How to Raise the Real Wage

por Mario Valdés Navia

Since the President announced the rise in wages and pensions for August, a number of opinions have followed about the hazard of an inflationary rebound which might wreck the expected benefits. It’s an essential question, since what determines the standard of living for workers and their families is not the magnitude of the Nominal Wage (NW), but the amount of goods and services they can acquire with it, that is, their Real Wage (RW).

The latter depends on three factors: the magnitude of the NW, the supply-demand correlation and the value (price) of the money in which the NW is paid. The much-expected measures have a decisive influence on the first factor, but the necessary control over the other two remains a question mark. The biggest concern is that the congenitally depressed supply in our economy may not be able to cover the added demand, thus triggering an inflationary spiral.

The government itself has voiced its concerns on this matter, and measures have been announced to bring offers in tourism and telecommunications to those who, presumably, may now set aside more money for such ends. The suggestion was also made to multiply summertime recreational offers, the sale of construction materials and of any other idle or slow-moving products lingering in warehouses so as to raise short-term supply for the newly plentiful wallets.

I honestly don’t believe the rise will go a long way for government employees and pensioners. The fundamental problem to be solved in the day-to-day life of any Cuban family without a special diet, or their own farm, is the same from San Antonio to Maisí: buying food. If this aspect of supply increases, both in quantity and diversity, is it to be presumed that this single factor, practically by itself, might siphon off most of the additional monetary mass.

According to economists’ estimates, Cuban families set aside as an average between 50% and 70% of their income for purchasing foodstuffs. Never before in history had Cubans spent so much to fill their plates. In accordance with Engel’s Law, that indicator places Cuba among the poorest countries, where income is drained off by this product group to the detriment of all others, which are also necessary if you go by the old adage that man shall not live by bread alone.

But, how to bring more food to the markets if production plans fail to be met year after year?

In Economics there’s little room for brilliant ideas and strokes of genius that yield positive results, moving past propaganda and slogans. I see only two paths: to increase imports, or to invest more in national production.

My childhood memories take me back to a similar situation in the early 1970s, when salaries were raised as part of a policy of increasing material incentives and, in contrast, the enormous inflation amassed in the 1960s dropped sharply. The main cause for the apparent miracle was a flooding of Cuban markets with an abundant and inexhaustible stream of products imported from the socialist bloc which were sold at fixed and reasonable prices to most consumers.

Such a gush of imports is hardly possible now, but if only 320 million dollars were to be spent in the purchase of additional foodstuffs, the 8 billion pesos’ worth of the raise –considering the 25 to 1 CADECA exchange rate– could be covered in a flash and at purchase prices. When the taxes of our TRD shops are added, the raise would need to be doubled so that the products could be sold.

However, the path of investing more in agricultural producers seems to be the more expedite one to promoting health in our foreign finances and a promising future to national agriculture and industry. I would do it in correspondence with the place now occupied by the different forms of production in national food manufacturing: first, independent farmers; second, cooperatives (Agricultural Production Cooperatives, CPAs and Basic Units of Cooperative Production, UBPCs); and third, government-run companies.

Avoiding or postponing these economic measures –or others like them– by replacing them with slogans, appeals, visiting leaders and lists of capped prices which are impossible to control in practice, would only lead us to making true again that sonnet from the 1990s that poet Guillermo Rodríguez Rivera entitled “Ode to the Food Plan”:

See the yucca that comes from Lithuania

And the mango, the sweet fruit of Krakow,

Taste the yam, which hails from Warsaw

and drink the coffee from Pomerania.

The taro corms we bring from Romania,

Moldavian potatoes sure are sweet;

Siberian mamey with pleasure we eat

and the plantain that’s grown in Albania.

We lack all that; the fault’s not ours.

But in the drive to meet the Plan

a harsh, vigorous battle rages.

Here’s proof that in our sleepless hours

the mighty work being done is grand:

there’s food on TV and the papers.

(Translated from the original)