The priority in responding to the inflationary crisis should be wage increases that protect the purchasing power of citizens, who have been hardest hit, according to a study released this Wednesday.
In the study “Post-pandemic inflation: reflections of the Portuguese economy”, published in the Notebook of the Observatory of Crises and Alternatives, of the Center for Social Studies (CES) in Coimbra authors Diogo Martins and Vicente Ferreira argue that the current biggest problem “is not inflation itself, but the cost-of-living crisis resulting from the compression of real wages”.
In this sense, they criticize the response of central banks – which, in order to contain inflation, have raised interest rates after years at historically low levels – and argue that “a progressive response should focus on the crisis in the cost of living”.
The rise in interest rates is not an adequate response to the inflationary process and threatens to accentuate the structural weakness of the Portuguese economy.
The authors believe that “priority should be given to promoting (rather than restricting) wage increases that make it possible to protect workers’ purchasing power and strengthening the relative power of the power factor, through measures to promote collective bargaining and work organisation”.
“This strategy should also include other measures to combat the inequalities that inflation has exacerbated, with an emphasis on taxing corporate extraordinary profits or capping profit margins,” they add.
The authors also argue that “in light of the shock caused by the surge in the prices of essential commodities such as energy commodities, the maintenance – and, in some sectors, the increase – of profit margins and the very modest growth of nominal wages translated into a change in the functional distribution of income in favor of the capital owners and against the workers”.
“In this sense, inflation has particularly affected lower-income social groups,” they point out, but add, however, that “it is important to bear in mind that this is not an established or inevitable consequence of the rise in the general level of prices, but rather the result of the diminished claim power of the workers and the lack of measures to strengthen their position”.
Source: DN
