warn that wages are heading to lose the race against prices

warn that wages are heading to lose the race against prices

It is that the perspectives of a new acceleration in inflation conspire against the recovery of the purchasing power of income. And, although the “short” parities will help cushion the contraction, revenue is expected to fall in real terms for the sixth consecutive year. The impact will be greater, logically, for informal workers.

“After the relative deceleration of inflation in June and July (it averaged just over 6% per month, after reaching an average of 8% between March and May), the recent exchange jump will result in inflation that we expect will reach double digits in August and September”, pointed to Ambit Santiago Manoukian, Head of Research at Ecolatina.

In this context, the economist pointed out that, “although purchasing power will feel the blow, the nature of the joint negotiationscharacterized not only by more frequent adjustments but also by a shortening of their validity, will allow unions to adapt their claims to the new nominality more quicklywhich will be combined, most likely, with a fixed sum for all formal workers”.

“Thus, a moderate drop is expected, in the order of 1.5% of the average real formal salary this year, a value that we hope will support the level of consumption in a context of increasing nominality. Nevertheless, will have marked the sixth consecutive year of falling real wages in the economybeing the informal the most disadvantaged”, highlighted Manoukian.

Along the same lines, Francisco Ritorto, economist at the consultancy ACM, explained that, “Just like last year, there’s going to be a widespread loss of purchasing power.” “With the data available up to now (June), we see that wages in real terms show a fall of close to 2.2% in the first half of the year. As a higher floor of inflation is already expected, it is unlikely that wages can keep up with such nominality. In addition, there is an additional problem, which is the disparity between salaries: if you analyze the unregistered sector, you find yourself in a situation of much greater vulnerability and a more accentuated drop in purchasing power,” the analyst highlighted.

“On the other hand, we usually look at the evolution of wages against food inflation exclusively -because it is the most basic and main expense of people-: in this case, the loss of wages against inflation is greater and accumulates up to a 5% real drop from January to June”, explained Ritorto.

“In short, wages have already lost enough ground against inflation if compared to previous years and this dynamic is unlikely to change”, added the analyst, who in terms of the new parity formats remarked: “Shortening the negotiation terms can somewhat alleviate the impact, but it would not be enough to improve purchasing power expectations. In addition to the fact that a shorter duration of the contracts ends up feeding prices back when you find yourself in a process of high inflationary pressure like this one”.

Meanwhile, Martín Kalos, director of EPyCA Consultores, stated that “the problem in these situations is that an inflationary acceleration always leaves wages running behind and on the defensive”. “Because the parities were closed with lower expected inflation numbers and the time until the parities reopened, and between the time those increases take effect, there is always a period in between in which salaries were delayed,” he explained.

Meats Butchery Price Consumption Inflation

Due to accelerating inflation, wages will fall again in real terms this year

Mariano Fuchila

“There are always two ways to measure whether the salary is late or not. One, end to end: perhaps, in a year in which inflation levels off at the end of the year, wages then end to end can tie it. But it will not be the case this year, since prices are accelerating again and with great uncertainty regarding the dollar and therefore the other prices in the economy. That is to say that this year it is difficult for wages to match inflation end to end”, added Kalos, who concluded: “But even worse, if throughout the year they fell behind, it will give the measurement of the average year: the average salary of the year 2023 against that of 2022 is going to give a fall in the real salary”.


After the PASO and the devaluation of the official dollar, different consultants analyzed the impacts that the new situation may have on different variables of the economy. One of the aspects that was addressed was the evolution of wages.

For example, from Fundación Capital they analyzed the evolution of income this year compared to the last election periods: “Wages in the registered private sector, the least affected given the recurring wage negotiations, would fall 4.1% yoy in 2023 in real termsbeing 5.3% below the income of 2019 and 18.5% of 2015. In addition, the minimum wage, proxy for income in the informal sector, would be 11.3% below 2019 and 34.8% below 2015”.

For their part, LCG highlighted that “The anemic activity and the climate of confusion take away the bargaining power of the workers, so the emergence of new poor wage earners is to be expected”. “Salaries will be further behind, with a real cut of 33% accumulated in 6 years (16% in the last four years). In the case of informal wages, the situation would be even worse, falling 52% in the same period (34% since December 2019)”, they concluded.

Source: Ambito

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts