argentina's manufacturing living-wage gap: still a ways to go but steadily closing in


Álvaro J. de Regil

Argentina traditionally enjoyed the highest standard of living in Iberian America for most of the XX century. It had the most literate and well fed population, vast agricultural and mineral resources and a large immigration force eager to thrive in this new land. In the first part of the century, although the economy was heavily dependant for foreign exchange on the export of agricultural products, Argentina was considered one of the richest countries in the world. Real wages had a very favourable gap vis-a-vis real wages in many countries in Europe, a factor that attracted millions of European immigrants to populate much of its, until then, scarcely populated territory.

However, during the second part of the century, despite its focus on industrialisation through import substitution, Argentina experienced a long period of recurring political and economic crises, with high inflation rates becoming a permanent feature of its economy. Military coups, deteriorating terms of trade for its agricultural exports and an inconclusive import substitution strategy did not allow Argentina to become a developed economy and instead descended into a middle income economy with a deteriorated standard of living and increased inequality.

At the end of the eighties, and in line with the global trend, particularly radical in Iberian America, Argentina adopted the recipes of the so-called Washington Consensus. This entailed the imposition of the supply-side neoliberal mantra through trade liberalisation, privatisation and the reduction of the State to its minimum expression.

Under the new paradigm Argentina experienced a short bout of economic boom at the end of the century. But in 2001, the laissez-faire opening of Argentina’s economy actually resulted in its complete collapse due to the sheer speculative and predatory basis upon which it was anchored. With “el corralito” –the actual freezing of all bank deposits due to lack of funds provoked by massive capital flight– Argentina was forced to declare a credit default of its large and mostly securitised foreign debt. As a consequence, since 2003, Argentina has moved from sheer laissez-faire to far more cautious economic policies –with some measure of regulation, and a less privatised and a more demand-side economic approach.

As for the quality of wages, although real wages in Argentina since WWII were not nearly as good as they were in the first part of the century, they continued to be by far the highest in Iberian America and reflected low levels of inequality up to the mid seventies. To be sure, with the abandonment of demand-side economics in favour of a sheer neoclassical approach, real wages deteriorated substantially –except during the brief period of neoliberal GDP growth during the last decade of the past century, and inequality grew exponentially, particularly during the turn of the century until the economy collapsed in 2001-2002.

Since then real wages have improved dramatically in line with the unprecedented sustained economic recovery that began in 2003. As a result, manufacturing real wages in particular are at their highest level since at least 1996, more than doubling their previous real value during the short neoliberal boom.

By the same token, since 2003 the living-wage gap vis-àvis equivalent real wages in the U.S. has decreased dramatically as well and, as could be expected, it is much smaller than comparable manufacturing wage gaps among its counterparts in Brazil and Mexico, the largest economies in the region.

Nonetheless, from TLWNSI’s (The Living Wages North and South Initiative) living-wage perspective, before Argentina’s real wages in the manufacturing sector can be considered of a living-wage kind, they still have considerable ground to cover to reach the levels of Western Europe and East Asian wages. Yet, if Argentina is able to sustain the current trend, it will cross the livingwage threshold in less than a decade at a gradual pace and will attain comparable wages –in living-wage terms– to those of Western European and East Asian countries. A realistic goal indeed.

Brief prepared in September 2011. For a full review of this brief, click here or on the picture to download the pdf file.