As inflation jumps, poverty is on the rise and is already over 40%

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On March 30, INDEC will release the poverty record corresponding to the second half of 2022. The latest known figure, from June last year, was 36.5%.

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Analysts anticipate that the data we will know in ten days it will be around 40%a leap that can be explained by the escalation of inflation, which closed last year with a rise of 94.8%.

But at the same time they warn that this is an “old” figure: with February inflation at 6.6% and an increase in the total basic basket – the poverty line – of 8.3% and in the food basket, which measures poverty, by 11.7% in that month, Poverty in Argentina is already around 42%.

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The 42% record is a turning point for the Frente de Todos. So far under Alberto Fernández’s management, the highest record was that of the second half of 2020, with 42%, when the pandemic caused the index to jump to the highest records since 2003.

Since that figure of 42% in 2020, all measurements have shown a decline in poverty. But this trend would be curtailed in the report that comes as a result of the collapse in real wages.

Data from the FMyA consultancy indicate that in February the minimum wage represented only 38% of the Total Basic Basket for a typical household, which settled at $177,063. “In March it will be an even smaller percentage. When Alberto Fernández took office, it represented 43%.”

Martín Rozada, director of the master’s degree in Econometrics at Di Tella University, creates the Poverty Nowcast, a measurement based on INDEC’s Permanent Household Survey (EPH) together with projections of the Basic Total Food Basket (CBT) and deciles of total household income.

“We have an estimated poverty rate of 38% in the third quarter of last year. In the fourth quarter, the basic basket already had a 97% year-over-year jump, while income grew less than 90%. Here’s why We expect rates for the second half to be close to 39.6% on the INDEC measurement“says Rosada.

But Rozada goes one step further and specifies that the NowCast for the period from September 2022 to February 2023 puts poverty at 42%.

“My impression is that the number that INDEC will give in a couple of weeks It is the minimum level of poverty that we will observe during 2023. Thus, this management would tend to end with a poverty index higher than that of the pandemic.

Is there a chance that poverty will decrease the rest of the year? “Everything that can be done in this election year is palliative, It won’t affect the poverty level too much. To reduce poverty, inflation must be controlled and to have a substantial decline, growth must be sustained for many years,” says Rozado.

None of that would happen this year: private sector forecasts already point to inflation above 100%, while the economy has been slowing since September, with high chances of entering a recession in the coming months.

Agustín Salvia, from the UCA Social Debt Observatory, assures that he is leaving this quarter “some very dramatic data on the evolution of the basket”. And he explains that the situation has worsened compared to last year. “Until the second half of 2022, formal wages followed inflation. And in the informal sector, there was an increase in employment, which compensated for the decline in real wages.”

As for upcoming poverty data, Salvia notes that it will give about 40%. “Right now there is no more employment to compensate for a decline in real wages. I estimate that there will be an increase in poverty and extreme poverty“.

However, for Salvia, poverty will not return to the level of the pandemic. “It can go up a point or two above the current 40%. The tendency is to increase poverty, but not to overflow“.

“Certainly poverty today is over 40%agrees Leopoldo Tornaroli, a senior researcher at the Center for Distribution, Labor and Social Studies (CEDLAS) at the National University of La Plata (UNLP).

Tornaroli points out that the increase in food baskets this year will be higher than inflation and will not be able to compensate for the decline in real income with more employment. “If inflation reaches 100%, poverty is not likely to decrease.”

The CEDLAS researcher observes that with these levels of inflation, official policies lose effectiveness. “Poverty and destitution are lower with the Universal Child Allowance (AUH) than they would be without the allowance. But they can lose out to inflation and their role as a poverty alleviation policy loses effectiveness”.


Source: Clarin

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