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The wage bill returns to pre-pandemic levels

The wage bill returns to pre-pandemic levels

These have been years not suitable for the faint of heart in the economic course of the Uruguay. After a historic expansion cycle between 2006 and 2014, the drop in the international price of the products of export It led to a period of very modest growth until 2019. There came the change of government and the pandemic, and the political and health agendas overlapped.

The virus hit the economy due to the drastic reduction in mobility, and the government sought to mitigate its impact, increasing the fiscal deficit and agreeing limited salary increasesso that the employment not be affected as much. Even so, he did not resign his own agenda for structural improvement of the fiscal accounts and employment, which had already been declining before the arrival of the virus. The result was years of strong variations, first downward and then upward, in various indicators.

Already in 2022 the economy had a strong expansionwith improvement in employment and –about the end of the year– with the beginning of the salary recovery. Many exceptional factors were affecting these figures. On the one hand, the large works of UPM 2, which contributed to sustaining employment in the midst of a pandemic. If it weren’t for that big project, the employment indicators would have been even worse.

In turn, the pandemic delayed the recovery of tourism and face-to-face services, which began to rise with a long lag. He agriculture had an excellent cycle between 2021 and 2022, with record meat exports at high pricesnext to very good agricultural harvests. The drought it interrupted that drastically and its consequences will have to be seen this year.

Employment, salary and income

To clarify all these factors as much as possible, it is of interest to make historical comparisons. In turn, it is good to take the most recent monthly data, for a panorama that is as up-to-date as possible. With this objective we take the employment rate and the real wage index in it first trimester every year from 2016 to 2023 (the latest data available is March). The product of both indices is an approximation to the evolution of the so-called wage billthis is the estimate of the total income of wage earners.

Taking the INE data and calculating the historical series, it can be seen that the wage bill in the first quarter of the year would be reaching pre-pandemic levels. Specifically, the 2023 data is below the 2019 data (one year before the arrival of the virus) and above the 2020 data (the pandemic began in March of that year).

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Seen in this way, the performance of the labor market and real wages is not bad, but one must be cautious and not draw final conclusions: the recent increase in real wage It is the product of the political commitment to post-pandemic recovery and the inflation drop.

The lower inflation is in line with the drop in international pricesbut it is also a consequence of the contractionary monetary policy which -among other things- has implied a sharp fall of the dollar, with the consequent deterioration of competitiveness. Prices in Uruguay, measured in dollars, rose more than 20% in 2022.

This increase in prices in dollars coincides with the Argentine exchange rate depreciation. Through the informal dollar or blue dollar, Uruguayans visit the neighboring country with increasing intensity and frequency, not only to make purchases and tourism, but also to consume services of all kinds. The transfer of contraband across the border is not a new phenomenon and it increases with exchange rate differences, but the current situation has no precedent.

This is particularly affecting the economy of the Uruguayan coast and trade, raising the levels of unemployment in that area. If this continues, it seems difficult to sustain the positive dynamics of the wage bill that we described at the beginning.

This diversion of consumption towards Argentina is having its cost for Uruguay, beyond the obvious benefit for compatriots who consume cheaply and happily in the neighboring country. AND no solution in sight in the short term.

Source: Ambito

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