One year after Javier Milei took office, how have revenues changed? In general, losses are predominant, but with different intensities. The hardest hit were those workers most exposed to inflation and recession, those dependent on public spending and those with few tools to defend themselves. Wage earners with paritaria were able to navigate a little better. The choice to carry out a programme that centrally attacks inflation without major compensations is the main key to understanding what has happened in the first ten months of government.
Ilustración: Juli Álvarez.
Popular incomes under Milei's government
Javier Milei’s arrival in government implied a major shift in economic policy. The protection of jobs in a context of high inflation and macroeconomic instability was replaced by a programme that attempts to decelerate prices by means of a strong monetary and fiscal adjustment. The choice to carry out a programme that centrally attacks inflation without major offsets is the main key to understanding what has happened to incomes in the first ten months of government.
The change in the macroeconomic and political context led to a major income shock. The groups most affected were those most exposed to inflation, the level of economic activity, those dependent on public spending, and those whose institutional income umbrellas were dismantled. Those who had institutional tools (such as private bargaining), even with significant falls, were better able to defend themselves.
A generalised but heterogeneous deterioration
If we take the averages from December 2022 to September 2023 and from December 2023 to September 2024, all the incomes considered were reduced, with the exception of the Universal Child Allowance. That is to say, within the income system of the general population, losses predominate but with different intensities.
At the extremes we find those who receive the AUH with a real growth of 27% and the beneficiaries of the Plan Volver al Trabajo (ex-Potenciar) with a fall of 46% on average. These differences can be explained by the government’s objective in terms of income: to disarticulate social assistance via social movements and to prioritise transfers that are not mediated through the AUH. Despite the increases in the allocation, considering it together with the Tarjeta Alimentar (given that 80% of AUH beneficiaries receive both benefits), it is difficult to argue that this sector was protected. Furthermore, the 30% increase in the poverty rate and the doubling of indigence is evidence of the limited impact of this policy.
Three characteristics, with greater or lesser weight depending on the sector, help to explain what has happened:
- inequalities associated with high inflation;
- the sharp cutback in public spending, with an important focus on salaries and social security;
- the deinstitutionalisation of the general wage discussion bodies (such as the Minimum Wage Council or the National Teachers’ Paritaria).
The heterogeneities inherent in a high-inflation economy were magnified
As we saw in the first income analysis paper, wage bargaining is a key instrument in the capacity of sectors to defend themselves against inflationary shocks and jumps, in the face of those who are more vulnerable, without institutionally established updating mechanisms. In a recessionary context, these mechanisms are amplified. This is why the private sector was one of the sectors whose incomes deteriorated the least and where the recovery process started the fastest.
Registered employees vs. other categories
Labour formality and the existence of collective bargaining bodies, which are available to registered wage earners, generate an advantage over unregistered wage earners and non-wage earners (mainly informal self-employed, self-employed trades workers and independent professionals). In this sense, both groups underperformed compared to registered wage earners.
Income was not the only thing that was affected. The most precarious jobs are also more rapidly affected by changes such as the fall in economic activity (4% on average), the increase in unemployment (22% per year, from 6.2% to 7.6%), and the increase in claimant underemployment.
Private vs. public sector
Another major heterogeneity is linked to the sector in which the wage labour is located, i.e. who the collective bargaining counterpart is. In contrast to what had happened under the previous government, with the change of presidency, operating expenditure on public sector wages was subject to a significant cutback, explained both by the large number of layoffs and by wage bargaining that was not adjusted to the new nominal inflation rate. This meant that public sector wages fell by 22.1% between November and January, much more than in the private sector (12%). The recovery was also much weaker.
Disparities within the public sector
Even within the public sector we find greater disparities. University teachers’ salaries were cut even more than the average. The fall in purchasing power between November and January for this segment of workers was 30.3% and, although there was a slight recovery thereafter, it was as weak as in the public sector average (21.9%).
Disparities within the private sector
The heterogeneity within the private sectors also shows a breadth of performance. Although they all fell during the period under analysis, some sectors managed to practically equalise purchasing power, while others saw falls of around 20%. The less favourable performances are explained by the delay in signing agreements and intermittent increases that did not catch up with past inflation (under-indexed). The more favourable ones were due to a shortening of agreements and the inclusion of monthly increases.
The fall in the income of families dependent on the State
An important part of the anti-inflationary plan promoted by the Milei government focused on fiscal adjustment. This had a strong impact on family incomes dependent on the national state. Pensions, public salaries and social programmes account for almost 50% of this adjustment.
Pensions
Pensions showed two negative but differentiated trajectories. In April 2024, those receiving the minimum amount were updated monthly according to the Consumer Price Index (CPI), with an extraordinary increase of 12.5%. This modification allowed for a rapid recovery of purchasing power. However, the freezing of the bonus (which in the previous period had enabled inflation to be matched) prevented this recovery from reaching the levels prior to the devaluation leap.
Medium and high pensions, governed solely by the mobility formula, recovered more quickly. However, without a bonus, the fall in the face of accelerating inflation after the December devaluation was much more abrupt, and the loss of income in between accounts for the greater deterioration.
Asignación Universal por Hijo (Universal Child Allowance) and Tarjeta Alimentar
Volver al trabajo (Back to work)
After the change of government, the minimum wage (SMVM) ceased to be a reference for updating this policy, which was frozen at $78,000. This made it the income with the greatest deterioration of all those analysed. On average during the period the cut was 46% and, if September is taken against November, the fall is 63%. The strong erosion of this policy can be explained in the context of the government’s tension with social movements, which are generally mediators in the implementation of this policy.
De-institutionalisation of general areas of income bargaining
Another salient feature of the first months of Milei’s government is the gradual process of dismantling certain labour institutions linked to collective bargaining, particularly the Minimum Living and Mobile Wage and the National Teachers’ Paritaria. In other words, it was the executive branch that unilaterally decided the time and form of the updates for these incomes.
Salario Mínimo Vital y Móvil (Minimum Living Wage)
The regular determination of the minimum wage is the responsibility of the National Council for Employment, Productivity and the Minimum, Vital and Mobile Wage, a body with representation from the state, trade unions and business. After Milei took office, the Council met three times: in February, May and July. In none of the meetings was a consensus reached regarding the determination of the SMVM, so the Executive decided to unilaterally decide on the increase of the legal minimum. On average, during the period analysed, the SMVM fell by 28.2%.
Teachers'
The National Teachers’ Union guarantees a minimum floor for teacher salaries across the country, compensates lower-income provinces that cannot afford to pay that salary and regulates a national contribution to all teachers via the Fondo Nacional de Incentivo Docente (FONID).
In March 2024 the new government decided to take away the budget allocation for the National Teacher Incentive Fund (FONID) from the paritaria. Throughout the first half of the year, no meetings were called for this negotiating body. During the month of August, without having reached an agreement, the executive branch opted for a retroactive update that reached the month of April, allowing for a slight recovery of what had been lost. Despite this update, the average drop for the period is 28.8%. The performance of the level remains similar to that of average public sector wages; however, the loss over the period is much higher.
Domestic workers
The National Commission for Domestic Work is another special collective bargaining body. Its performance was less problematic than the two above-mentioned bodies, as increases were achieved with the agreement of the parties. However, it did not produce favourable results either. After an uninterrupted fall between December and January, which deteriorated the purchasing power of domestic workers by 28.6%, wages began to recover slightly. Despite this, the period shows a fall of 20.8%.
