1. Higher increases in the first months of validity to alleviate the rapid acceleration of inflation.
2. Shortening of contracts -as a result of an increasingly uncertain inflation expectation for 2022.
“This resulted in rises that -in general terms- avoided a return to “reds” of real wages throughout the first semester,” said the consultant. In that sense, she affirmed that the “dynamics of the paritarias caused the inflationary surprise -and its very slow deceleration after the peak in March- to have been not so harmful for formal workers”.
This is one of the key factors -not the only one- that explains the sustainability of private consumption throughout the first half of the year, which we estimate will rise by around 8.7% yoy, more than 2 pp above GDP. The cost was the stimulus to one of the most relevant inflation propagation mechanisms, sustaining the inertia above that of the previous year: very soon an inflation was already in sight that was not going to fall below the levels of the previous year.
However, it should be noted that this trend fundamentally favored formal jobs. “The recovery of purchasing power was much less intense, given that the increases in the mobility formula -which depend on wages and part of past nominal collection- react with a lag to inflation. Instead, a constant deterioration of the real income, product of the absence of a mechanism that sustains it in the face of rising prices,” they added.
Scenarios for the second semester according to Ecolatina
1. During the third quarter we will begin to see a reopening of parity that tries to reduce the erosion of real -registered- wages.
2. Assuming a greater nominality -and the prospect that it will accelerate- has the counterpart of continuing to encourage consumption in these sectors, even in a context of strong and growing exchange restrictions. The ruling party’s bet will be to keep at least part of the economy moving in a second semester.
In this sense, the consultant predicted that retirees and recipients of allowances and social programs “will not have such encouraging prospects.” “The adjustments for mobility will run behind inflation and will close the year recording a real loss, even with the existence of bonuses as compensation. The performance of informal workers, who already enter the workforce with a strong deterioration in purchasing power, will definitely be bad. second half of the year and will be exposed not only to higher inflation but also to a drop in the level of activity,” added Ecolatina.
“The validation of a greater nominality via the reopening of joint ventures in order to sustain the purchasing power of the “formal” world and a certain level of consumption in the economy, erodes the conditions of those outside. This is not only aggravated as nominality is greater -because purchasing power is lost faster- but it is conditioned by the little margin to carry out income policies that benefit the latter group,” they asserted.
three alternatives
For the Ecolatina consultancy, the Government has three alternatives to direct salaries:
1. The first alternative is a combination of massive and high parity reopenings with a decidedly expansionary bias in fiscal policy.
2. The second constitutes a turn in relation to the recent dynamics. With the objective of reducing nominality in a context of absence of anchors, the Government does not validate parities in line with expected inflation nor does it grant transfers to those who are not formalized.
3. The third alternative is to maintain the logic of the first semester, with parity that seek to follow inflation and slow down the decline in private consumption.
Source: Ambito
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