President Javier Milei’s drastic economic reforms have sent income inequality soaring in Argentina, testing how much his voters can tolerate his “shock therapy.” According to the latest available data, wages for the country’s large informal workforce rose 136% year-on-year in April, almost half the 248% growth rate recorded among wage workers in the formal private sector.
Not only are wages in both sectors unable to keep pace with 272% annual inflation, they are worsening income disparity. in a nation where 42% of its population already lived in poverty last year.
“I have had to cut a lot of expenses,” says Valeria Verín, an independent professional masseuse who voted for Milei last year knowing that her austerity policies would affect her income.I will have to devote myself to another activity, which I don’t know what it would be because I don’t have a plan B. I never needed a plan B.”
A long-time informal worker, Verín still supports Milei and holds out hope that she can bring about the economic changes Argentina needs. But she knows that difficult decisions lie ahead if the economy does not recover soon.
Verín, 46, who lives in Wilde, a working-class town 20 minutes by train south of Buenos Aires, He currently earns about 600,000 pesos (US$650) a month, compared to the 500,000 pesos he received in December (US$540), when Milei took office. Although the figure is above the Argentine poverty line, a basic basket of goods and services defined by the government, Prices have risen more than 100% since December, while Verín’s revenues have only increased by 20%.
She has stopped saving and has cut back on vacations and nights out. She also works as a waitress at events on some weekends and gives private lessons to high school children to compensate for the sharp decrease in hours for massages, a consequence of the reduction in Argentines’ purchasing power and disposable income. “Unfortunately, I even had to stop doing something as simple as going to the hairdresser,” adds Verín, who now dyes her hair at home.
The outlook is even bleaker for wages when adjusted for inflation: the incomes of informal workers, who typically earn lower wages, fell 22% annually in the first quarter of this year, compared to a 14% drop in the case of formal workers, according to the Buenos Aires-based consultancy Equilibra.
The Gini coefficient, a global measure of income inequality, soared in early 2024 to its highest level since 2005, when Argentina was recovering from one of its worst crises, according to data from the World Bank and the Buenos Aires-based consulting firm Suramericana Visión, headed by former Economy Minister Martín Guzmán.
“The approach taken to address fiscal and macroeconomic imbalances is highly regressive,” said Guzmán, who is often critical of Milei’s policies. “It is not surprising to see the brutal increase in income inequality in the first quarter of the year.” Milei’s spokesman, Manuel Adorni, and the press office of the Ministry of Economy did not respond to requests for comment.
Latin America has long been the most unequal region in the world, and wage disparity has worsened under all types of Argentine governments. In addition to Milei’s economic policies, there are many other factors that influence wage increases, although they are a dominant force. Milei also warned the Argentines that the start would be tough.
How much pain Argentines can endure as Milei tries to stabilize the economy is key to maintaining his approval ratings, which are at surprisingly high levels above 50%. This has allowed him to govern with a minority party and win the approval of investors.
Milei’s most important measures, eliminating price controls and devaluing the peso, more than offset the federal aid he gave to families of low-income countries to mitigate the impact of its cuts in funding for public works, social security and public employee salaries.
Political leaders are putting Milei on notice. His most powerful ally in Argentina, former President Mauricio Macri, He demanded that Milei return federal funds owed to the Government of the City of Buenos Aires, highlighting the sacrifices that Argentines are making.
The governor of the province of Santa Fe, Maximiliano Pullaro, also called out Milei by name at an event held at the end of June and urged him to resume spending on public works.