Consulting No One, Maduro Dictates Record Breaking Minimum Wage Raise

There’s a reason why the ILO established in its 26th Convention that governments must consult with the private sector before proposing an increase in the minimum wage.

Photo: The National retrieved

Beyond the political differences between the Maduro government and the private sector, there are some decisions that need to be taken with a minimum consensus. Even more so if the private sector has to pay for them.

The minimum wage increase is one.

The 26° Convention of the International Labour Organization (ILO) demands that governments must consult with representatives of the employers and their guilds on any measure that may affect them, specifically mentioning that employers and workers have the right to participate in the method deciding the minimum wage.

Though minimum wage was set by Presidential Decree for the first time in 1974, it became one of the main populist tools of 21st century socialism. Neither Chávez’s nor Maduro’s governments have consulted, ever, private employers or workers’ unions on a single adjustment.

Chávez adjusted the minimum wage a total of 21 times in 14 years, and Maduro 23 times in less than 6 years. And though they claim the decision is made “to protect the purchasing power of the Venezuelan family,” it’s actually one of the main causes of this hyperinflation: if you send a lot of money to the streets through salaries, but keep fewer goods in markets, the prices automatically increase.

For many years, Fedecámaras (the national federation of employers) has reported on how the government doesn’t check with anyone about minimum wage, and the current situation is particularly critical, with Maduro’s unilateral increase by 5,900%. Today, all of Venezuela’s private sector is evaluating if it’s possible to face this new unconsulted rise.

Because as a private company, you may: (i) try to continue operations paying the new salary; (ii) try to “clean” a little your list of workers; (iii) try to reduce operations, or (iv) find an opportunity to close.

This is, precisely, the reason why the ILO Convention demands the participation of employers in the conversation about the minimum wage, it’s to avoid arbitrary rises that have nothing to do with the economic reality.

For now, we can be sure of one thing: the increasing monetary mass will generate massive inflationary pressures and the already downsized and weakened private sector will have to pay for a bill it wasn’t consulted about.