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The wage crisis worsens and they foresee further deterioration

Days ago, the National Institute of Statistics and Censuses (INDEC) published the data that showed the first impact on the pockets of the devaluation and price liberalization. The wage index of December it barely rose 8.9% against a record inflation that reached 25.5%. This involved a 13.2% collapse in purchasing power. Among registered private sector workers, the drop was 11.5%. But it was even more drastic in the other two large groups of employees: 14.3% for informal workers and 15.9% for those in the public sector.

With an average decline of 2.3%, 2023 was the sixth consecutive year of salary deterioration. At the end of that period, the purchasing power of registered employees lost 18.9% compared to what it had in 2017.


The consequence was reflected in the sharp decline in consumption at the beginning of this year. For example, the Argentine Confederation of Medium Enterprises (CAME) measured a drop in SME retail sales of 28.5% year-on-year last month, which in some of the most sensitive areas had even more marked declines: in Pharmacy of 45 .8% and in Food and beverages 37.1%. In supermarkets, preliminary data from the consulting firm Scentia indicate a collapse of close to 10% monthly in January.

Without official consolidated data on economic activity in general, the leading indicators show the depth of the recession that leaves this scenario. Already in December, according to INDEC, industrial production sank 12.8% year-on-year and construction (due to the brake on public works), 12.2%. For January, the consulting firm 1816 compiled the first eight alarm bells: in year-on-year terms, check tax collection fell 15.7%; motorcycle patenting, 18.7%; car sales, 32.7% (the worst January in 20 years); automotive production, 16.7%; consumption of construction inputs (Construya Index), 29.2%; cement shipments, 20%; SME retail sales, 28.5%; and loans in pesos to the private sector, 35.2% in real terms.

Salaries and parities: the projection for 2024

Blender and recession through, the scenario for what is coming does not improve. The Capital Foundation projected a salary deterioration with few precedents for this year (the seventh consecutive) that would be in the double digits for all sectors, even in the registered private sector. Despite the activation of shorter joint negotiations in the unions with greater capacity to negotiate, the consulting firm predicts that this segment will end 2024 with a drop in purchasing power of 10.5% year-on-year.

The report states that, as usually happens in recessionary periods, wage claims would be affected by the need to bid to sustain jobs. “In particular, this could be evident in those productive sectors that depend to a greater degree on domestic demand (given the strong contraction that consumption will suffer, -7.4% year-on-year estimated),” he says.

Outside this segment, the salary crisis projected by the foundation is even more acute. For the state, it foresees a drop of 21.3% year-on-year, that is, they would lose more than a fifth of their purchasing power. The forecast responds to the “strong cut that the authorities promised in public spending (-0.5% of GDP in operating expenses, where spending on salaries predominates)”, something that began to become evident with Resolution 28/2024, which He put a ceiling on the negotiations by tying the salary update to possible expansions of budget items. Wrapped in a more precarious situation, the informal sector would be the most affected: the study predicts a 25% year-on-year collapse.

An indication of this dynamic is given by the first joint ventures signed. Although some large unions or unions with high firepower achieved high percentages for January, when the joint variation of the last two months is taken in the unions selected by the Capital Foundation, a loss is observed in all cases, with the sole exception of the Oilers. “In the accumulated of the first two months of the new management, formal income evolved well below the dynamics of prices (38.4% average vs. 51.9%),” the report said.


Salaries, blender and dollarization

The truth is, As the President recognized, the blender is one of the pillars of the plan. This was evident at the meeting of the Salary Council on Thursday, in which the tandem business representatives-Secretary of Labor blocked the proposal to recompose the 85% CGT. Furthermore, this Friday Milei himself ruled out that he is going to define an increase in the minimum, vital and mobile wage by decree. Given this, Pablo Moyano, co-secretary general of the plant, did not rule out the possibility of a new general strike. The truth is that the salary floor, in addition to being a kind of guideline for the informal sector, indexes the amount of the Empower Work program and the minimum retirement for those who have 30 years of contributions, so the strategy is also a way to adjust social spending.

The director of the Scalabrini Ortiz Center for Economic and Social Studies (CESO), Andrés Asiain, linked this entire process to the dollarization plan ratified by the Executive and resisted by the bulk of the opposition, which considers it a restriction on development for the country, as Cristina Fernández de Kirchner pointed out this week and as various voices have been raising.

In dialogue with Radio 10, Asiain said: “The conditions are being created. When you see the politics of these brief but hard months of Milei, one reads it in a transition towards a dollarization scheme. The first package of measures, which he summarizes with the chainsaw and the blender, includes a push for inflation (with the dollar, fuel, tariffs, etc.) to eat away at salaries, pensions, public spending and savings. That’s why they lowered the fixed term rate. All this is to reduce imports and liquefy the pesos so that, later, with a small amount of dollars, we can dollarize. Afterwards, the objective is to freeze a ‘Latin Americanized’ salary level.”

Regarding the feasibility of activating the change in the monetary regime in the short term, the economist stated that, with this situation, “a precarious dollarization can be launched in a few months.” This “precarious” scheme would imply, according to his view, buying the few pesos in circulation, but it would not yet be enough to buy those in savings accounts, fixed terms, bonds and shares, which would eventually be converted without support.

In any case, regardless of the next step that the Government seeks to take, the blender is doing its job and leaving a significant income transfer from workers to the most concentrated sectors. The fact is that, although the recession will generate a general fall in GDP this year (which the Capital Foundation estimated at 4.3% and the REM of the Central Bank projected at 3%), this would be of a smaller magnitude than a setback. double-digit salary: the additional deterioration of the income of employees in some account will go to the distribution of the cake.

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