2023-06-09 07:00:00
The inflationary escalation does not hit everyone equally and affects the poorest sectors to a greater extent, which allocate a greater part of their income to consumption, mainly food.
According to a report by Ecolatina, the sectors with the least economic resources allocate a greater proportion of their income to the consumption of food and beverages: within the basket of the poorest 40% of households, food represents an average of 32% of consumption, while for the other 60% of families with higher incomes this item accounts for 21% of spending.
The latter allocate a greater proportion of their income to the consumption of articles for the home, education, leisure or health.
Likewise, Ecolatina stated that “while spending on food and beverages and clothing represents almost half (44%) of the spending of the poorest 10% of households, in the richest 10% of households these two items account for less than 20%, less than half.
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For this reason, “the uneven growth of some items of the CPI with respect to others can deepen the regressivity that inflation has by definition (it affects to a greater extent those who allocate a greater proportion of their income to consumption) or, on the contrary, or give it a less regressive character”, pointed out the consultant.
What does this answer?
This situation is mainly due to greater relative dynamics of food prices: while the General Level of the CPI climbed 32% in the first four months of the year, food and beverages increased more than 41% (+9 percentage points).
For this reason, food and beverages accounted for almost half of the inflation in the poorest households (48.3%) so far this year, while for the richest sectors the incidence was 20.4%.
“In the sectors with higher incomes, inflation was explained to a greater extent by the greater increases in Education and in Restaurants and Hotels (which were located 9.2 and 3.5 percentage points above the General Level respectively) that have a greater weight in the baskets of the richest households”, indicated Ecolatina.
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In the same way, The update in the tariffs for public services (gas, electricity, water and public transport) that has been carried out since the end of 2022 also has a regressive component in terms of prices.
“Its consumption is unavoidable and represents a higher percentage of the spending of lower-income households,” explained the consultant
“Although the social tariff is operational, protecting families in the first deciles, the ‘porosity’ of the segmentation (households that do not register, implementation failures) makes this an additional problem for some of the households in lower income, ”said the consultant.
other looks
Eugenio Marí, Chief Economist at Fundación Libertad y Progreso, said: “Inflation in Argentina has generated a redistribution of wealth; from holders to issuers of pesos; from savers to debtors; of those with a greater capacity to press for wage adjustments than those who do not”.
“Not only that, but it has also broken the main economic ordering mechanism, which is the price system. As a result, we live in a stagnant economy, where the adjustment is made through the drop in purchasing power, but in a heterogeneous way”, he affirmed.
“The most affected sector has been precisely the one with the least bargaining power for wage increases: the informal sector. The real wage of this group of workers fell 42% since November 2017; while the registered private wage contracted 19% and the public 18%”, detailed.
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Asked about what the Government can do in this context, Marí pointed out: “To stop this dynamic, it is necessary to cut off the sources of the exogenous emission that the BCRA currently has, which is the financing of the deficit. If we compare the primary result of the first four months of recent years, we see that this government received a primary surplus of 0.1% of GDP, which fell to a deficit of 1.4% in 2020, and then never returned to its normal levels. pre-pandemic”.
“What’s more, the deficit was widening; in the first four months of 2021 it was 0.2% of the product, in 2022 it climbed to 0.3% and this year it stood at 0.6%. Efforts to adjust spending on tariff subsidies and transfers have been partial, and little has been done to shrink the structure of the State or reduce the deficit of public companies. As a result, it continues to depend on issuance as a source of financing and inflation continues to accelerate,” he added.
Meanwhile, the Director of the Center for Argentine Political Economy (CEPA), Hernán Letcher, indicated: “Although wages do not lose substantially against inflation, there is a loss of participation of wage earners, there is a process of regressive income distribution.” .
In addition, “salaries fail to recover anything lost between 2016 and 2019, which occurred a drop in purchasing power of 20 pointsbecause high inflation levels prevent it,” he said.
On the other hand, Letcher affirmed: “The basic food basket is above inflation and even the evolution of general inflation food”
“In other words, those who consume cheaper products probably suffered higher inflation than the average for the economy”he explained.
“The government’s priority is to gain access to dollars that prevent a devaluation, which by the way is promoted by some sectors that would benefit, which would have very negative inflationary effects and would affect the whole,” he said.
“There is another very significant condition that is the agreement with the Fund, which prevents the use of the usual inflationary anchors such as the exchange rate or rates,” stressed.
For his part, Camilo Tiscornia from C&T Asesores Económicos said: “In general, inflation is always regressive because it generally affects those who have a fixed income in pesos and those who use a lot of cash, which is the case of people with lower incomes. Inflation is a regressive tax.”
Regarding what measures could be taken, Tiscornia said: “Lowering inflation is not easy and they do not reach this type of cosmetic measures that the government takes of the price agreements. A deep reform is needed.”
“The measures that are being taken are not giving results and, on the contrary, since at the same time that it takes these measures, it expands the fiscal deficit and keeps the interest rate low, it ends up generating more inflation,” he added.
LdG / ED
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