Venezuelan May day: a 30% salary increase.

by rahul | May 1, 2008 at 12:07 pm | 376 views | 5 comments

Caracas, Venezuela, 1 May 2008. Last night and during a televised messaged, Venezuelan President Chavez decreed a salary increase of 30% for civil servants and minimum wage workers. This Increase ranks Venezuelan minimum wage workers as the first ones in Latin America followed by Argentina and Chile. From 1 May 2008, they would be getting a US$372 per month. The average minimum wage in Latin America is US$212 per month. Venezuelan Civil servants would also be getting their 30% increase monthly.

These wage increases have two motivations. First, the electoral motivation as local government elections are due by the end of this year. The Chavez administration is most interested in grasping power at current opposition local government offices. The continuation of the socialist project and extension of Chavez tenure in power depend on the outcome of the local elections. The second motivation is the fight against inflation. Venezuelans have been enduring an inflation rate of over 20% yearly. Such salary eroding rates and food scarcity have also motivated the government to both regulate some food prices and increase saving rates.

Today, 1 May 2008, the opposition and the government show their political might at Caracas. They both stage workers concentrations at Caracas downtown. Pro government workers will parade in support of the 30% salary increase. The opposition will march for the betterment of working conditions. They will also reject the government proposal for socialist education curricula at schools.

Sources: VTV, Globovision, Unionradio, Telesur, El Universal,YVKE, ,

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greek_forum

at 11:57 on May 3rd, 2008

Dear rahul,

Either you've made some kind of a typo or you need to sit down and do some basic reading on economics. Writing that a 30% rise in wages (with current inflation around 20%) is part of the fight against inflation is the craziest thing I've read in a long-long time!

rahul

at 14:10 on May 3rd, 2008

Dear greek_forum, Thanks for reading my story. Your comments allow me to ponder on the fact that Economics is just another Social Science discipline! Models are used to predict future outcomes without resorting to a Delphi oracle. It may sound like madness but there is method in it. Yes, societies have held beliefs that later proved inaccurate or fictitious. Nonetheless, they allow them to build and create great enterprises or motivate people to perform in different manners. Nowadays and like other Social Science disciplines, economic models are used to support a theoretical world. However, using models is not guarantee a desired outcome would take place at all. For recent examples of such failure, you may look at the stagflation phenomena or recent economic recession in the US.

Parakalo, be aware my story reported on a current event. At this particular moment in time with high oil prices, Venezuelan Socialist government believes in an economic model that states a causal relation between salary increase, few price controls and lower inflation. It also promotes social oriented policies such as wider housing facilites for the poor, free and universal schooling and medical care and the empowernment of indigenous peoples and minorities. This would no doubt sound strange to those akin to Neo Liberal prediction and explanation models of Economics. However, knowing one’s models and theoretical constructions is just like that ancient dictum: Know yourself. It is an uncharted road full of unpredicted outcomes and situations.

Finally, I would invite you to keep an eye on the evolution of Venezuelan economy; it is still too early to judge the impact of its future performance. Venezuelan economic policy on salary and energy are the opposite of the one followed by Greece at this moment. Thus, it would be rather revealing to make comparisons at a later stage. When Venezuela followed neo liberal models in the 80´s, social unrest, low salaries, cheap international oil prices and poverty was the outcome.

greek_forum

at 06:29 on May 4th, 2008

Dear rahul,

Thanks for taking the time for the long answer. In response to what you're saying I have this one bit of information, published in a Greek newspaper. President Chavez himself is quoted as saying that "the workers having money is more important than the fight against inflation".

Either way, muchas gracias :)

arysio

at 23:42 on May 14th, 2008

Agreed greek_forum - both in 'theoretical models' and in the reality as
I live here - this wage increase will only increase inflation. The only
way it could decrease inflation is if employers decide to stop hiring
workers, which increases unemployment, and would thus decrease consumer
spending. But this doesn't seem to be a desirable outcome.

And Rahul - regarding "stagflation" not being predicted, you are only
half correct - true, stagflation ended up contradicting the commonly
held faith in the "Philip's curve" but some economists, such as Milton
Friedmen, predicted stagflation would happen nearly a decade before it
did, using an "economic model."

And with regards to it being too early to tell the future of Venezuela,
you are correct - it will be somewhere between atrocious mismanagement
which will take many years to fix and a complete collapse that will
propel Venezuela into a standard living commensurate with sub-Saharan
Africa. Venezuela has the third highest inflation in the world, ahead
of only Zimbambe and Myanmar!

rahul

at 14:04 on May 15th, 2008

Thanks for reading this story. As you seem to be another member of the Venezuelan lot, I will surely feel happy to read your stories. You have none yet. As regards to economics and the future, I can sense your theoretical tents also agree with greek_forum. I am afraid I only believe in prediction when it comes form Sorte Mountain or a Wayu Shaman in Guajira. They are very good at interpreting dreams.

Economic interpretation of Friedman and his backing of Pinochet did such a bad impact on Chile society and politics. An economic prediction has more than once failed when applied to another context. They tend to be taken as dogma. However, culture seems to matter too.

I guess that those who follow local social "democrats", Opus Dei and rightist Primero Justicia are ready to follow the path of easy criticism. They tend to forget inflation or unpredicted stagflation during the times of Carlos Andres Perez and Rafael Caldera governments. It is also easy to forget how Venezuela scores in UN Human Development Index or Latinbarometro.

Finally I would like to welcome you to NP. Please do write your own stories as it would be nice to have another local view of events. Just make sure you make your sources public and known in order to avoid bias and propaganda.