“You Heard It on No Te Duermas”
In his regular economics and finance column, Darío Banga discussed the real value of wages in relation to inflation.
Tomás Modini
@ModiniTomas
At the start of the column on No Te Duermas, Darío Banga stated: “It’s true that the indicators are favorable to Milei, but there are other factors. When you talk about inflation, you also need to talk about wages, because you could have an 8% monthly inflation rate and then salary increases of 10%, so people are gaining 2% more in purchasing power every month.”
“But you can also have a 3% inflation rate and not see any wage increases, which is the problem in developed countries like the United States. They go crazy over a high monthly inflation number that we experience in just 15 days. Their culture dictates that wages remain stable, and that’s a big problem,” he added.
He then explained, “I think what’s happening with Milei is exactly the same because inflation is low, but money just doesn’t go as far, and that’s the reality.”
The Year-over-Year Data for September
To illustrate the situation of wages in relation to inflation, Banga explained: “If you analyze the year-over-year data for September, which goes back to October 2023, it’s 209%. When it comes to wages, none of the three sectors of the wage mass exceeded that number. The private sector, which is doing the best, is at 197%. The public sector is at 149.7%, and the informal sector is at 191%. Having low inflation results in a loss of purchasing power.”
“According to October data from INDEC, food and non-alcoholic beverages had the lowest increase at 1.2%, but housing services like water, electricity, and gas—basic household necessities—had the highest increase at 5.4%. Second came clothing and footwear at 4.4%, followed by hotels and restaurants at 4.3%, health at 3.7%, education at 3.5%, and alcoholic beverages at 2%,” he elaborated.
On this, he confirmed: “What’s happening now is that food prices are stable in some cases, but people are paying much more for services. Under the previous government, it was the opposite—people were paying more for food and less for services. Now, it’s reversed.”
“The Impact of Rising Service Costs on Purchasing Power”
“The increase in service costs has a greater impact on purchasing power because things like cell phone bills and electricity are increasing at disproportionate rates, which is a huge financial drain. Food prices haven’t increased as much, but the money goes elsewhere,” he said.
What Might Lie Ahead in Milei’s Administration
On the other hand, the specialist expanded: “Milei says he’s been protecting workers’ purchasing power for the last four months, and if you look at INDEC data, he’s right because wages are actually rising.”
“For September, the private sector saw a 3.8% wage increase, surpassing inflation by 0.3%. The public sector saw a 3.9% increase, surpassing inflation by 0.4%, and the informal sector had an increase of 10.4%,” he specified.
He also noted, “He can say that wages and inflation are above where they were before, but only by a small margin. The comparison should be done year-over-year, not constantly bringing up the previous administration.”
“My view is that if Milei manages to increase the purchasing power of wages within a year, or over the full year from January to December, with a stable dollar, decreasing inflation, wages gradually surpassing inflation, and if the currency controls are lifted, his economic management will greatly benefit, and that’s a reality,” he concluded.
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