rates. While they are all lower-middle-income countries, Honduras is the poorest, with a per capita GDP of US$ 4,740 in 2016 PPP - just over half of that of its two neighbors ($8,620 for El Salvador and $7,950 in Guatemala). Poverty rates are high – with half of Hondurans and Guatemalans living on less than $5.50 per day in 2016 (data are from 2014 in the case of Guatemala), and 30 percent of Salvadorans.

Labor demand is weak, and most jobs are low-skill and informal. The agriculture sector, including subsistence farming and market crops like coffee, employs 29 percent of workers in Guatemala and Honduras and 19 percent in El Salvador. Even after excluding agricultural employment, the majority of jobs are in the informal sector, which absorbs 63 percent of workers in El Salvador and 74 percent in the other two countries.<sup>9</sup> Due to the countries’ low average educational attainment, most of these workers are low-skilled. In each of the three countries, only about a quarter of the potential labor force has completed upper secondary school, and only about one in ten has completed any type of tertiary education. Workers rely heavily on self-employment: nearly half of Honduran workers are self-employed as are 38 and 40 percent of workers in Guatemala and El Salvador respectively. This group includes employers, mostly small business owners and family enterprises: 3 percent of all workers in El Salvador and Guatemala and 10 percent in Honduras.

In this context of weak labor demand, a largely low-skilled workforce, and high informality, labor force participation is low, especially for women. Participation rates for women range from 44.7 percent in Guatemala to 51.6 in El Salvador (Figure 1). Participation rates are higher for men, accounting for 9 out of 10 working-age men in Guatemala and Honduras. However, they are lower in El Salvador, where only 84.3 percent of men are in the labor force. Crime, which can reduce labor supply by both absorbing labor (particularly male labor) and imposing obstacles to participation due to security costs and concerns, is a significant factor in these three countries.<sup>10</sup>

**Figure 1.  Labor force participation and unemployment, by gender 2014**

<!-- Start of picture text --> a) Labor force participation rate b) Unemployment rates, urban only<br>92.0 90.1<br>84.3 6.6<br>5.8<br>51.6 50.2 4.3<br>44.7 3.5<br>2.4<br>1.8<br>El Salvador Guatemala Honduras El Salvador Guatemala Honduras<br>Female Male Female Male<br><!-- End of picture text --> _Source_ : Authors’ tabulations using the Socioeconomic Database for Latin America and the Caribbean or SEDLAC (World Bank and CEDLAS).

_Note:_ The sample is limited to individuals ages 18-65.

Since a large fraction of the workforce is absorbed in informal work, unemployment rates are relatively low in the three countries, and particularly so in Guatemala where urban unemployment rates are 2.4 percent

> 9 Figures in this paragraph are from the World Development Indicators, World Bank.

> 10 Sizeable gangs and other criminal enterprises have resulted in the Northern Triangle having some of the highest homicide rates in the world, with either El Salvador or Honduras recording the highest rates globally each year between 2008 and 2015 (the most recent year for which global data are available).

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