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Salaries fell sharply against prices in the first quarter and companies expect to increase less than inflation

Salaries fell sharply against prices in the first quarter and companies expect to increase less than inflation

Purchasing power continues to plummet and between December and March, Registered salaries rose 58% while inflation in the same period was 90%. There was hardly any recovery in March, which for the first time since Javier Milei was president beat inflation. For now, Everything seems to indicate that in 2024 salaries will once again lose against prices.

The latest data comes from INDEC and the RIPTE (Taxable Remuneration of Stable Workers) prepared by the Secretary of Social Security, which includes 10 million formal workers in the public and private sectors. With this loss of purchasing power, the realignment of income was more than thirty points in relation to the cost of living.

In four months, salaries had a nominal increase of 57.9% (8.3% December, 14.7% January, 11.5% in February and 14% March) and inflation in December-January-February-March was 90.1%, which represents a drop of 16.9%, according to INDEC data.

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In the midst of these very negative data, formal salaries with contributions to Social Security improved in relation to inflation in March. They increased by 14% versus a price increase of 11%.

How much did they lose salaries in 2023?

In 2023, salaries closed with an average that went from $194,175.11 in December 2022 to $484,298.40 in the same month of 2023. It represents an increase of 149.4% versus an inflation of 211.4%. It is equivalent to a loss of purchasing power of 60 points. Thus, from the beginning of 2023 until now, salaries have lost almost half of what the cost of living has increased.

This fall occurred with greater force after the August devaluation of the previous Government and the spike in inflation, which was accentuated in December with the depreciation of the current Government and the sharp rise in prices.

In March, the average formal salary was $705,832.58, a value that was below that of the poverty family basket which, for a couple with 2 minor children, valued by the INDEC at $773,385.10, without considering the rent.

In this framework, the number of workers with formal employment and contributions to Social Security who live in poor households increased.

In relation to the end of 2015, the RIPTE accumulates a loss of more than 30% of which 20 points correspond to the government of Mauricio Macri and 10 points to that of Alberto Fernández and now this drop in the first 4 months of the management of Javier Milei.

The RIPTE (or the INDEC Salary Index) is one of the variables that is taken into account for the calculation of pension mobility along with the evolution of the tax collection that goes to Social Security, discounting the increase in the list of beneficiaries .

How much will salaries increase in 2024?

Argentine companies foresee an annual increase of 191% in the remuneration of their collaborators, so they will maintain a certain lag with respect to the projected annual inflation, which would be around 202%, according to the results of the latest update of the Executive Summary Compensations, Benefits and Talent.

“We once again find ourselves facing a complex and challenging economic scenario that directly impacts not only salaries, but also competitiveness and the potential to attract and retain talent. In a context where adjustments to public service rates and general consumption directly affect purchasing power, union pressure and the movements of the most dynamic sectors of the market, emerge as the main factors that will mark the behavior of salaries and their periodic review,” analyzes Damián Vázquez, partner at PwC Argentina, leader of Management Consulting.

According to the latest survey by PwC Argentina, in which 179 organizations participated, an increase in the periodicity of adjustments is beginning to be observed more frequently with bimonthly and even monthly reviews to effectively counteract the inflationary rhythm. This can be evidenced by the fact that nearly 40% of the companies consulted make salary adjustments on a bimonthly basis to alleviate inflation.

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“Given that the estimated inflation for this year continues to be higher than the projection of salary adjustments for this year, the human resources areas will continue to focus on improving the employee experience and enhancing the value proposition, where benefits maintain a role.” important to compensate for the loss of purchasing power,” adds Vázquez.

On the other hand, 89% of the organizations surveyed stated that they pay bonuses to their staff, a tool used to maintain salary competitiveness and motivate the achievement of strategic value objectives. Regarding bonus payment methods, 76% of companies choose variable amounts assigned to meeting objectives, 14% are guided based on a fixed amount, and 7% use a combination of both.

In this sense, among the benefits granted to accompany the acceleration of the increase in the cost of living, we can highlight the increase in the number of adjustments per year, the advance of bonuses, the advance of salaries, the incorporation of new benefits, the review of reimbursement amounts and the development or improvement of the employee value proposition.

“Given the difficulty of maintaining competitive salaries, another way to retain talent is the Employee Value Proposition (PVE). Companies more focused on improving the experience of their staff, combining the attributes that people value in the current labor market and what the organization can deliver. Reviewing the benefits package remains relevant when looking for alternatives to compensate for the loss of purchasing power. For them, the management of compensation, the brand, ways of working, experience, development plans, well-being and work spaces must be analyzed,” adds Mariela Rendón senior manager of People & Organization at PwC Argentina.

Source: Ambito

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