Soaring inflation: readjustment of the minimum wage has already been ‘swallowed’ by the rise in food

The basic food basket of São Paulo rose 6.38% in April. Now, those who earn the minimum wage will spend practically all their income on items of the very first need, which are the 39 products monitored by Procon-SP. In December of last year, the basket cost R$ 1,088 and the minimum wage was R$ 1,100, leaving R$ 12. In April, this surplus dropped to R$ 2.29. The salary rose to R$1,212 and the basket rose to R$1,209.71.

It is the first time since 2016, as far back as the research by the consumer protection agency, that the minimum wage is only enough to buy the basic food basket. In April 2019, there was still BRL 259.15 left over.

— We are seeing a persistent increase in basic basket products, we are not seeing a slowdown in this crisis. There is no prospect of an end to the war in Ukraine and there is still an escalation in the price of diesel and oil — says Marcus Vinicius Pujol, director of Studies and Research at Procon-SP.

The annual correction of the minimum of R$ 112 did not withstand a four-month period of inflation this year. In April alone, the basket rose by R$72.

This is just one aspect that shows the salary squeeze being the impediment for inflation to be even higher than the current 12%. The average real income of Brazilian workers of R$2,483 when discounting inflation is at the same level as in 2011, according to MB Associados’ calculations.

— The real salary has been falling significantly in the last two years, with inflation close to 10%. In 2020, emergency aid increased income, but as soon as it stopped being paid, the drop in income got bigger. The minimum wage has no real increase. Inflation is eroding not only the income of the poorest population, but of the middle class as well — says Sergio Vale, chief economist at MB Associados, noting that food inflation has been at 35% in the last three years.

Salary lower than in 2012

In the labor-intensive service sector, the situation is worse. Workers in accommodation and food services have real wages 11.7% lower than in 2012. In the Broad Consumer Price Index (IPCA), personal services rose by only 3.91% in the last 12 months, against an average inflation of 12.13%.

Hairdresser and micro-entrepreneur Maria Claudimere Bezerra, 50, opened her beauty salon at the end of 2019.

— It was complicated because there was no way to go back on the decision to open the salon and I had to hold on because there was a contract. Anyone who survived the pandemic is footing the bill now. I’m earning more, my clientele has increased, however, the bills have also gone up. And with that, I’m always on the brink of going into the red,” said the carioca, who has already started a rationing plan to close the bills.

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Maria Claudimere hasn’t adjusted the price of the manicure service since she opened the salon and, now, she still does promotions to keep her clientele: foot and hand paid in cash cost R$45 any day of the week, instead of R$55 charged on another type of payment.

“We’re trying to survive somehow. Keep the business running. I try to guarantee my employees’ salary and a good price for my clients who understand my situation. It’s difficult, I admit, but we try to push as far as we can with our stomachs,” he added.

Although the micro-entrepreneur has not been able to pass on the increase in salon costs, prices are starting to rise. Still well below the average inflation of 12%: the manicure service rose 8.81% and hairdressing 8.08%.

Food outside the home shows how transfers are more difficult in the sectors that employ the most. This group that aggregates services rose only 6.63% in the last 12 months, despite the fact that food at home rose 16.12%.

— But services are accelerating, close to 7%. There’s a pressure that’s starting to show. Effect of the exit from the pandemic – says Vale.

An analysis of inflation by groups, from March 2020 to February of this year, shows that food at home increased by 30%, managed food (gasoline, energy) rose by close to 20%. At the other end, services in general rose 8% and services provided to families, which are more labor intensive, have become 4% more expensive since the pandemic, according to a survey by Tullet Prebon Brasil.

“It is the highest inflation with the worst composition. There’s no getting away from fares and food. Food and managed go up since the pandemic. Labor intensive services are in the flashlight. It is an inflation loaded with very harsh distributional effects”, observes Tullett Prebon Brasil in an excerpt from the analysis.

Recurring highs

Maria Claudimere says her salon costs have more than doubled in five months. She has been replacing brands so she doesn’t have to change the price of the service. Used to spending an average of R$1,500 buying nail polish from leading brands, she opted for cheaper ones:

— I spent R$ 1,400 even looking for promotions. I’m doing it this way to try to win in quantity and not have to pass the raise to clients or have to send my manicurists away.

According to Patricia Costa, an economist at Dieese, this situation of high and localized inflation, unemployment and falling income from work are “leading families to have to choose between buying food and gas”:

— Families are eating less or eating poorly, reducing quality and quantity.

She recalls that the high inflation of staple foods does not come from today:

— We’ve been talking about this issue since 2020. We warned that this would eventually spread. At the end of 2020, the INPC (National Consumer Price Index, which calculates the price variation of families with incomes up to five minimums) was 4.45%, with food rising 15%.

The personal services sector in the IPCA rose 3.91% in the last 12 months.

Source: The Globe