Purchasing power continues to deteriorate for Uruguayan workers, according to a new report from the Cuesta Duarte Institute that, even in an “optimistic” scenario, real wages will only recover in 2024 or 2025.
“During the third quarter of the year, the interannual variation of the Consumer Price Index (CPI) was located in percentages similar to that of the Average Salary Index (IMS), in the environment of approximately 9.5% to 10%. In this way, the average real salary for the third quarter of 2022 is at levels approximately equal to those of the same period of the previous year”, the institute begins by explaining in its most recent report.
Given these numbers, one begins to intuit that “the process of recovery of remuneration in real terms, announced as of mid-2021, has not yet begun in the third quarter of 2022, according to the data that arises from comparing the Average Index of Wages with inflation.
For its part, in the July-September 2022 average, purchasing power was 3.6% below that of the third quarter of 2019, and 3.5% below the average registered in all of 2019.
“In the month of July 2022, salary adjustments were higher than those foreseen
initially (inflation corrections in some branches of the private sector and advances on account in the case of the public sector) together with the already planned adjustments for future inflation and recovery components in the case of private activity. However, the persistence of inflation levels above 9% year-on-year during these months has prevented these adjustments from being translated into a beginning of the recovery of the average wage in real terms”, continues the summary of the analysis.
Just in two years
Cuesta Duarte concluded that, according to his forecasts, a tangible salary recovery would only begin to be seen in 2024 or 2025, far from what the government has promised on various occasions.
“The fall in the purchasing power of wages, which has already been going on for two and a half years, is explained by different reasons at different times,” he adds, and goes on to explain that “between March and June 2020, the acceleration in inflation after the start of the pandemic, led to the deterioration of the average real wage.
The deterioration of the purchasing power of the average wage has been accumulated for 31 consecutive months, compared to the reference level of the average real wage of 2019. “Even taking for granted the optimistic scenario that from the next few months the average real wage begins a growing trajectory and that by the end of 2024 or 2025 it reaches the level it had before the pandemic, we will also have witnessed a period of at least four years of accumulated loss of economic well-being of wage earners”, the report also says. .
In summary, “in terms of annual averages, we are going into a new year of falling average real wages, mainly as a result of the impact of a very negative first half of 2022 in terms of the evolution of the purchasing power of wages. Therefore, the process of beginning to recover the level of real wages prior to the pandemic, which was to begin in July 2021, as announced by the government, is postponed to 2023.”
