Real wages in Argentina down 10% in the two months since Macri's election.
Acoording to a study published by the CTA labor federation, the purchasing power of workers in the private sector in Argentina fell from 7.6 to 10.1% between November and January. Accelerated inflation prompted by the 40% peso devaluation decreed by the newly-elected right-wing administration of President Mauricio Macri on December 17 was, according to the study, the biggest factor behind what's been the sharpest decline in real salaries since the 2002 crash.
"The current decline in real wages is part of a plan of economic austerity which seeks to control inflation only by reducing consumption and wage costs. The new economic team seems to believe that this would reinvigorate investment and economic growth," Pablo Manzanelli, head of the CTA's statistical office, told local news daily Página/12.
The CTA warned that while the nation's labor unions debate as to how to react, the ongoing macroeconomic changes are inevitably leading to an increase in unemployment and an even larger contraction in real wages as the Macri administration seeks to dismantle the domestic market.
Wage erosion has been a fixture in right-wing governments in Argentina over the last four decades, with real wages falling by around half between 1975 and 2002. They recovered during the Kirchner era, however - growing by 72% by 2013 even using private inflation estimates (which are higher than official ones). The only significant fall in real wages during the Kirchner era took place after a speculator-driven devaluation in early 2014, when real pay slid 4.5% between December 2013 and April 2014. The CTA noted, however, that "since then, the wage recovery was almost systematic, recovering to December 2013 values in real terms by mid-2015."
"There seems to be no economic justification for these policies. It is difficult to attract new investment with falling domestic consumption when exports stagnate due to the global crisis in general, and the recession in Brazil and China's slowdown in particular. Given this scenario, the recession being provoked in Argentina by devaluation and austerity is unlikely to be reversed in the near future," said Manzanelli.
"Regardless of his rhetoric promising 'macroeconomic balance and restored investor confidence' at the World Economic Forum in Davos, Macri's policies are not laying the groundwork for growth," concluded Manzanelli. "If there is to be a significant increase in investment, there must be a good level of consumption in addition to profitability; but with measures like these Macri hits domestic consumption at a time external demand shows no sign of growth."
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