Venezuela’s Minimum Comprehensive Income Announcements: A Thorough Reading

Orinoco Tribune, May 7, 2023 —

The president of Venezuela, Nicolás Maduro, announced and signed the decree to increase the comprehensive minimum income for active and retired workers in the public administration, and for pensioners.

He referred to the adjustment of the warfare bonus in an amount in bolívars equivalent to $30 per month, at the exchange rate of the Central Bank of Venezuela (BCV), and the food bonus equivalent to $40, thus totaling $70 per month.

According to the president, these amounts would be indexed to the fluctuation of the BCV exchange rate.

However, the president did not specifically announce the amount of the minimum wage, which has an influence on all public administration salaries, vacation bonuses, year-end bonuses, and retirement payout. This indicates that the minimum wage will remain the same as it is now.

Moreover, the Venezuelan president, through a video published on his Twitter account, highlighted that these actions are part of the first step for the progressive recovery of the monthly comprehensive minimum income so that, “in the months ahead, at the moment we have the resources, we can take a definitive step in the recovery of the wages and the total income of the workers.”

From this, it may be deduced that the dynamics of adjustments is a progressive process, and that the wage issue in the strict sense has been deferred for the time being.

The increase in the food bonus signed by the president on May 1 amounts to an increase of 2122%.

Public administration retirees will receive an amount equivalent to $49 per month as warfare bonus, in addition to the retirement pension they already receive. Public sector pensioners will receive the equivalent of $30 as warfare bonus, in addition the monthly pension of 130 bolívars, equivalent to the current minimum wage.

Due to its relevance, this topic demands a thorough analysis. What were the criteria that the Venezuelan government probably used to make these announcements?

Value of available resources
The payroll dependent on the Venezuelan State comprises active workers, retirees and pensioners from the public sector, and beneficiaries of the Venezuelan Institute of Social Security (IVSS), which includes beneficiaries of the Gran Misión En Amor Mayor (people included in social security even if they never paid any contributions to it). This is a payroll of a little over 7 million people.

Therefore, the announced increases in bonuses, like the existing payroll at the current wage level, can be estimated at approximately $7 billion a year.

Based on this amount, it can be guessed that the criteria that the government is using to plan the amount assigned is the resource base that it can have at its disposal for financing it.

In the existing political and economic situation, there has been no extraordinary change in the conditions of the blockade against Venezuela, nor is there any significant element that could imply a favorable change in the economic outlook.

In other words: no new perspectives are envisioned in the income sources of the State. The government might estimate an increase in revenue this year, but it might not be as big an increase compared to the previous year.

In 2022, although there was a rebound in oil activity through methods that could circumvent the blockade, the government’s income from oil remained 90% below historical levels. Only $4.758 billion entered the BCV coffers.

In 2022, tax collection increased 97% compared to the previous year through the modification of tax rules. This figure reached $4.744 billion.

Thus, in 2022, the Venezuelan State earned $9.502 billion from its two main sources of income.

From this, we can conclude that the current amount of the State payroll, amounting to $7 billion, is equivalent to 73% of the oil and tax revenue earned by the State in 2022.

Sources of income 
The Venezuelan government has announced that the monetary benefits, paid in bolívars, will be anchored to the dollar, a measure meant to shield the income of the working class, retirees and pensioners from deterioration due to devaluation of the national currency.

The period of indexation is not clear, but if it is carried out on a monthly basis, we may assume that the government will constantly acquire bolívars in the exchange system by placing foreign currency for such purposes.

On May 3, President Maduro presented to the workers oil wells in Monagas, whose profits will go only to the National Fund for Social Benefits of public sector workers. Photo: Presidential Press.

This is a very important element of this scheme. It implies controlling the exchange rate by injecting currencies with fluidity to be able to meet the payroll. The measure is extensive to contain devaluation and therefore inflation, which are the main factors that deteriorate wages and pensions.

Additionally, based on the Venezuelan government’s monetary policy since the end of 2021, it can be deduced that the government does not intend to finance the bonuses through the uncontrolled printing of bolívars and increased liquidity. It will maintain monetary sobriety so as not to accelerate devaluation of the bolívar.

Political scope of the announcements
Clearly, the Venezuelan government expects to have more resources by 2023, but it must be insisted that for now there are no reasons to think that these will be a lot higher than those achieved in 2022.

It seems evident that the administration intends to reserve a significant part of the available budget in 2023 to finance its commitments for public services, which has been in recovery since the beginning of 2022.

The strengthening of public services, the rehabilitation of schools, the recovery of health services, productive investment, the beautification of public spaces, support for social policies such as CLAP, public works, and housing remain important programs that the government will try not to abandon despite the ongoing adverse economic situation and foreign pressures.

Moreover, it does not make sense for the government to maintain a large payroll of public sector workers if there is no volume of work and management to offer. Therefore, the government will continue to allocate resources for public and social services.

However, the big debate is that bonuses were increased by large amounts but no salary increases were announced at the same time. The minimum salary as a base has an impact on social benefits, salaries, and other benefits such as vacations and end-of-year bonuses.

As for social benefits, on May 3, in an event in Monagas state, President Maduro announced the delivery of oil wells for workers, so that profits from those wells will go directly to the National Fund for Social Benefits.

The announced bonuses put the fate of the salaries and contractual benefits at the center of attention.

The minimum wage has several implications on the public payroll. It is precisely the tabulators, the ranks, the levels, and benefits such as vacations and year-end bonuses that have a greater weight on the budget.

Based on this deliberation, and in accordance with the amount of $7 billion necessary per year to finance the announced bonuses, if a linear increase in the minimum wage—and, therefore, in the tabulators and contractual benefits—had been announced , the adjustment would have been an equivalent of more or less $40 a month.

Although this increase would have had an impact on benefits like vacations and Christmas bonuses, it would have been insignificant when compared to the $70 announced in bonuses for public sector workers. It would have been considered even more insufficient by the working class.

The government seems to have considered the profile of the beneficiaries of the public payroll. It seems to have used a class criterion by announcing linear benefits and thus distributing the budget. The announcements benefit more those who live on daily earnings in very adverse conditions, while those who enjoy higher-level positions and better pay would not receive as high vacation bonuses and utilities as they had expected. At least that is the case for now, and the situation might change if salary adjustments are announced “in the coming months.”

The salary issue, which should be treated with objectivity and without demagogy, has a political analysis at its center that should not be overlooked. The specific conditions of the Venezuelan economy, especially the public budget, remain very complex. Despite the weakness of the measures due to the non-adjustment of wages, a clear change in the profile of the government’s policy is evident to make viable a recovery of incomes for a very large sector of the population.

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