Inflation put wage increases in check and led to the worst fall in three decades

Despite positive negotiations in the last months of the year, the salary increases at the federal level they had a decrease of -1.84% in real terms in 2022, the worst behavior in almost three decades, reported the Ministry of Labor and Social Welfare (STPS).

According to the data published by the agency this Tuesday, in December an advance of 0.52% was achieved in salary reviews in the federal jurisdiction in real terms, however, this behavior was not able to offset the negative balance accumulated in the year, the second in a row with a decrease.

In a context of high inflation, which reached a level of 7.82% in 2022, the highest figure in more than 20 years, salary reviews remained in negative territory in the annual balance. The worst months were October, September and April. Thus, although in nominal terms an average salary increase of 6.0% was observed in the contracts, in real terms the figure was -1.84 percent. This report is the lowest since 1996.

According to the International Labor Organization (ILO), the inflationary crisis and the slowdown in the economy have pushed real wage growth down in many countries and regions, which has translated into a decline in purchasing power, which which has mainly affected the middle class and low income groups.

“Unless the salaries and other kinds of labor income adjust to inflation, it is probable that the standard of living of many workers and their families will decrease,” the agency said in the report. Global Wage Report 2022-2023.

In preliminary terms, the ILO estimates that monthly wages in the world decreased -0.9% in real terms in 2002, the first setback in this measurement since 2008. For its part, within the G20, a group of countries to which Mexico belongs and which represents the 60% of salaried workers globally, it is estimated that the fall was -2.2 percent.

“Fight it deterioration of wages can help sustain economic growth, which, in turn, can help restore pre-pandemic employment levels. This can be an effective way to reduce the probability or intensity of recessions in all countries and regions,” said Rosalía Vázquez-Álvarez, an ILO analyst and one of the authors of the report.

The rise in consumer prices will remain a source of pressure for companies and wages this year, estimated Héctor Márquez Pitol, president of the Mexican Association of Human Capital Companies (Amech). “Inflation is not going to end, it is expected that it will be controlled, but we will wait a long time and, in the meantime, we will continue talking about the impact on wages”.

Analysts consulted by the Bank of Mexico estimate that the rise in consumer prices will begin to subside throughout 2023, to close the year in a 4.99 percent level.