.