Curious regularity between income and employment: the richest sectors of the population are those who work the most in the state

It’s almost a cliché: the poor are the main victims of inflation. And that’s sadly true, even more so when inflation is accelerating and wages – as another cliché goes – go up the stairs, while prices go up the elevator.

A recent report by the consultancy firm Ecolatina consistently and accurately corroborates the inverse relationship between inflation and income distribution (the higher the former, the more unequal the latter) and adds a surprising verification: the higher up the scale of income, of the population, the proportion of those who work in the State increases.

In 2022, says the study, wages still lost to inflation, but they lost more in the lower income bracket, whose purchasing power fell by 5.1%, than in the 9th deciles. and 10 (between the two, 20% of people with the highest incomes) who lost “barely” 1.2% of purchasing power.

This is not only due to the acceleration of inflation but also to the structure of expenditure and employment.

To begin with, “inflation in the most vulnerable sectors is not the same as that of the population with more purchasing power”, underlines the report, since those with fewer resources are more affected by the dynamics food and drink prices while older people consume a greater proportion of their income on household, educational and leisure items. The phenomenon translates into a perfect scale: the incidence of the food and non-alcoholic beverages category in the budget of the poorest 10% is 36.1% and it is reduced decile by decile: it already becomes less than 25% in the sixth and is less than 14% (i.e. less than a seventh of the budget) for the richest 10%.

The regressive nature of inflation was accentuated in the first half of the year, explains Ecolatina, because during this period food inflation was higher than the general level. It should be added that the relative lag in the price of meat made it possible to overcome this effect in the second half of the year, but it was violently reversed from January of this year.

In fact, according to the neighborhood price index, based on the survey of 57 basic food basket products (CBA) carried out by the Institute for Research on Social, Economic and Citizen Policies (Isepci), in the businesses in the suburbs of Buenos Aires, in In January, food prices increased by 6.2% and marked an interannual variation of 102.2%, with which “a family of two adults and two children who, at beginning of 2021, needed $33,685.3 to buy their essential food, in the first month of this year, he needed $68,094.3 to buy the same products”.

Regarding the structure of employment and income, that more than 85% of workers in the poorest 10% of the population are self-employed or informal workers, almost 7% have formal employment in the sector private and ditto in the State these are data in line with the general perception, without digging into statistics. In contrast, that the percentage of those working in the state systematically increases as one moves up the income scale seems more novel. And this is what is happening, according to data that Ecolatina has prepared and graphed from the Permanent Household Survey (EPH, INDEC’s richest socio-economic database): while only 7.3% of the poorest decile of workers work in the state, the proportion of those who derive their income from public employment increases to 12.1% in the next decile and rises to more than 30% in the eighth and exceeds a third (exactly 34.3%) in the latter, for the richest 10% of the population.

Along with public employment, as income increases, the level of formal private employment also increases, rising from just 7% in the poorest decile to over 41% in the richest decile. Ergo: more than 75% of the wage income of the richest 10% of the population comes from formal jobs in the private sector or in the state.

Another information is that while the labor income of the richest half increased by 90% year-on-year, that of the poorest 50% increased only by 81%, which reinforces the regressive effect of the inflation, pressures for more government assistance and also explains, the report says, the persistence of the “additional worker” effect: more household members turn to looking for work in an attempt to compensate for the decline revenues.

In 2023, Ecolatina predicts, the purchasing power of the most neglected sectors will once again be the most affected. “This would first go through prices: the acceleration in food prices observed in January (it went from an average of 4.8% in the fourth quarter of 2022 to 6.7% in January) will increase significantly in February with the rise in beef,” says the report, according to which in the first fortnight in Greater Buenos Aires, the catering item became more expensive by 9.2%, which would be offset by increases lower than those initially announced in the tariffs for public services and transport, to “moderate the regression of inflation in the first months of the year”.

Then, thanks to the parity agreements, the gap between the deciles would continue to widen because “wages in the wealthiest sectors, by being able to reconstitute income more often and more in harmony with inflation thanks to the parity agreements, will continue to leave behind them the labor force returned from the most neglected sectors, with a higher proportion of informal workers and a good part of the self-employed”.

The result, concludes the report, is a paradox for the Government: in an election year, the mechanism allowing oil parities and the fact that they go at the same rate as inflation is the main springboard for supporting the level of private consumption. , centered on services, a sector which – at risk – “could be the only component of GDP which avoids ending up in the red this year”. On the other hand, if the sectors lose ground again, the demand for social assistance will intensify in the context of reducing expenditure to reach the budget deficit target agreed with the IMF.

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