Crisis clouds May 1st: more inflation, less employment | Crisis opaca el 1 de mayo, hay más inflación y menos empleo

By Leonel Suárez, El Pais:

While official events are being prepared in Tarija to highlight the historical struggle of the working class, the economic backdrop is clear. The College of Economists confirms the loss of purchasing power

The crisis has increased informal employment in the country

This May 1st, Bolivia commemorates International Workers’ Day in a context marked by economic tensions. It is clear that this is not a day of celebration. The date finds the country facing the highest inflation in the last ten years, sustained growth of informal employment, a shortage of U.S. dollars, and an economic slowdown that has cast doubt on the sustainability of the country’s economic model, which has been promoted by the Movement Toward Socialism (MAS) since 2006.

While official events are being prepared in Tarija to highlight the historical struggle of the working class, the economic backdrop of this May 1st is evident. The once-heavily promoted narrative of a “shielded economy” by government authorities now appears weakened in the face of a reality that is hitting the wallets of thousands of Bolivian workers.

Informality on the rise

One of the most concerning indicators is labor informality, which has shown an upward trend over the last two decades. According to the National Institute of Statistics (INE), in 2006, 62.4% of jobs were informal. By 2023, a report from the International Labour Organization (ILO) placed that figure at an alarming 80.8%, the highest in all of Latin America. In comparison, the regional average stands at 48%.

The situation is even more critical among women—83% of them work informally, compared to 78% of men. This means that the majority of workers in Bolivia lack labor benefits such as health insurance, job stability, or retirement, and they depend on precarious and often unstable incomes.

Challenges This May 1st is a reminder of the pending challenges: ensuring decent employment, reducing informality, and curbing inflation

Wages vs. purchasing power

In this context, the government’s annual wage increase, set in coordination with the Bolivian Workers’ Central (COB), is once again under scrutiny. For 2025, President Luis Arce has ordered a 5% increase to the base salary and a 10% increase to the national minimum wage. However, experts warn that such measures, rather than benefiting workers, could worsen economic problems and contribute to inflationary pressure.

Economist and president of the College of Economists of Tarija, Fernando Romero, explains that this wage policy has not always aligned with economic growth or inflation. He recalls that in 2008, the wage increase was 9.9%, while annual inflation was 11.85% and economic growth reached 6.1%. Although inflation was more moderate in the years that followed, in 2024 it has surged again, reaching 9.97% cumulative, making this year the most inflationary in a decade.

“Despite the salary increases, we have seen that real purchasing power has decreased. This means that even if people have more money in hand, it is worth less, and that’s not good for the economy,” he warned.

Union defense

In response to criticism, COB executive Juan Carlos Huarachi defended the wage increases agreed upon with the government. During a press conference held in Tarija, where the traditional May 1st march will take place this Thursday, he stated that the private sector must give back to workers the benefits gained from measures promoted by the union sector.

“Many of the measures granted to the private sector must also be returned in the form of wage increases for workers, because those who do the work in the different production centers are the workers, the laborers,” he said.

Huarachi pointed to examples of these initiatives such as the anti-smuggling law, the promotion of national product consumption, and the state-run mobile wallet. He assured that the COB not only demands increases but also proposes public policies in favor of the economy.

Employers’ criticism

From the business sector, the announcement was described as an irresponsible and election-driven decision. Business representatives warned that the wage increase—especially in a time of crisis—could trigger more inflation, the closure of small and medium-sized enterprises, and job losses.

Additionally, the effectiveness of the measure has been questioned, considering that only 20% of Bolivian workers benefit from the wage increase, while the rest, stuck in informality, are left out. To this, Huarachi responded that the effect is indirect, since the increase puts more money into circulation.

“We will have a little more to spend,” he said.

Romero: The COB should fight for stability

Fernando Romero, president of the College of Economists of Tarija, stated that the Bolivian Workers’ Central (COB) and other organizations representing the country’s workers should redirect their efforts to guarantee job stability and workers’ rights, ensuring they have dignified and quality employment.

“You can’t celebrate a salary increase that everyone knows is mostly symbolic, something temporary—and if we crunch the numbers, when we compare the year-on-year inflation from May 2024 to 2025, we’ll see that according to government figures, 25% of purchasing power will have been lost,” he said.

Romero pointed out that the wage increase benefits only about 20% of the country’s workforce—around 1 to 1.5 million workers.

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