Milei’s shock therapy ignites ‘brutal’ income inequality in Argentina

President Javier Milei’s economic overhaul is driving up income inequality in Argentina, testing just how much “shock therapy” his constituents can bear. 

The country’s vast informal workforce saw wages increase 136 percent year-over-year in April, nearly half the pace of the 248 percent jump among the formal private sector, salaried employees, according the most recent available data. Not only are wages in both sectors unable to keep up with 272 percent inflation, they’re exacerbating income disparity in a nation where 42 percent of its people already lived in poverty last year.  

“I can’t cut anything else out of my budget,” said Valeria Verin, a self-employed masseuse who voted for Milei last year knowing his austere policies would affect her income. “I’ll have to leave this profession that I love and find a different line of work, I don’t know what it would be. I don’t have a Plan B, I never needed one.” 

A longtime informal worker, Verin still supports Milei and remains hopeful he can bring the economic changes Argentina needs. But she knows hard decisions lie ahead if the economy doesn’t recover soon. 

The 46-year-old, who lives in the working-class town of Wilde, a 20-minute train ride south of Buenos Aires, now earns about 600,000 pesos (US$650) a month, versus 500,000 pesos in December when Milei took office. It’s above Argentina’s poverty line — a basic basket of goods and services defined by the government — but prices are up more than 100 percent since December while Verin’s pay has only risen 20%. 

She’s stopped saving money while cutting out vacations and nights out. She’s also now working as a waitress at catering events some weekends and tutors high school kids to compensate for a huge slowdown of massage appointments — a result of Argentines’ decreased purchasing power and disposable income. 

“I even had to give up something so simple as going to the hair salon,” Verin adds, noting she colours her hair at home now.

It’s an even bleaker picture when wages are adjusted for inflation: Incomes for informal workers, who tend to earn lower wages, tanked 22 percent annually in the first quarter of this year versus a 14 percent drop for formal workers, according to Buenos Aires-based consulting firm Equilibra. 

The Gini coefficient, a global measure for income inequality, spiked in early 2024 to its highest level since 2005, when Argentina was recovering from one of its worst crises, according to data from the World Bank and Buenos Aires-based consulting firm Suramericana Vision, led by former Economy Minister Martín Guzmán. 

“The approach in place for addressing the fiscal and macroeconomic imbalances is highly regressive,” said Guzman, who often criticizes Milei’s policies. “It is unsurprising to see the brutal increase in income inequality in the first quarter of the year.”

Milei’s spokesman, Manuel Adorni, and the Economy Ministry press office didn’t respond to requests for comment. 

To be sure, Latin America has long been the world’s most unequal region and wage disparity has worsened under all types of Argentine governments. Many other factors influence pay gains besides Milei’s economic policies, though they’re a dominant force. Milei also warned Argentines the beginning would be hard. 

Just how much pain Argentines can stand while Milei attempts to stabilise the economy is key to maintaining his approval ratings, which are remarkably high at more than 50 percent. That’s allowed him to govern with a razor thin minority party and win over investors’ approval.

Milei’s bigger policy moves — lifting price controls while devaluing the peso — more than offset the federal aid he provided to low-income families to soften the blow of his slashes to public works funding, social security and government workers’ salaries.

Leaders are now putting Milei on notice. His most powerful ally in Argentina, former president Mauricio Macri, demanded Milei give federal funds owed to the government of Buenos Aires City, highlighting the sacrifices Argentines are making. And Governor Máximiliano Pullaro of Santa Fe Province also called out Milei by name at an event in late June, urging him to restart public-works spending. 

At the Catholic Mass in Argentina’s national cathedral on Independence Day on July 9, Archbishop Jorge García Cuerva delivered a clear message to Milei, who was seated right in front. 

“So many Argentines are making a huge, inspiring effort that’s moving,” García Cuerva said. “Don’t let us crush it with petty interests, with the voracity of power for the sake of power itself, with reproachable behaviour that only shows that many lack the social thermometer to know what Argentines are living through on the ground. Let’s not mortgage the future.”