Agustín Salvia: ‘Poverty has fallen, yet we are becoming poorer’

Sociologist and analyst Agustín Salvia is the Director of the Observatorio de la Deuda Social Argentina (“Argentine Social Debt Observatory”) at the Catholic University of Argentina (UCA), a research centre that measures poverty, destitution and living conditions; he is also a researcher of the CONICET scientific research council. 

His background is academic: he holds a degree in sociology, with postgraduate studies in the social sciences, and specialises in areas such as the labour market, poverty, inequality and public policy.

In a conversation that unpacks the contradiction between statistical indicators and the reality facing households, Salvia examines how the slowdown in inflation produces nominal relief that fails to halt the deterioration of the middle class.

You anticipated this situation in our last discussion: that over the half-year poverty would appear to improve, but that the final quarter – or even the final two months – was already showing a deterioration in poverty, which would only become evident once INDEC released the next half-year figures. So today I’d like, with the data now confirmed, to offer the audience a summary: what you said roughly a month ago and what reflections these now-confirmed figures prompt, regarding this decline in poverty that everyone is reporting when, paradoxically, it is actually increasing.

Social change is not magic, nor is it achieved by decree or by isolated decisions. A single economic or social policy measure cannot transform anything. What we are seeing, then, is that statistically poverty falls and may even begin to rise again, but there are social processes that are extremely difficult to change unless they are transformed structurally …

Inflation has been an important factor in that the slowdown in inflationary dynamics has accounted for almost 30 percent of the reduction in real poverty we have experienced in this period. Regardless of the starting or ending point, the basic food basket has fallen as a result of exchange-rate liberalisation and other processes. It has remained below the general price index, and this has meant that the poorest and most destitute sectors have seen a more genuine decline in extreme poverty … even though this trend has already begun to reverse in the fourth quarter as the cost of the basic food basket rises above the price index.

Now, alongside this, there are more informal workers and more social programmes, since universal child benefits and food cards were doubled in 2024. This has created a kind of market – an externality of the informal economy – which provides significant relief to the poorest sectors.

On poverty more broadly … the statistical measure of poverty is affected by improvements in the recording of household income and, at the same time, by a failure to take account of changes in the composition of household spending. Today, households devote a far greater share of their resources to fixed costs than to everyday consumption – more to services than to food or other goods. This shift, driven by the price system, means that the poverty statistic does not reflect the real level of wellbeing.

The poverty statistics tell you: “It has fallen by such-and-such due to the inflation effect”, and that is indeed true. But the non-food component is not accurately captured, because it does not take into account the expenses families now incur for the same goods and services they consumed two or three years ago. In other words, a household two or three years ago, consuming the same level of fuel, gas, electricity, water, transport or communications, might have avoided poverty with 1.5 million pesos.

Today, that same amount is no longer sufficient. Paying for those items at current prices forces households to cut back elsewhere. As they consume less, they say: ‘You tell me poverty has fallen, but my income doesn’t stretch far enough.’

This real effect – the sense that one’s income is insufficient – undermines the validity of the methodological measurement of poverty, quite apart from weakening its comparability over time. This dual process means that poverty has indeed fallen in terms of food consumption: people have regained some capacity to purchase food compared with 2024 and even 2023. But they have not improved their ability to consume other goods or services, let alone invest in education, healthcare or housing.

In other words, this decline in poverty is real when compared with the worst point of adjustment in the first quarter of 2024 or the fourth quarter of 2023. People are better off – but how much better compared with before those periods? At that point, it becomes less a statistical question and more an analytical, interpretative one. And the answer is: they are as badly off as they have been for the past 20 or 30 years, because the underlying processes have not changed.

Argentina still has structural poverty of around 25 percent to 30 percent, and reducing that level will require employment, investment, and increased investment in small and medium-sized enterprises, both for export and for the domestic market. That is not currently happening, which makes this reduction in poverty unsustainable, regardless of what happens to inflation.

In other words, even if inflation falls, statistical poverty will decrease, but that structural poverty – the shift of the lower-middle classes towards greater job insecurity, or of the more skilled middle classes towards more privileged sectors – that growing inequality is taking place structurally. And the only way to change this is through greater investment, more jobs, higher productivity and better wages.

That is easy to say, but a government cannot achieve it in one or two years, nor simply by stabilising the macroeconomy. Introducing a new productive economic system capable of generating employment and well-being into society is a learning process. These are the challenges facing Argentine politics today.

If we move beyond the strict technical definitions of destitution and poverty, there is another term that is less rigid from a statistical point of view, namely impoverishment. What we could say is that extreme poverty has fallen, that poverty has been reduced to levels similar to those prior to critical moments, but at the same time consumption of food, milk and meat is falling, families are in debt, the level of debt default is the highest it has been for many years and there is impoverishment. In other words, society may feel that it is becoming poorer even as the poverty rate falls.

Exactly. But I want to make a distinction: the upper-middle class – professionals and technical workers – is not becoming impoverished. That segment maintains its standard of living, consumption levels and even its capacity to invest in human capital.

The upper-middle class, I suppose.

The technical-professional middle class: the dynamic sectors – finance, commerce, mining, energy, and technology services. This segment is seeing improved wages and competitiveness; it is not losing out, but actually gaining ground, even under this model. But there is another middle class in between that is hoping for improvements and, in reality, is becoming poorer.

This relates to traditional sectors: small and medium-sized enterprises [PyMES], industry, and trade geared towards the domestic market. That model is in decline, in crisis. The suburbs are in crisis; formal salaried employment is being lost and survival strategies in the informal economy are becoming more widespread. A more fragmented society is emerging.

A section of that society has aspirations of social mobility and continues to struggle. Some struggle to move up, and others to avoid falling down. And the trend we have seen in recent months is one of decline.