Unlike physics or chemistry, in the social sciences it is impossible to establish exact and unambiguous relationships between their phenomena. Such is the case of the economy in general and macroeconomics in particular, especially if the country under study is Argentina.
It is that our country is a land of sad paradoxes in economic matters. In recent times, there has been an increase in employment, as a result of economic growth, and an improvement in the distribution of income among families. However, the number of poor people and households registered an increase.
We propose to unravel the causes that are behind the simultaneous occurrence of these phenomena. First we will display and analyze the most relevant data and at the end we present some conclusions.
The work market
For a couple of years, the Argentine economy has exhibited a rapid recovery. The expansion of the Gross Domestic Product (GDP) was 10.3% in 2021 and it is estimated that in 2022 it was higher than 5%.
As a correlate of greater economic activity, employment increases. According to data from the National Institute of Statistics and Censuses (INDEC), unemployment reached the lowest levels since 2015 in 2022. In particular, in the third quarter of last year the unemployment rate was 7.1% when a year ago it was 8.2% and two years ago it was 12.7%.
- 37,4%
- It was the percentage of the employed population that did not have retirement discounts in the third quarter of 2022.
This fall in the unemployment rate was accompanied by an increase in the activity rate and, therefore, cannot be explained by the discouragement factor. Likewise, the percentage of the population that was found working in 2022 reached the highest levels in 7 years. Indeed, in Argentina there is employment generation.
However, a more detailed look at the recent labor market data allows us to note that labor informality has also grown in our country. Of every eight employed people, three were not registered in the third quarter of last year, a very high proportion considering the values that historically registered the informality rate. Compared to the same period in 2021, it increased 4.1 percentage points. This is a serious problem, since “black” workers are in a vulnerable situation, without the protection of labor legislation, without retirement discounts and with salaries that are not defended by unions in joint negotiations, leaving them more exposed to the inflation.
income distribution
Another phenomenon that has been observed in recent times is greater equity in the personal distribution of incomewhich results from ordering the members of a society according to their income level and stratifying them into groups of the same number of people.
The Gini coefficient is an indicator that synthesizes the degree of inequality in the personal distribution of income. It varies between 0 and 1, and the smaller (closer to zero) it is, the more equitable the distribution in the society in question.
In Argentina, the Gini coefficient has shown a reduction in recent times, which indicates an improvement in the distribution of income among the social strata. It was located at 0.424 in the third quarter of 2022 and decreased 0.017 points year-on-year, according to INDEC data. It was the best third quarter since 2018, and the greater assistance from the State since the beginning of the pandemic to the most disadvantaged sectors is an explanatory factor for this fact.
These data show that The income gap between the lower strata and the upper strata of Argentine society has been narrowing, which is good news a priori. However, the way in which this phenomenon occurs also deserves to be commented.
The greater equality in the distribution of income actually hides a decline in the real income of the population as a whole, but more pronounced in the highest deciles than in the lowest.
Since 2020, the average income of the low social stratum has been increasing faster than that of the high social stratum. However, in both cases a slower growth rate was observed than that of the consumer price index (CPI). The same was evidenced in the middle social stratum. Therefore, this more equitable personal distribution actually hides a decline in the real income of the population as a whole, but more pronounced in the highest deciles than in the lowestand it is not explained by upward social mobility as happened in other passages of our history.
The functional distribution of income, on the other hand, has become more unequal in Argentina. It shows how the income is distributed among the different productive factors of the country, and reveals a decreasing participation of the remuneration of salaried work in the gross added value of the economy. Excluding the public sector, it was 34.65% in the third quarter of 2022, one of the lowest percentages recorded in recent times. For its part, the annual average share of the gross production surplus (compensation for company assets) in the gross added value of the economy has not dropped below 50% since 2020.
The catastrophe of poverty
Poverty is a multidimensional concept. However, we will concentrate here on the so-called income povertythat is, the one that results from comparing the income of individuals and households with the monetary valuation of a set of products considered essential (total basic basket).
The data is as alarming as it is sad. According to the Argentine Social Debt Observatory (ODSA) of the Argentine Catholic University (UCA), in 2022 43.1% of the Argentine population was below the poverty line. In 2021, that percentage was 42.4% and in 2019, before the pandemic, it was 39.8%. Therefore, in addition to being high levels, they do not exhibit a downward trend.
- 43,1%
- It was the percentage of the Argentine population below the poverty line in 2022.
For its part, the indigence rate, which measures the proportion of people whose income is not enough to access the basic food basket, has shown an improvement. It stood at 5.7% in 2022, 0.9 and 0.5 points below those registered in 2021 and 2019, respectively. This fact is attributed to reinforcements in social assistance.
The background of the paradox
In post-pandemic Argentina, employment is generated, unemployment is reduced and the personal distribution of income becomes more egalitarian. At the same time, poverty increases. A true paradox. However, a more detailed observation of the figures can lead us to hypothesize regarding the causes of this phenomenon.
In terms of job creation, a quantitative but not a qualitative improvement is observed. What is taking place in Argentina is a process of labor precariousness, where a growing percentage of the population that works does so “in the black” and, therefore, receives a remuneration that is not consistent with the work carried out or with the time allocated and which grows below the wages of registered workers and the general level of prices. There are more and more poor workershe says at UCA.
For its part, although greater equality is observed in the personal distribution of income, in real terms the deterioration in income is widespread and also affects, although to a lesser extent, families in the lowest stratum. So, many of them end up falling below the poverty line due to high inflation. In this context, companies are left with more than half of gross value added and wages lose relative weight in the economy.
In terms of job creation, a quantitative but not a qualitative improvement is observed. What takes place in Argentina is a process of job insecurity.
The State assistance policy seems to achieve that many families manage to cover the basic food requirements, but it is not enough to reverse the condition of poverty of a substantial part of the people. The living conditions of the bulk of the population are deteriorating.
Inflation is functional to the State, since it allows it to liquefy spending and collect more. Likewise, in this inflationary context, many companies have increased their profits considerably and, in fact, the levels of investment over GDP are at very high levels. What is curious is how the salaried population has become accustomed to this perverse price dynamic and the passivity with which they see their purchasing power and quality of life vanish.
Although there is greater equality in the personal distribution of income, in real terms the deterioration in income is widespread and also affects, although to a lesser extent, families in the lowest stratum.
There is a phenomenon addressed in economics called “monetary illusion.” From it, it is explained why people value the nominal increases in our income more than the losses of purchasing power due to inflation. In simpler words, we value more having more money than what that money can buy. This is magnified in inflationary contexts: workers see their salaries double from one year to the next. However, for many of them making ends meet becomes more difficult.
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