Should or should it not increase the minimum wage?

The announcement of the central government of temporarily increase the minimum wage through a subsidy of 70 soles, divide opinions. On the one hand, it is considered to be a populist measure, which does not attack the main problem of lack of investment. While others indicate it is necessary, due to the increase in prices.

This week, President Pedro Castillo announced a temporary subsidy of 70 soles per month to formalized workers who receive less than 2,000 soles. Thus, the minimum wage of 930 soles (established in March 2018), would rise to 1000.

For the economist Glenn Arce, it is a populist measure that attacks the symptom, but not the disease. He argued that the underlying problem is inflation, generated by the lack of confidence of economic actors in the central government. This translates into a high dollar price and a lack of new investment.

“The subsidy it is temporary, it is short-term. If things do not go well, the inflationary process will make that wage not what it represents, ”said the economist.

He added that, like any subsidy, it will represent an expense in the state coffers. The problem would come if the income is contracted (due to the lack of new investments). Then external loans would be used. “If conditions remain the same, it will be more difficult to get external financing. And if it is achieved, it will be at high rates, “he said.

This financial aid would be for three months. It is still a mystery if, once the deadline is met, the government will set the increase in the Minimum Living Remuneration at 1000 soles. The Minister of Economy, Pedro Francke, said yesterday that it will be studied, since since 2018 inflation reduced the purchasing power of the minimum wage.

The technical secretary of the SME Chamber, Lucia Choquehuanca, indicated that an official increase would affect small businesses, where most of these salaries are located. Nor is he in favor of the subsidy, he asks to improve the conditions for investment.

Comex manager Jessica Luna said an increase in the minimum wage would discourage formalization. It is estimated that between 70% to 75% of the Peruvian labor force is in the informal sector.

Necessary by situation

The secretary of the La Ibérica Workers’ Union, Tania Quispe, supported the subsidy of 70 soles. Expressed that the voucher will be a help due to the increase in prices of inputs such as gas. He was also in favor of standardizing the minimum salary at 1000 soles.

Quispe accepted that some small companies could be affected by these increases, he argued that the State should give aid to these businesses. But he commented that there are other firms with solvency to improve wages. “The production capacity of the companies should be considered,” he said. .