Tuesday, April 16, 2024

ECONOMY | 12-03-2024 12:23

Falling wages: 12 years of lost purchasing power in Argentina

New study shows evoluation of Argentines’ wages over past 12 months and points to economic sectors likely to gain traction this year.

Over the last 12 years, the income of Argentine wage-earners and ongoing devaluations have contributed to an explosive cocktail for families, many of whom are struggling to retain their standard of living.

A new study by the Focus Market consultancy firm reviewed wage variations from 2011 to date and they reached the conclusion that, only during the second term of Cristina Fernández de Kirchner, and only in the case of State workers, updated salaries won out against cumulative inflation over the period. Inflation was 204 percent, while wages in the public sector were slightly higher at 206 percent during that time.

On the other hand, both during the governments of former presidents Mauricio Macri and Alberto Fernández, inflation ate away at wages.

Whereas cumulative inflation during Macri’s administration hit 297 percent, public wages rose by 139 percent. In the case of Fernández, consumer prices rose 1,143 percent during his government, while public wages increased by 896 percent.

Recently, Argentina's minimum wage was set at 202,800 pesos for March 2024, yet that new value represents, in real terms, the lowest level since June 2003, when it was 120,776 pesos, using January 2024 prices as a form of measurement.

According to the consultancy firm, the minimum wage is now at its lowest level over the last few decades. “It hit a ceiling of US$489 in February 2017, while seven years later, in March 2024, it’s at one of its lowest levels: US$193," reads the report.

“So far, the Argentine economy had gained traction driven by the public sector through tax collection and money printing. The latter action entailed that this country today has the highest inflation in the world,” explained Damián Di Pace, director of Focus Market.

According to the economist, “the government is willing to achieve a fiscal surplus, which necessarily involves reducing public expenditure and closing money printing to finance it.”

He added that “in the short term, this will cause a contraction and fall of economic activity and consumption in the domestic market. Restoring wages in this scenario will be very complex.”

Di Pace said that “in many cases, the decision and tension will be whether to increase wages or keeping the staff. In the context of a drop, the latter is a priority and wages, in many cases, can hardly be equated to inflation."

On the other hand, those with private wages did not fare better either.

During the government of Cristina Fernández de Kirchner, 163 percent evolved as against a cumulative inflation of 204 percent during her second term of office; and while cumulative inflation in Mauricio Macri’s administration was 297 percent, registered wage-earners saw their income rise by 155 percent. Lastly, during Alberto Fernández’s administration, with a cumulative inflation of 1,143 percent, wages evolved by 974 percent.

At any rate, unregistered wage-earners were the worst off. Those wages rose by 159 percent as against 204-percent cumulative inflation during Fernández de Kirchner’s government, 124 percent as against 297-percent inflation during Macri’s administration, and 595 percent as against 1,143-percent inflation in Fernández’s government.



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