Workers lose their jobs as Venezuela raises minimum wage Workers lose their jobs as Venezuela raises minimum wage

Workers lose their jobs as Venezuela raises minimum wage
25 Sep 2018

Venezuelan workers have received their first wages since a 60-fold increase in the minimum wage, but many are losing their jobs as a result.

Across the country, seven million employees are guaranteed 1,800 bolivars a month, worth about US$20 at the current black market rate. 

But while many similar moves have been made in the past, none have proved as disruptive due to hyperinflation, economic depression and currency devaluation. Some employers are attempting to tackle the situation by restructuring costs, rejigging pay scales and negotiating settlements with workers, while others are simply laying them off.

Edwin Lumar, a 29-year-old shopping-mall security guard, told Bloomberg: "In a situation like this, the government should have an emergency plan to advise workers.” His employer fired three out of six workers without providing any legal paperwork. "How many times have new wages been put in place with no results to end hyperinflation?" Lumar said.

Since President Maduro took office in 2013, he has boosted the minimum wage 24 times. But inflation keeps galloping ahead and businesses keep shutting down. According to trade organisation Conindustria, more than half of the companies surveyed reported they worked at less than a quarter of their capacity in June. 

On top of the astronomical wage rises, companies also have limited ability to adapt due to restrictive controls. For example, food operations are closely monitored as the government provides them with imported raw materials. According to Cedice, a private-property watchdog group, more than 500 supermarkets and stores have been fined and 200 managers and workers detained since Maduro’s announcements.

In August, the government seized a Smurfit Kappa cardboard plant after it closed several production lines and sent workers on early vacation. Demand had fallen as the food packagers it supplied closed.

Banking, commerce, education and construction companies, which often have large and stable payrolls, are expected to be the hardest hit. Big firms are subject to collective-bargaining agreements that are scrutinised by government and benefits pegged to wages - which depend on an employee’s tenure – are also expected to increase.

Aurelio Concheso, a labour expert at Fedecamaras, said: “The impact can be devastating. It can consume a whole company’s capital.”

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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Venezuelan workers have received their first wages since a 60-fold increase in the minimum wage, but many are losing their jobs as a result.

Across the country, seven million employees are guaranteed 1,800 bolivars a month, worth about US$20 at the current black market rate. 

But while many similar moves have been made in the past, none have proved as disruptive due to hyperinflation, economic depression and currency devaluation. Some employers are attempting to tackle the situation by restructuring costs, rejigging pay scales and negotiating settlements with workers, while others are simply laying them off.

Edwin Lumar, a 29-year-old shopping-mall security guard, told Bloomberg: "In a situation like this, the government should have an emergency plan to advise workers.” His employer fired three out of six workers without providing any legal paperwork. "How many times have new wages been put in place with no results to end hyperinflation?" Lumar said.

Since President Maduro took office in 2013, he has boosted the minimum wage 24 times. But inflation keeps galloping ahead and businesses keep shutting down. According to trade organisation Conindustria, more than half of the companies surveyed reported they worked at less than a quarter of their capacity in June. 

On top of the astronomical wage rises, companies also have limited ability to adapt due to restrictive controls. For example, food operations are closely monitored as the government provides them with imported raw materials. According to Cedice, a private-property watchdog group, more than 500 supermarkets and stores have been fined and 200 managers and workers detained since Maduro’s announcements.

In August, the government seized a Smurfit Kappa cardboard plant after it closed several production lines and sent workers on early vacation. Demand had fallen as the food packagers it supplied closed.

Banking, commerce, education and construction companies, which often have large and stable payrolls, are expected to be the hardest hit. Big firms are subject to collective-bargaining agreements that are scrutinised by government and benefits pegged to wages - which depend on an employee’s tenure – are also expected to increase.

Aurelio Concheso, a labour expert at Fedecamaras, said: “The impact can be devastating. It can consume a whole company’s capital.”

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

Nicaraguan president U-turns on social security changes to contain unrest

A brief guide to Chile's labour laws

A brief guide to Argentina's labour laws

 

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