Societies often confuse the name of a thing with its true cause. They call salary the number printed on a receipt and believe that increasing it simply means writing a larger figure. But a person's income is not, in essence, an amount of money. It is the portion of goods, services, and opportunities that their work allows them to obtain. When the currency loses value, the number may grow while life becomes tighter.
In May, the general salary index increased by 2.2%, just above a monthly inflation rate of 2.1%. However, the average hides different realities: registered salaries rose by 1.8%, while incomes in the unregistered private sector advanced by 3.5%. Year-on-year, the salary index increased by 35.9%.
The real news is not that salaries have matched or exceeded inflation for a month. The real news is that the economy is beginning to recover the conditions for salaries to depend again on productivity and not on inflation.
For years, inflation altered that link. The salary stopped reflecting the value of work and became a permanent race against the loss of purchasing power. Companies and workers negotiated looking at the past, trying to recover what the currency had already destroyed, while uncertainty made it increasingly difficult to invest, hire, or plan.
Purchasing power can only be permanently recovered when monetary stability reconnects salary with productivity. That is the true importance of disinflation. It does not guarantee that all incomes will improve immediately, but it returns to the economy an essential condition for sustainable growth to resume.
The Austrian School has insisted for decades that the price system is much more than a mechanism for setting monetary values. It is an information system that coordinates millions of dispersed decisions. When inflation stops distorting that information, companies, workers, and investors can recalculate more accurately, allocate resources better, and discover new production opportunities.
Therefore, a month in which the average salary slightly exceeds inflation should not be presented as either a definitive victory or an irrelevant data point. It is a signal that the economy is beginning to leave a regime where salaries reacted to inflation to gradually enter another where they respond again to productivity.
Moreover, salary does not arise from an isolated decision by the employer. It is the result of a complex process of social cooperation. It depends on the value that consumers assign to what is produced, the available capital, technology, business organization, and existing labor alternatives. Murray Rothbard explained that the remuneration of productive factors tends to be linked to the discounted value of their marginal productivity. In other words, a company can sustainably pay better salaries when each worker has more capital, better tools, and more efficient processes.
For that reason, no law can replace capital accumulation. A nominal salary can be imposed by decree, but not the productivity needed to finance it. When mandatory remuneration persistently exceeds the value that an activity can generate, the adjustment does not disappear: it reappears as informality, lower hiring, technological substitution, or business closures.
The difference observed in May between registered and unregistered workers should also be interpreted with caution. Informal incomes react more quickly because they are negotiated with greater flexibility, although that same flexibility coexists with greater uncertainty. Formality, on the other hand, tends to respond with a lag due to more rigid agreements and contractual structures. A monthly data point is not enough to draw definitive conclusions about a long-term trend.
The true salary policy is not to intervene in every negotiation, but to build the institutions that allow for investment, saving, innovation, and hiring with freedom. The more companies can compete for workers, the greater the bargaining power of those workers will be, and the better their opportunities for progress will be.
The true success of the economic program will not be that one month salaries beat inflation. It will be having rebuilt the conditions for salaries to grow because the economy produces more, invests more, and creates more value. That is the only path by which an income improvement ceases to be temporary and becomes progress.
A stable currency protects yesterday's salary; capital, investment, and economic freedom build tomorrow's salary.
