Esperanza lives in Altavista, Catia. She has a degree in education and works as a preschool teacher. She has a husband and two children and her salary is 20 million bolivars, or about $ 7 per month. Just buy a kilo of cheese and a carton of eggs.
When the pandemic ends and on-site classes return, the cost of going to work will be similar to your salary. Like Esperanza, millions of salaried Venezuelans have seen their wages drop in just a few years.
Most formal jobs in Venezuela are anchored on a scale that depends on the minimum wage. But not only in Venezuela, the minimum wage is almost universal and most countries have already introduced it because, together with the eight-hour working day, it is part of the legacy of more than a century of workers’ struggles.
The minimum wage aims to guarantee the subsistence of the worker and to protect him in the unequal balance of power which is established between the tenant and the tenant. It is the main means of State intervention in the labor market.
This does not mean that everyone earns more than the minimum wage. Many citizens who have part-time contracts or who are self-employed earn less. In Colombia, for example, according to official data, almost half of workers earn less than the minimum wage.
However, its value is a very important indicator of the lifestyle of the population of a country, as it has an impact on the entire salary scale. And its value depends on many factors: the size of the economy, the strength of workers, the political orientation of governments, the level of unemployment, productivity, etc.
In Latin America, the vast majority of employees are at the base of the wage pyramid and earn less than two minimum wage. In Mexico, for example, 60% of workers fall within this range.
THE MINIMUM WAGE IN VENEZUELA
The value of the minimum wage in Venezuela is clearly an anomaly: $ 2.4. It is so, so low that it is not sufficient for sustenance. According to the Cenda (Centro de Documentación y Análisis para los Trabajadores), it represents less than 1% of the basic food basket.
However, its amount is used as a basis for calculating what the 3 million state employees and 4.5 million retirees – who in total represent a third of the elderly population – and part of formal private employment receive. . Moreover, the seniority and professionalization multiplier is also very low, so that a civil servant with a doctorate and 20 years of seniority will not earn more than US $ 35 per month.
There are no official data on formal private employment. The main source, the National Institute of Statistics (INE) Household Sample Surveys (EHM), have not been published since 2015. However, there are a few partial surveys.
According to them, currently any private wage negotiation between employer and employee is above the minimum wage. In other words, the minimum wage loses its main function and its raison d’être: to protect ordinary citizens from abuse by employers and to guarantee a decent income. Plus, because it’s so low, it works in reverse, driving down all other wages.
Currently, wages in the private sector are much higher than in the public sector, but they are still very insufficient. According to the OVF (Observatory of Finances of Venezuela), in a recent survey of more than 300 companies, the average salary of workers is US $ 53. Among professionals and technicians, the average is around US $ 100 and that of company executives is, on average, $ 216.
Your fall has other side effects. Many collective agreements and salary scales in private companies are structured with reference to the minimum wage. Thus, as the minimum wage fell, workers and employees gradually abandoned collective agreements in exchange for dollarization of wages, which resulted in the loss of rights.
Many salaried workers in Venezuela already receive their wages in foreign currency. Even in the public sector, some institutions pay bonuses in dollars to their employees, especially those in more senior positions. This creates, in addition to the historical division between those who own capital goods and those who are salaried, another division between Venezuela which works with remuneration in bolivars and those who receive dollars, increasing inequalities.
Just nine years ago, in April 2012, President Chávez announced an increase in the minimum wage to $ 476 – at the official exchange rate – according to its terms the highest in Latin America. But from 2014, its value began to decline rapidly as the economic crisis, sanctions and hyperinflation collapsed in the country. According to official figures, the minimum wage has lost 99% of its value in the last ten years and 87% in the last three years.
The crisis has led many workers to switch from formal employment to self-employment. According to the Living Conditions Survey (ENCOVI) for the year 2019-2020, carried out before the pandemic, nearly half of Venezuelan workers are self-employed, mainly in informal commerce, while the other half are almost evenly split between formal public and private employment.
Faced with the sharp fall in wages, the government presented strategies to mitigate the effect of the crisis, such as the Bonos de la Patria and the Clap. In addition, utilities have been kept low, although this reality is gradually starting to change. Despite this, daily life has become difficult for the majority of the population and the average Venezuelan is looking for ways to “resolve” the situation.
On the other hand, as emigration has increased, remittances have increased exponentially. This, which has long been a reality in Latin America, is new to Venezuela. Many families now receive small amounts periodically from family members who work abroad, which is an important source of income given the current size of the economy.
Hyperinflation and declining government revenues, due to both lower oil and tax revenues, as well as the long economic recession, are central factors in lower wages, regardless of the outlook. ideological. And in Venezuela, all of these happened in ways rarely seen in history.
One dollar has gone from 9 bolivars in 2012 to 300,000,000,000,000 today, taking the bolivar of 2012 as the equivalent. And we have been in recession for eight years, where our economy has lost 80% of its value during road.
These are the facts. And to explain them, there are many versions. Whether it is economic warfare, sanctions, induced inflation and financial blockade or rather the imposition of an obsolete system, macroeconomic policy mistakes, inorganic money creation and dollarization, or even a mixture of these, depends on the cut through which if you look at it.
* This is an abridged version of the text originally published in Ph9 from Venezuela.