Caracas, Venezuela — Venezuela’s minimum wage of 130 bolivars (VES), or about $0.28, is one of the main problems for the population, with people experiencing a plummet in their income and consequently their quality of life.
Last week, Acting President Delcy Rodriguez pledged to raise the minimum wage “responsibly” by May 1 (Venezuelan Labor Day), but gave no specifics.
Latin America Report We spoke with economist Aarón Olmos. Institute of Advanced Public Administration In Caracas, he outlined some of the impacts wage increases could have on the country amid continued political uncertainty following the arrest of Nicolás Maduro by U.S. forces on January 3.
“Whatever the amount, it will be welcomed by Venezuelan households because their income levels have actually fallen sharply. They are meager and poor. The purchasing power of the bolivar has been lost. Foreign currencies are used as the basis for price calculations, which weakens their purchasing power,” Olmos said.
The professor pointed out that it is still unclear whether this is a direct increase in wages or a bonus allocated by the government to certain civil servants.
With Venezuela’s oil revenues reaching $18.2 billion, according to data released by the Central Bank of Venezuela, Olmos believes there is a significant base from which to fund significant public salaries.
“We’re talking about almost 9 million people – about 7 million public sector workers and 2 million retirees,” he said.
But he warns that economic conditions should not depend solely on oil sales. “It is important to recognize that Venezuela needs to generate revenue through various channels, not just oil. This should be oil, mining, raw materials, semi-finished products, finished products, etc. That means that the entire production apparatus needs to be activated so that Venezuela does not rely solely on crude oil sales,” he said. “The idea is to revive the economy rather than relying on the volatility of the energy market.”
The economist pointed out that some changes would also be needed at the production level, such as revising Venezuela’s labor law to make wage increases more effective.
For private companies, Olmos believes wage levels will adjust, even though this sector has always paid more than the minimum wage.
“If you raise wages, you’re going to have a price effect where the price setter is trying to appropriate this person’s surplus, their new income. And that appropriation of the surplus is going to affect both people who earn more and people who earn less,” he said.
He said companies would be “very vigilant”, acknowledging they would have to adjust pay scales in response to wage increases in the government sector. “Probably not at the same rate, but definitely some tax adjustments will have to follow,” he added.
Wage increases in recent years
Venezuela’s last minimum wage increase was promulgated in March 2022, setting it at 130 bolivars per month. Although the administration subsequently applied a ‘comprehensive minimum income’ adjustment through non-wage bonuses, this nominal amount remained frozen.
For example, in May 2023, food vouchers (Cestaticket) were worth $40 USD and the economic warfare bonus was increased to $30 USD (for active workers), making the minimum monthly income indexed to the official exchange rate $70 USD.
Then, in January 2024, new adjustments to these bonuses were announced to increase comprehensive income to $100 while keeping the base salary the same at 130 bolivars.
A year later, an order was issued to raise the total minimum earnings to $160 per month for active public sector workers.
This amount was achieved by adjusting two non-wage benefits: the Cestaticket, which is worth $40 USD, and the Economic War Bonus, which has been increased to $120 USD.
Featured Image: Delsey Rodriguez.
Image Source: Russian Government via Wikimedia Commons
