The advance of inflation which is already reducing the population’s consumption capacity, has accelerated its corrosive effect in the last two months. The 25.5% increase already known in December was added An average price increase of 20% between now and March would translate into a 10% decline in real wages.
The estimate, from the consultancy firm Ecolatina, raises the question among analysts: is there room for last year’s dynamics to return and for joint ventures to closely follow inflation or Will the recession resulting from the fall in purchasing power contain the increase in prices?.
“We believe there will be a combination of both, where the recession coexists with wage settlements that slow any deceleration in inflation. All This process will have costs – social and political – “which will add to a latent risk of spiraling as long as the ruling party has difficulty in carrying out its fiscal-monetary plan or in achieving at least part of the reforms proposed in the DNU or in the “Omnibus” law sent to Congress,” he the consultant explained.
Unlike what happened for much of 2023, when private consumption remained around 1% despite inflation that exceeded 200%, Now the situation seems to be different..
“The change of government not only led to a sharp devaluation of the exchange rate. The correction of relative prices also involves the “liberation” of many prices – elimination of agreements, prepaid cards, fuel, telecommunications – and the increase in tariffs for public services. All “This set guarantees several months with double-digit inflation,” according to Ecolatina.
Given expected inflation, for purchasing power not to erode in the coming months, wages must keep pace. Getting out of this process seems difficult: only the jump in inflation in December will leave losses of around 10% in real terms.
Rocío Bisang, economist at the consultancy EcoGo, explains: “in the first months of the year we expect a decline in real wages, which will be attenuated by the increases obtained in the joint negotiations that began this month. What we’re seeing in terms of parity, is that they are always shorter (many monthly) and many include trigger clauses that allow a retroactive adjustment for inflation.”
In this sense Ecolatina also expects “a combination of bimonthly/quarterly joint ventures that will try to “beat” prices, with others with monthly adjustments – some virtually indexed -, where fixed sums will certainly also proliferate to compensate for a diminished power of purchase .”, he estimated.
“However, All this will not be enough and the minimum purchasing power will lose 10% of its value during the summer, so the effect of the recession – and the wage anchor – will also play a role in these months,” the consultant added.
The forecast of a fall in the purchasing power of wages thus adds to a situation that dates back several years. This was recently reported in a work by economist Nadin Argañaraz, according to which “in the last 72 months, Argentine formal workers have lost 11 salaries since 2017. While informal workers have lost 19 since then.
According to estimates from the Association of State Workers (ATE) of the National Institute of Statistics and Census (Indec), the minimum wage – which is now $156,000 – should have been higher than $156,000 last December. 700 thousand dollars to meet minimum needs. Taking into account that the value of a total basic basket for a typical family is $495,798.32.
Source: Clarin
