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Fernando Cuadros: “There is enough margin to raise the minimum living wage in the country”

Is it a good time to deliberate on minimum wage?

Yes, because there was a significant economic recovery. The GDP is projected to have grown 13% in 2021, which indicates an important recovery, after a fall of 11% in 2020. It even exceeded the GDP levels of 2019. And this has gone with the recovery of adequate employment, of the formal employment, and the level of income in certain sectors. There is merit to the Government in its fiscal policy complemented by the monetary policy of the Central Reserve Bank. But it is also important to point out that there are other economic indicators that give us room for an increase in RMV, such as the fall in purchasing power from inflation, not only in 2021, but also that accumulated since 2018, which was the last period where the minimum wage was raised. There was a significant loss of purchase of the workers that has to be replaced through the salary policy, in this case, an increase in the minimum wage.

From several fronts they say that this figure of 13% growth in 2021 is just a rebound. What do you think?

To a large extent there is a rebound effect, obviously. But there is also a recovery from what was in 2020. It is also true that in the last months of 2021 it was observed that the GDP level was above that registered before the pandemic, in 2019. It is not just a rebound. It is very important because everything lost must be recovered, as a base, but there was also an improvement in the economy, even at pre-pandemic levels. That is seen in the figures.

Does it say that adequate employment was generated due to the economic recovery?

In 2020, almost 7 million jobs were lost, and within them more than 3 million adequate jobs, formal jobs and income fell. The truth is that since the second half of 2021 these indicators have been gradually recovering. The loss of adequate employment, formal employment, has been reduced in line with the improvement of the economy. Although it is true that there are pending improvements, in aggregate terms there was a significant recovery in the economy and also in employment.

Why is it important to take into consideration what was indicated by the Minister of Labor, Betssy Chávez, to agree from this fortnight to raise the minimum wage?

There is a context of economic growth, projected at 13% for 2021, which exceeded projections. Additionally, in the last four years there has been some improvement in economic productivity, of companies, of workers, and obviously it must be transferred to the pockets of the workers who are part of the production process. These two additional criteria also show that there is enough room to raise the minimum living wage in the country.

How much should it go up?

If we use as a reference the technical mechanism approved by the National Labor Council, by employers, workers and the State in 2007, strictly taking into account variables such as inflation and productivity, currently the minimum wage would be around S/ 1,200. There is a certain margin for the increase, and it could be between S/ 1,000 and S/ 1,200 at most, but the gradual nature of the possible increase must be taken into account so that it does not have a greater negative impact, especially in formal micro-enterprises, which pay wages and are closer to the minimum.

From the right sector, it is said that raising the minimum wage would make it impossible to hire more workers. This is so?

There is a certain economic approach that is against raising the minimum wage, and does not even believe that there should be a minimum wage, because supposedly it should be due to the interaction of labor supply and demand, but international evidence shows us that, in terms of wages At least, it depends a lot on the context and the criteria to be taken into account. In Peru, for the period from 2004 to date, there were successive increases in the minimum wage, which did not generate greater labor informality, or unemployment, or less coverage of the minimum wage.

Is there no opposite effect?

Reality shows us that, in aggregate terms, if the increase occurs in a context of growth of the PBI and if technical criteria such as inflation and productivity are taken, and it does not go beyond that, it does not generate a negative effect on the labor market.

What are your recommendations to enable investment and job creation?

One has to do with continuing to energize the public investment. In 2021, an annual public investment record was reached in the country, with an important execution, above 80% in several cases, but there is still a little more to do, in continuing to train regional governments to better manage resources , choose good projects, productive, and that they conclude in reasonable terms. Also avoid having inflation due to corruption. This is important to continue improving the execution of public investment. Central elements are to continue promoting public investment to generate productive infrastructure, which in turn contributes to generating productivity and continuing to generate formal jobs.

But this is not enough.

Confidence must continue to be generated for private investment to take off. It is essential for Peru, for any country, in the sense that productivity must be improved and quality employment generated. The other has to do with continuing to strengthen the cabinet with appropriate appointments, technical ministers, specialists in their sectors, with the appropriate professional profile, with experience and an impeccable resume. People who do not meet the profile are useless. It is fundamental for, in the government’s approach, attracting more investment.

And how should this investment in the private sector be?

It has to adhere to the strictest environmental, labor and social rules. It is not about investing for investment’s sake, it is about generating quality employment and not harming the country in social and environmental aspects and continuing to break labor rules.

What does the solution to the conflict in Las Bambas tell us?

This generated more confidence in the mining sector and showed that the Government has the capacity to solve conflicts of this type, while reactivating the operations of the mine.

And in terms of employment?

It will be important to strengthen the Work Peru program of the Ministry of Labor, but also to provide incentives to generate formal employment, and this implies a structural labor reform that will lead us to a new general labor law that rebalances labor relations between companies and workers and give quality employment, and generate formal employment.

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