CARACAS, Friday February 04, 2011 | Update
Average household income has experienced a real drop of 8 percent in 2010

Inflation and recession undermined the financial good standing of families

Since 2006, adjustments to the minimum wage have been lower than inflation (File photo: Venancio Alcazares)
Friday February 04, 2011  04:39 PM

Economic crisis and high prices in goods and services were the common denominators in a year where family income plummeted for the first time since 2003.

According to the numbers managed by the National Statistics Institute (INE), by the first half of last year, household monthly income averaged USD 743.62, versus USD 621.24 the previous year.

In nominal terms, it was a 19.7-percent growth. However, inflation added, in 2009-2010 there was a real drop at 8.3 percent.

The income indicator provided by the INE not only is composed of work income, but also of scholarships, food bonuses and pensions, among others.

If the effect of aids is taken out, real household income diminished 8.8 percent; this means that there was not much intention to offset the reduction through increasing aid.

Without scholarships, family average income in the first half last year stood at USD 646.88, according to data supplied by INE.

This means that 13 percent of the money received by families in January-June last year came from activities other than work, slightly above 11.9 percent the same term in 2009.

In the report, INE underscored that people's wellbeing not only relies on work, but also on the government social policy.

In 1999-2010, average income of Venezuelan households moved 890.6 percent in nominal terms. However, an accrued inflation at 758.8 percent in that period dramatically arrested such growth. In real terms, family income averaged 11.1 percent.

Causes and consequences
Ending last year, consumer prices in Venezuela climbed to 27.2 percent, based on the numbers provided by the Central Bank of Venezuela (BCV). The emphasis on hike of prices was put on food, precisely where families spend the most.

As a matter of fact, the capacity of families to cover their food-related expenses with a base wage edged lower.

Ending last year, 89.3 percent of staples could be covered by a minimum wage, estimated by INE at USD 319.57 last December.
One year earlier, when the food basket amounted to USD 249.63, 90.3 percent could be covered by a minimum wage.

In addition to the inflation recorded the past term, economic recession, at 1.9 percent last year, had a material effect. The components in this shrinking formula were sliding oil prices and a 2.9-percent drop in final family consumption.

Harmed poverty
The INE had previously reported that in the first half last year, the poverty rate per income slightly surged from 26.4 percent to 26.8 percent in Venezuelan households.

Such a situation appeared for the first time since 2003, although to a lesser extent. That year, the effects of the oil strike seriously damaged finances.

In 2010, households that have been most harmed by plunging income are those which depend on a minimum wage. Based on INE data, for four years, adjustments to the minimum wage do not match up to the inflation rate.

Last year, the increase amounted to 26.4 percent. Therefore, the lowest compensation in Venezuela stood at USD 285.30 a month. But a 27.2-percent inflation ending 2010 curtailed the adjustment to wages.

Translated by Conchita Delgado

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