Gary gives again, a wonderful analysis on Bolivia’s economics and political situation, from El Deber:
Is it enough to raise wages?
The Government announcement of a mandatory increase of 8% to the basic salary and 20% to the national minimum stunned Bolivian entrepreneurship, which was declared in emergency, describing the measure as a blow to the sector. For its part, the Central Bolivian Workers [labor union, COB] accepted the increase reluctantly. Entrepreneurship criticizes that the increase is more than inflation, which in 2012 did not reach 5%, and the workers insist with the claim of some $1,200 dollars for a worthy ‘basket’, something ‘nor laudable’ according to the Government, because it would end up with public investment.
That workers deserve a living wage, no one denies it, and that all Bolivians earn more to live better, either. However, trying to solve poverty by Decree may become increasingly less attractive to produce in Bolivia. First, because it is mandatory only for formal businesses in a country where it is estimated that more than 60% of employment is in the informal economy, an unfair competition for producers and traders established by law. Second, a wage increase without productivity growth is an additional cost. For example, now that home workers will earn Bs1,200, may all families pay more [afford?] for same service? The same happens in companies that see their costs raise without seeing their workers being more productive. Third, aside from the retroactive payment to January, the increase implies a ‘cascading’ rise in employer obligations, higher cost of bonuses, Sundays, holidays, overtime, etc.
Finally, this recurrent increase causes distortions in the curve of the wage, approaching the operating levels of the professionals, causing strong internal pressures. Is this measure related to reality, being that few companies earn much, and most earn little, others do not earn and even many lose, but all must pay more? Could this not result in a rise in prices, discourage investment and job creation, and inducing informality there, where minimum wages are not paid, social benefits or taxes [are not honored], as opposed to the legal sector, who is also affected by the legal uncertainty, export restrictions and smuggling?
Decrease poverty is not easy, I know. But I also know that education is the key to improving the lives of people, and it is here where we must work! At greater skill, the worker shall receive a better salary, without the need for a mandatory Decree.
Economist, master in international trade
There is this joke, attributed to people from Cochabamba… about some crabs who are kept in an open basket… when asked about it, owner says, those crabs won’t scape, as they are from Cochabamba; they pull back among each other, no worries… just hope Cochabambinos are not angry with the messenger… this serves only to illustrate current central government’s desire to have all Bolivians further down, thus preventing us from being competitive, self sufficient; mining our self esteem so they can perpetuate in power, to the expense to those who keep on voting for this inefficient, corrupt, useless “socialism of the 21st century”