The acceleration of inflation In the last months of 2023, it fully hit the purchasing power of the wageseven those that were updated by parity. A negative trend that would continue – at least – during the first part of 2024.
In fact, a private studio estimated a 10% drop in the purchasing power of registered wage earners “during the summer.” Some analysts project that, if the Government’s economic plan works, Starting in the second semester, a scenario of lower inflation, reactivation of activity and recomposition of salaries could be seen.
For example, from the consulting firm Ecolatina they indicated that “Inflation will average 20% monthly between December and Marchperiod for which We expect real wages to fall by around 10%.”. “Given the expected inflation, so that purchasing power does not erode in the coming months, salaries must keep pace. Although the already oiled joint ventures will play their role, mitigating the deterioration of purchasing power, coming out of this process ‘tied’ seems difficult: Only the jump in inflation in December will leave losses of around 10% in real terms,” the firm summarized.
In this scenario, the consulting firm pointed out that in the face of inflationary acceleration “salary demands are not long in coming” and that a “combination of bimonthly/quarterly joint ventures that will seek to ‘beat’ prices, with other monthly adjustments – some virtually indexed-, where fixed sums will surely also proliferate to compensate for diminished purchasing power.”
However, “All this will not be enough, and the minimum purchasing power will lose 10% of its value during the summer, so the effect of the recession – and the salary anchor – will also play its role in these months.
Salaries vs inflation: what will happen in the coming months
After the inflation data for December, which was 25.5% as reported by INDEC, different consulting firms estimate that the CPI in January would once again be around 20%. In this context, beyond the fact that many unions seek to restore income through short joint ventures, They estimate that it will be difficult for them to keep up with the price rise.
“I highly doubt that salaries keep pace with inflation.. Quite the opposite, we may see falls only comparable to those of the beginning of 2002 and those of the hypers of 1989 and 1990”, Luis Campos, coordinator of the social law observatory of the CTA – Autonomous, told Ámbito.
The thing is, as he explained, it is possible “adjust by parity, but if you arrive two or three months late, with these levels of inflation, the blow is brutal”. Estimating with certainty how much the fall in wages could be in real terms, Campos added, is complex: “Because prices and wages entered into a dynamic that is very difficult to project forward.”
For his part, economist Martín Burgos maintained that in this context “the risk is the spiralization of prices and wages.” “Each increase in salaries will generate price increases, and so on every month. Furthermore, the rates and the exchange rate will follow those rhythms,” he remarked.
However, he estimated that “at this inflationary rate, “Wage earners can lose half their salary in the first quarter of the Government.”
Salaries: when can they “recover” what was lost
Aldo Abram, director of the Libertad y Progreso Foundation, agreed that during the first months of the year salaries will lose the race against inflation. But he projected that starting in the second semester a recovery could begin to be seen in this regard.
“The previous Government left us in the middle of a hyperinflationary process, which implies a continuous acceleration of the rise in prices. Unfortunately, not even with short parities it is possible to keep up with the pace of inflation“, said Abram, who added: “In addition, since a hyperinflationary process also implies an impoverishment of society, it puts you in a recession. And that makes it impossible for business owners, who sell less and less, to raise salaries.”
“So, unfortunately, Until this hyperinflationary process ends, workers will continue to lose purchasing power. The same as until the economy recovers,” stressed the economist, who highlighted that the Government has already “turned off” one of the engines of the inflationary process, which is “the uncontrolled issuance of the BCRA to finance the Government.”
“Now we have to stop the other engine, which is the fall in demand for pesos, because people are fleeing the peso. And when something is stopped being demanded, its value also falls,” said Abram, who concluded: “The agreement with the Monetary Fund could generate confidence. The key is to maintain confidence in the change of course. This will slow down inflation, stop the hyperinflationary process, and then with the economic recovery -which will also begin to appear towards the middle of the years- there is a possibility of recovery in real terms even in the second half of salaries.”
Source: Ambito
