Ecuador’s basic monthly salary rose US$108 in a decade

RIO DE JANEIRO, BRAZIL – A possible agreement to define the unified basic salary (SBU) for 2022 looks difficult. On the one hand, workers are requesting an adjustment to the current amount, which is US$400 per month, based on the campaign promise of President Guillermo Lasso to reach US$500 during his four years of government.

Employers consider that the value should not be hastily established, considering that the country is still in a period of economic recovery.

Read also: Check out our coverage on Ecuador

The polarized positions complicate the scenario of dialogue and the search for consensus within the National Labor and Wages Council (CNTS), which began on November 9, 2021. Both parties were scheduled to meet November 17, but still without a concrete proposal. Finally, they have decided to meet next week.

According to the Ministry of Labor (MDT), in 10 years, only once was a consensus reached. That happened at the end of 2016. In that year, representatives of the worker and employer sector agreed to set the monthly salary at US$375 for 2017. Since then, the amount of the increase has been defined based on projected inflation.

Between 2012 and 2021, the salary increased by US$108. In those years, the average annual increase was 4.3%, records the MDT.

The most representative increase occurred in 2013 when it went from US$ 292 to 318, this means that the average income that a formal worker should receive by law was increased by US$ 26.

Currently, the basic monthly salary in Ecuador remains at US$ 400 and has not changed for two years. In 2020 the decision was made to freeze the item because the projected inflation for 2021 was negative.

Despite not making any increase, Ecuador is the country with the third-highest basic salary in the region, being surpassed only by Chile and Uruguay, with US$ 441 and US$ 423, respectively. Brazil’s minimum salary (R$1,100) is today the equivalent of only US$200.

This year, workers are focusing the debate on reaching US$ 500, promised by the current president Lasso.

Édgar Sarango, president of the Central de Trabajadores del Ecuador, said that this is a firm promise and it must be fulfilled or, if it is the case, indicate the mechanisms that will be applied to reach this commitment.

The Ministry of Labor said that “it will be informed in due time” how the gradual increase will be carried out in the four years, complying with national regulations and international recommendations.

For the workers’ representative, however, an increase must be defined this year since the idea of the wage-setting is that it should go at the economy’s pace. “We need a salary that covers, in part, the cost of the basic food basket, which is getting more expensive every month”, he pointed out.

Until October, the Basic Family Basket stood at US$ 712, according to data from the National Institute of Statistics and Census (INEC).

Nelson Erazo, president of the Popular Front, added that the increase for next year should not be limited to people who receive the basic but should apply to all levels. “The first year has arrived in which the government will be able to demonstrate that it was not just a campaign promise,” he said.

During the first meeting of the CNTS, macroeconomic projections were presented, which served as a reference to set the salary. For example, it is estimated that economic growth for 2022 will be 2.85%, while average inflation will reach 1.28%.

From the business sector, it is considered that any measure taken in relation to the definition of wages may affect the possibility of having a significant recovery in total employment rates.

“In the post-pandemic recovery year, we must be very cautious about the impact that the wage definition may have on the indicators of formal employment recovery,” explained Xavier Rosero, employers’ representative in the Council and vice-president of the Ecuadorian Federation of Exporters (Fedexpor).

For Diego Olmedo, economic analyst, a point to be considered in the definition is that it must be related to the performance and productivity of workers.

The International Monetary Fund (IMF) itself also points out this premise. “The reality of companies and workers must be analyzed and made transparent, due to the cost of living, to opt for decisions that do not go against job creation,” said Olmedo.

According to Olmedo, the government has the difficult task of finding a point of balance to fulfill its campaign promise; but not to generate social discontent in the country.

The Ministry of Labor defined 2020 as a new technical methodology to determine the UBS, based on nine variables: the inflation rate and elements such as the labor productivity factor and elasticity of employment and informality.

The head of the Labor Ministry and president of the CNTS, Patricio Donoso, pointed out that during the first session, the Council “has work ahead of it”: to set a wage that is up to par and contributes to the country’s growth.