Just how low can salaries get in Venezuela?

During a trip we recently took to a Caribbean island, I saw a local salesman selling arts and crafts supposedly typical to that island. One of his products was a t-shirt that boldly stated “Different Island - Same Sh..”. This same message could easily be applied to the economic policies implemented in our countries. These policies seem to be based on an economic Hit Parade list rather than on a profound analysis of the problems at hand. This can be good or bad.

It can be good if it forces our authorities to apply rational economic measures in order to avoid the indignity of looking out of place and time in the televised debates that have become so popular in spite of their boring economic themes. It is bad if it implies trying to adapt measures that may be rational in one country, but not in another.

Fifteen years ago, Venezuela was a country that attracted foreign investment by flaunting its sustainable economic advantages. Among these was cheap gasoline, electricity and fertilizers. Additionally, internal production was protected by a series of import duties. This compensated for the fact that the country’s oil income allowed it to maintain an exchange rate that rendered the non-oil sector uncompetitive.

Today, having applied a large part of the economic recipes that are currently en vogue, we find that the only sustainable economic advantage which remains is a rock bottom salary level. This definitely does not seem correct.

On which strange theory is the government basing its policy of raising the price of gasoline sold in the local market to international levels while at the same time paying doctors, teachers and other professionals’ salaries that are only a fraction of what they would receive elsewhere? Should the country really need to introduce certain artificial measures to maintain its economy’s competitivity levels up to par, it would be much easier to justify applying subsidies to fertilizers than to exact the sweat of our farm workers by paying miserable salaries and benefits.

Obviously, this note does not imply that we should be subsidizing inefficiency or that we should be paying salaries to those that do not show up for work. Those that do not work evidently do not deserve a salary either in New York, Tokyo or Caracas. On the other hand, those that do work deserve salaries that are reasonable in New York, Tokyo and Caracas.

When a public sector worker is competent and performs his or her duties with responsibility while receiving a fraction of the pay that would be reasonable, he or she is making a contribution to the state that is exactly equivalent to the payment of taxes. As is the custom, this tax payment will never be accounted for in our so-called fiscal paradise.

The difficult problem Venezuela is currently suffering through with regards to labor and salary structures, and which has resulted in salary levels comparable to poor countries rather than to an oil rich nation, is clearly a product of the failure to properly select and adapt an economic policy.

I attribute this failure to two basic factors. The first is that while the selection of an economic plan was aimed at strengthening the private sector, the only parts of this plan that were actually implemented were those that increased the state’s income. The magic used to achieve this was the ability to effectively disguise planning officials armed with a soviet style centralist philosophy in a neoliberal skin.

The second factor is that due to a cyclical weakness of the oil sector, the need to adjust any measures to the basic reality that we are indeed an oil country was blithely ignored. As an example of this, you may remember that some experts managed to find a comparative sustainable advantage in the cultivation of apples in Venezuela.

The reality is that in spite of the fact that our politicians have hawked a series of agendas, the country does not have a coherent model that can guide it’s development and guarantee workers, handymen and professionals a reasonable income in a globalized world. Obviously, the only way to develop such a model is by means of a unified effort by the main players in our economy, that is, the business and labor sectors. The first logical step is to avoid the traps set by the party guilty of having set them against each other in the first place.

In the absence of other subsidies and advantages in Venezuela, only salary levels remain as a means of attracting productive investment that can offer Venezuelans dignified occupation. Given the inefficiencies of the state such as bad infrastructure and the lack of physical, judicial and social security, these would most likely have to be offset by accepting salaries that wouldn’t cover the basic requirements of a Tibetan monk on a vegetarian diet.