Official data: wages of private workers are collapsing under inflation conditions

In July, wages of formal and informal private sector workers lost ground to inflation. A deepening of the strong downward trend in household income and purchasing power, which could continue for a long time with 100% inflation forecast for the year.

In July, the average salary in the country increased by 5.5%, against 7.4% inflation.. So far in 2022, workers’ earnings are up 41.8%, against inflation of 46.2%. In the last twelve months, inflation of 71% exceeds wages, which have risen to an average of 68.7%.

If the wage rate reported by the index is broken down, it can be seen that state workers are the only ones to beat inflation over the past year., by 74.7%. Representatives of the registered private sector lag behind by 68.7%.

But the worst scenario is configured for those informal private workers (those without Social Security benefits): Their earnings rose 58.9% in the twelve months, 12.1 percentage points below inflation.

Informal private workers are impoverished at an alarming rate: The basic grocery basket — which defines the poverty line — rose 70.6% year-over-year through July, outpacing the sector’s earnings by nearly twelve points.

The data clearly shows this In 2022, the situation of informal workers has worsened a lot -Among the lowest earners-: In seven months, income increased by 31.7%, against inflation of 46.2%.

In addition to what the state pays, It seems that the private sector cannot afford to report revenues at the current level of inflation (July was the highest for that month in 20 years).

Judging by the fact that only a few joint ventures are being discussed, the situation would have worsened in August (with official inflation at 7%) and this month. According to Foundation for Freedom and Progress, September inflation closed at 6.9%.

Due to the acceleration of inflation in the middle of the year, experts note that The poverty rate for the second semester, which will be announced before the elections in March 2023, will be much higher than the 36.5% of the first semester.

Eugenio Mari, LyP’s chief economist, commented that Argentina had firmly entered a new inflationary regime.For the third consecutive month in September, the price level is 7% monthly.

“And there are no signs of it slowing down. In September, the central bank increased interest-bearing debt by $1.3 trillion, which means that the total amount of interest-bearing debt per month is $480,256 million. If we add to this a state with a fiscal deficit, there is little reason to think about a slowdown in emissions and prices,” Maria said.

On the other hand, he added Food grew at the same rate as the general indexThat will put further pressure on second semester poverty figures, “which will be higher than those released by Indec this week”.

In 33 months of management (pandemic included) Alberto Fernández’s administration has already accumulated 243.6% inflation and will exceed Mauricio Macri’s 295.7% during his term.A record since the end of hyperinflation in the early 1990s.

Fernando Marul, director of financial consulting firm FMyA, calculated that the country’s average real wage was 20.5% lower at the end of 2015., while private employment collapsed with the pandemic and has already recovered to its highest level in five years. That is, there are more workers, but they are poor.

Government reaction

Sergio Massa, economy minister since August, expects inflation to fall sharply in 2023 (100% to 60% or lower) Fiscal adjustment product implemented to stabilize the macro and reduce currency printing. But not only that.

Christina Kirchner spoke to Mass twice on Wednesday. And then he posted a message in which he accused food companies of increasing their profit margins too harshly. For this reason, he called for a “more precise and effective policy of intervention”.

Vice President too asked to “create a tool that will strengthen food security from a poverty perspective”. The government is ready and will announce in a few days: it will pay bonuses to 2 million poor informal workers who do not have universal benefits or food cards.

Gabriel Rubinstein, the economic policy secretary, agrees with Christina Kirchner’s diagnosis and believes there is reason to believe the slowdown is too strong. The economist said this Thursday that the monetary stimulus of fiscal origin planned for 2023 will be compatible with inflation of 40% per annum.

To match these predictions, Rubinstein said: The government will act to improve the exchange systemthe disorder of which contributed to the exaggerated growth of the gross margin of the business and to the factors of inertia”.

“By attacking inflationary inertia and judiciously reducing business margins, we will be able to bring real inflation closer to the ‘theoretical’ one.” (from 40%, given by the monetary impulse of fiscal origin)”, the official said.

From this point of view, Considered that if Congress would improve the budget by eliminating the primary fiscal deficit with a separate tax that would eliminate special tax regimes.It will be a great tool to “return to normal inflation of 10% a year in less time than almost everyone believes.”

Rubinstein said the excess aggregate demand caused by the fiscal deficit will continue to drive high inflation. For this reason, by inertia and action at the margins (reduction of the exchange rate difference, agreements and other actions), it can initially move from 90% to 60% of the CPI. “This is just the first step,” the official said.