I. Labor Market Indicators
The Employment Challenge ...
Milei's administration inherits an unemployment rate at its lowest levels since the first quarter of 2017. The unemployment rate in the third quarter of 2023 was 5.7%. From this perspective, there is concern that fiscal adjustments may increase this percentage.
Looking at private employment data, we can observe long-term stagnation. Between November 2013 and November 2023, only 250,000 jobs were created in the private sector. The government's challenge is to generate the right conditions to once again stimulate private hiring.
In the same period, the number of new jobs increased by 647,000 in the public sector.
Finally, real wages have shown a markedly declining trend. Since December 2017, the average salary in the economy has fallen by 37% in real terms. In the last year alone, the decrease was 18.9%.
Real Wage Rates
The purchasing power of wages has shown a negative evolution from 2022 onwards, although, as can be seen, it suffered a significant drop in the last month of 2023.
This is due to the government's decision to free or make transparent (at least partially) some specific prices in the economy (namely, dollar, fuels, prepaid medicine), which generated a jump in the inflation rate not accompanied by an increase in wages.
In the last year, wages in the private sector lost 14.7% of purchasing power, those in the public sector 20.2%, and those in the informal sector of the economy, 30.9%. In total, real wages contracted by 18.9% in 2023.
Number of (Formal) Jobs
The number of salaried jobs in the formal private sector of the economy strongly recovered after the drop in 2020. Since its low point, 585,000 new jobs have been created. However, comparing the latest data from 2023 (November) against the same month in 2013, there is observed growth of just 250,000 formal private jobs, a situation of stagnation related to the lack of dynamism in economic activity.
Public versus Private Employment
In the same ten-year period that the private sector created 250,000 jobs, the public sector saw an entry of 647,000 people, thereby increasing the ratio of public employment to private employment in the formal economy.
In August 2021, this ratio reached a peak of 35.8%, which has since decreased to 35.3%, the latest available record. It is expected that during Milei's government, this trend will continue and deepen, as private employment grows more and public sector jobs are reduced.