Caracas, 1st September 2013 (Venezuelanalysis.com) – Venezuela’s second minimum wage increase of the year came into effect today, provoking renewed focus on inflation and the state of the economy.
The salary increase is part of a three-tiered rise in the minimum wage being implemented this year by the government of Nicolas Maduro, which will result in a total minimum wage increase of 38 – 45%.
On 1 May the minimum wage rose by 20%, from 2,047 Bolivars (U.S. $325) to 2,457 Bolivars ($390). A further wage increase of 10% from today increases the salary to 2,703 Bolivars ($429).
Finally, in November, the government will decide whether to raise the wage by 5 or 10%, to either 2,838 ($451) or 2,973 Bolivars ($473).
Around 3.24 million workers on minimum wage will benefit from the increase, as well as pensioners and those on social benefits. This cash income forms part of a social wage received by all salaried workers in Venezuela, which includes monthly food tickets worth around 1,200 Bolivars ($190) and access to universal health and education services.
However, the cumulative salary increase of 32% so far this year is only just ahead of inflation, which rose 29% in the first seven months of 2013. This is due to an inflationary spike in the first six months of the year, peaking at 6.1% in May. Inflation has since almost halved, falling to 3.2% in July.
Further, the government’s National Institute of Statistics (INE) estimates the current cost of the basic monthly food basket for a family of five to be 2,779 Bolivars.
Under the administration of late President Hugo Chavez Venezuela’s minimum wage was increased annually, a policy which Nicolas Maduro has committed to continuing. In 2012 the minimum wage was raised by 32%, while annual inflation closed at 20.1%.
“During the [Bolivarian] revolution there have been permanent salary increases, unlike previous governments,” said INE president Elias Eljuri in an interview recently.
Meanwhile the conservative opposition’s Justice First (PJ) party has criticised the latest salary increase as “insufficient”.
“The new minimum wage…isn’t enough to eat properly,” said PJ leader Jorge Millan to Venezuelan media on Friday. The opposition politician went on to criticise the government as “a corrupt and inept gang who will never manage to defeat the inflation and shortages that are wearing down all Venezuelans”.
Nevertheless, analysts such as Caracas-based financial consultant Henkel García consider that the spending power of ordinary Venezuelans has increased over the previous fourteen years, in part due to the rate at which the minimum wage has increased.
“The [minimum] salary since the arrival of Hugo Chavez in 1998 has multiplied by approximately 24.5, but inflation has also risen significantly, which has left a minimum wage increase of 17% in real terms,” Garcia said in a recent interview with media outlet Noticias 24.