BUENOS AIRES -(Dow Jones)- Argentina’sLabor Ministry is bringing together representatives of organized labor and big business this week to negotiate a minimum wage increase amid a backdrop of double-digit inflation.
The national employment council and the minimum wage commission are scheduled to meet Friday, the ministry said in a resolution published in the Official Bulletin.
Annual inflation that most private sector economists say will be above 20% for a second consecutive year in 2011 will set the backdrop for Friday’s meeting. The government put the 12-month gain in the consumer price index at just 9.7% at the end of July, but very few people believe the heavily criticized data.
The powerful Confederacion General de Trabajo union umbrella group is said to be demanding an increase of 41% to the current minimum wage of 1,840 pesos($ 440) a month, while the business sector will initially offer only 20%, according to local media reports.
With those starting points, this year’s minimum wage hike looks set to top the 22.7% increase the government authorized in 2010.
Private sector unions have won wage increases of close to 30% so far this year, and a big increase in the minimum wage could put pressure on union bosses in some sectors to demand another round of salary talks.
President Cristina Kirchner has prioritized high economic growth at the expense of what private sector forecasters say are unsustainable levels of inflation.
Those pro-growth policies and government backing of wage increases well in excess of gains in consumer prices have benefited Kirchner’s reelection campaign.
Earlier this month, she won nearly 51% of the valid votes cast in a primary election, giving her a 38 percentage point lead over the nearest contender. That stunning victory puts Kirchner well on her way to winning a second term in October.
With the economy expected to grow about 8% this year and unemployment hitting a multi-year low of 7.3% in the second quarter, Argentines appear willing to live with high inflation, at least for now.
Just how long the economy can stomach surging consumer prices is less easy to say. Galloping inflation coupled with the central bank’s gradual depreciation of the peso have caused the local currency to appreciate in real terms against the U.S. dollar, hurting exporters and the trade balance.
-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740, ken.parks@dowjones.co
Source: Dow Jones