According to INDEX data released on Friday, wages lagged inflation by about 60 points in 2023. Although declines occurred throughout the year, the decline in December was brutal, as wages rose 8.9 percent – in line with the variation experienced in the second half – but inflation rose to 25.5 percent with the arrival of the new government, deregulation and exchange devaluation.
Thus, the general level of wages declined by 16.6 percent in real terms in the last month of the year alone. Experts warn that this adjustment in income is unprecedented in the last thirty years.
The variation in the general wage index, measured by Indek, was 152.7 percent in 2023, measured between tips. This represents a decline in the purchasing power of wages of 58.7 percent compared to an annual inflation rate of 211.4 percent. There is no parallel in recent history for such a massive loss in the purchasing power of income. One need only go back to December 2002 to see a similar, but smaller decline of 33 percent in real terms.
In recent years, the purchasing power of wages increased by a modest 2.4 percent in 2021 alone. If the average level of wages in 2023 is considered, the decline in real terms is smaller, at about 11.5 percent year-on-year.
Taking into account registered employment, the variation in wages in the private sector between the peak in 2023 was 165.8 per cent, and in public employment 148.6 per cent: representing a real decline of 45.6 and 62.8 points respectively.
If we look at unregistered private employment, the decline is even worse, as the year-on-year variation in 2023 was 115.3 percent, i.e. a real loss of 96.1 percent: the purchasing power of wages of this segment of the population. If average changes over the entire year are considered, registered private employees lost 7.5 percent in real terms, public employees lost 1 percent and informal employees lost 43.1 percent.
Inflation wreaked havoc in the last month of the year, boosted by expectations of price regulation due to the shift to an ultra-liberal government and the impact of a 118 percent devaluation during the first days of Xavier Miley’s mandate. Taking official data into account, the general level of wages fell in real terms by 16.6 points in December, with a monthly variation of 8.9 percent.
The general level includes both private sector registered employees, whose wages rose by 11 percent in nominal terms in the month, and public employees, whose remuneration rose by 5.5 percent: thus, in the first case the decline in real terms was 14.4 percent, and in the second In India it was 20 percent in just one month. In the case of unregistered private employees, their income increased by 7.6 percent in December, leaving them with a loss of 17.8 percent in real terms.
There is a question mark over what level the monthly inflation rate will be in the coming months. Researchers at the Centre-Periphery Institute predict a new floor of 18 to 20 percent per month, which would “accelerate inertia and prevent the decline in inflation from progressing further, making the traditional basis on which the current economic program is based less effective.” Will be done.”
Given the collective bargaining agreements in January, the traditional “diffusion mechanism” for inflation associated with wage adjustments was put into action, imposing “approximately 25 percent wage differentials”. This monthly indexation pattern is far from underpinning future inflation dynamics, to which other factors such as increases in service rates and exchange differentials should be added, the consulting firm warned.