Inflationary pressures —or the “inflationary spiral”, an expression repeated by the Government— was the phantom used by the Executive to counteract the demands of public servants to increase salaries above 0.9% (decided before the war and the escalation of inflation and, therefore, insufficient to prevent the loss of purchasing power). The argument, then, was that inflation would be temporary and continuing wage increases would only prolong it. For now, no sign in Portugal that wage increases are fueling higher inflationsay economists interviewed by the Observer. But they warn that the times ahead may bring to the surface the specter of the “inflationary spiral.” And, in this chapter, the State Budgets for 2023 will be decisive – due to the “sign” that the Government gives to the pensions and salaries of the public function.
In the first quarter of the year, the average salary (specifically, the monthly average total gross remuneration per employee) has increased 2.2% compared to the same period of the previous year (although, with “tax” inflation, the real loss was 2%). This trend accelerated in the following three months: in the quarter ending in June, wages already increased 3.1% compared to the same period of the previous year (adjusting for inflation, the real loss was 4.6%).
The average increase of 3.1% does not mean inflationary pressure, guarantee the economists contacted by the Observer. João Borges de Assunção, a professor at the Catholic University, also considers that nominal year-on-year wage increases of between 3% and 3.5%, as occurred in the first and second quarters, are “relatively normal since Portugal joined the single currency“. Therefore, he believes that “inflationary pressures derived from wages are still relatively weak in Portugal“.
Paulo Rosa, senior economist at Banco Carregosa, points in the same direction: “A rise of 3.1% doesn’t worry me at all. That is not why we are going to have rising inflation.”, he stresses. The economist is more concerned with the contribution of energy and food costs to inflation. For there to be some contribution from wages, the increases would have to be around the value of inflation, which in the second quarter of the year reached 8%, dictating a loss of purchasing power of 4.6%, a cut that “ it even takes pressure off inflation.” As the Observer has already written, most workers have already lost purchasing power and only two sectors escaped: “electricity, gas, steam, hot and cold water and cold air” (and because vacation pay was paid in the period under analysis) and that of “consulting, scientific, technical and similar activities” (which faces difficulties in hiring qualified workers).
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Source: Observadora
