With New Wage Increase, Venezuela Braces for Worsening Inflation, Layoffs
EspañolVenezuela’s national minimum wage was raised 50 percent this week, but experts warned President Nicolás Maduro the increase could result in closures to small businesses.
During a national radio and television broadcast, the president said the minimum wage will be set at VEF $22,076 (US $2,218) monthly, while the food bonus will be VEF $42,480 (US $4,269).
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Maduro has bragged in the past about the 14 increases in minimum wage made over the last three years, but fails to address that the country faces the highest inflation in the world.
Economists predict the price of products will increase as salaries rise, except that many companies must face price controls set by the government.
Before the adjustment was announced by Maduro, Venezuelans spoke out through Twitter with the hashtag #AumentoIrreal.
El #AumentoIrreal, que no cubre ni el 20% del costo de la canasta básica, traerá más hambre y miseria para nuestro pueblo
— Ebrio y Medio (@ebrioymedio) August 17, 2016
The raise won’t even cover 20% of the cost of the basic food basket, will bring more hunger and misery for our people.
— Lizmar Mercado (@LizmarMercado) August 17, 2016
Each day we suffer more, there’s no production, no food, no security, no jobs… Maduro, resign now.
Francisco Martinez, President of Fedecamaras, the largest confederation of employers in Venezuela, said the wage increase may not only lead to massive firings, but could also trigger the closure of many businesses.
Martinez systematic increases “are a recognition of the failure of the economic model… all it does is generate inflation.”
He further criticized wage increases that “are not accompanied by any structural measure.”
Employers criticized the decision as “surprising,” while denouncing the government’s failure to comply with the International Labour Organization (ILO).
Making the problem worse
Economist and President of Datanalisis Luis Vicente Leon said without a change to the economic model, the announced wage increase will only worsen the inflation problem.
“Workers need constant raises to live among overflowing inflation,” he said. “But compulsive increases without changing the model makes the problem worse.
Leon stressed that “the decreed increase in wages does not compensate for past inflation and generates future inflation.”
Economics experts recommended opening markets, increasing production and stabilizing prices so increases have positive effects on the pocketbooks of Venezuelans.
While private enterprise must comply immediately with minimum wage increases and food tickets, public agencies have delayed bonus payments for food and increases in the salary since last February.
The government is reportedly indebted to more than two million employees, as there are institutions that have not paid the wage scale increases of 20 and 30 percent installed in February and May.