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/ Wednesday, June 22, 2022
Puerto Rico decreasing gross salary signals less consumption Runaway inflation responsible for consumer distrust
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Brenda A. Vázquez Colón, The Weekly Journal
Bank of Atlanta Salary Growth Tracker, the salary of a full-time worker at large companies has risen about 5% in the 12 months preceding May 2022. However, data from the U.S. Bureau of Labor Statistics indicates that inflation has caused wages to decline by an average of 3.5% in the vast majority of sectors. Moody’s Analytics estimates that, as a result from high prices, consumers will have to spend about $460 more than they did during this same period last year for the same products and services.
he growing inflation currently experienced Puerto Rico is slashing through the pockets of consumers, particularly those with low to moderate income, Effect of higher wages whose earnings continue to be Zayas understands that undermined due to the high cost increasing salaries would allow of essential items and services, workers to buy more and such as food, fuel and utilities. The economic impact improve the economic activity “This is the perfect storm. will soon be felt in of the island, but it will not Higher interest rates and home purchases be easy for small businesses, runaway inflation. People and loans in general, since they face greater have the same salary with because the average challenges to stay afloat. more expensive products, so worker will have less “Small businesses will their income is reduced. They money to buy goods have to implement austerity are looking for ways to save and pay for loan measures, such as reducing and lower their expenses, interests. hours or laying off employees for example, with public because costs, particularly for transportation or car-pooling,” oil-dependent manufacturers, said certified public accountant are out of control,” he said. (CPA) Kenneth Rivera. “Solving these conditions is not The economic impact will soon be felt in home in the hands of Western countries.” purchases and loans in general, because the Dean of the Business, Tourism and average worker will have less money to buy goods Entrepreneurship Division at Ana G. Méndez and pay for loan interests, with a salary that is not University, Juan Sosa, coincided that the effects enough to cover minimum essential expenses. of inflation and the rise Former Secretary of the Department of Labor in interest rates will and Human Resources, Ruy Delgado Zayas, negatively affect considers that, although the rise in interest rates small businesses. authorized by the Federal Reserve (FED) seeks to “Micro lower prices and stabilize the economy, the scenario and small is still complicated for people with lower income. businesses will He pointed out that, while some employees have have to make received a rise in minimum wage of an additional decisions $1.25 per hour (from $7.25 to $8.50), that is not about how enough due to high inflation. Minimum wage to manage employees would need a greater rise in their their operating compensation to be able to face the increasing cost costs and of living. maintain their “Inflation is eating up the rise in minimum wage profitability and reducing consumption. You can already see it within inflation out there. Traffic is not that heavy because people because are driving less to save gas. There are fewer visits to consumers will stores as purchasing power lowers,” said the former be spending less. They will have to secretary. adjust their business models,” said Sosa. Larger companies and sectors such Statistics as restaurants, will be forced to increase According to data from the Federal Reserve wages and offer better deals, to retain their
In fact,
This is the perfect storm. Higher interest rates and runaway inflation. People have the same salary with more expensive products… Kenneth Rivera, CPA
staff and ensure that they do not migrate to other industries with better compensation and benefits. Having a salary that does not pay enough for monthly expenses in a scenario of uncertainty is reason enough for consumers to cancel or postpone their purchases. This is consistent with a University of Michigan study that found that real disposable income per capita could be seeing the biggest annual decline since 1932. “This is psychological behavior; if people understand that inflation is going to continue, they will hold up, and there will be less consumption. Decisions are made based on a pessimistic perception. If Russia decides to lower its weapons, then a better expectation will be created and the markets will react like the stock market,” Sosa said.
