Evolution of salaries and standards of living

Bachelor of Economics (UBA). Economic Analyst of Libertad y Progreso.

This article was first published on Nuevas Palabras on November 3rd, 2021.

According to the Workers’ Living Level Index (INVT), which is prepared by the Fundación Libertad y Progreso based on official statistics, in August workers have moved away from the poverty line by 2.2% compared to the previous month and they have moved away 1.8% with respect to August 2020. This implies, for example, that a family with an income of around 60,000 pesos gained 1.8% of the purchasing power in terms of the Total Basic Basket (CBT) with respect to August 2020, but lost 1.6% compared to the Food Basket (CBA), compared to August 2020.

The INVT measures the evolution of the wages of Argentine workers, deflated by the evolution of the total basic basket, from April 2013, using the FIEL series from April 2013 to April 2016, when Cristina Fernández’s administration stopped publishing the CBT. As it is a monthly variation index, it is possible to analyze whether the situation has improved or worsened since the last poverty data was published.

Natalia Motyl, Economist at the Fundación Libertad y Progreso, said that “what is most worrying is that the level of extreme poverty has worsened in the last year. The standard of living in the city of Buenos Aires has corroded by two percentage points since Alberto Fernández took office. We are in such a delicate situation that our country is crying out for a structural reform that improves the quality of life of Argentines. Short-term measures are not enough to win the elections, fundamental reforms are necessary.” The standard of living has improved by 8.1 percentage points since December 2020, based on the Total Basic Basket, but it has worsened by 40% since August 2013, the lowest point recorded.

Motyl points out that restraint regarding positive results of the INVT in recent months is important: “Brazil returned to pre-pandemic levels in September 2020, Chile at the end of 2020, and in Peru in May of this year. In Argentina we only returned this March”. The economist also pointed out that, although the value of CBT assets fell, those of the CBA increased, which meant that poverty levels fell, but indigence increased.

Aldo Abram, Executive Director at the Fundación Libertad y Progreso explains: “Although it is true that the salaries have been moving away from the poverty line since the beginning of the year, it is doing so because of measures that may not be sustainable over time. One is the reopening of collective labour negociations, which at first generate a gain in purchasing power (because the first increase is high), which is later liquefied with inflation. The second measure was an exchange rate delay that obviously impacts prices (lowering the rate of increase) and, therefore, ends up artificially moderating the rise in the CBT. Finally, the freezing of the cost of public services. These measures are not sustainable over time ”.

If structural reforms are not carried, reversing the direction that Argentina is taking, it is most likely that next year the decline will be dramatic.