Now “spreading” inflation has eroded the purchasing power of the middle class

Low- and middle-income families were the most affected by the general price hike in 2021, according to Ipea (Institute of Applied Economic Research). While the official inflation closed the year at 10.06%The index of these two groups was 10.4% and 10.26%, respectively. This is higher than the inflation rate of very low-income households (10.08%). According to the experts they consulted UOLthe figures are the result of the “spread” of price hikes, which, having affected the poorest, are now eroding the purchasing power of the middle class.

Class C, whose total family income is four to ten times the minimum wage (from R$4,848 to R$12,120 in 2022), is feeling the price weight of several items. In 2020, the problem was an increase in food, but now there is also an increase in electricity and fuel, which puts its weight on inflation. In the past year alone, your electricity bill rose more than 21%, gasoline, 47.49%, and ethanol, 62.23%, according to the IBGE (Brazilian Institute of Geography and Statistics).

“There was a water crisis, with electricity bills soaring, and petrol prices exploding. We started to see ‘democratization’ of inflation. Food went up, but items belonging to the richest basket also became more expensive. Services, in beauty salons, at meals away from home. Everything went up. The middle class felt it too,” explains André Braz, IPC (Consumer Price Index) Coordinator, from FGV (Fundação Getúlio Vargas).

Inflation spread. Before I was so focused [nos mais pobres]It is now in all categories. The difference is that the lower and middle classes feel more elevated.
Andre Braz, from FGV

Low wages and unemployment

However, high inflation is just one of the factors that explains the recent loss in the purchasing power of the middle class. High unemployment and subsequent stagnation in the labor market also reduced the bargaining power of workers.

In other words: Even those who work cannot negotiate the salary increase that accompanies the general rise in prices, says Rafael Saulo Marques Ribeiro, professor of economics at the UFMG Federal University of Minas Gerais.

“The labor market has been stagnant for a long time, and wage performance has a lot to do with this market heating up,” he says. He says the crisis predated the Covid-19 pandemic, but worsened with it.

“A lot of workers who have lost their jobs take time to relocate, and when they do, they usually occupy lower positions with lower wages. Often these people only get a place in the informal market, where the work is more risky.”

Unemployment rate in Brazil It reached 11.2% in the quarter ending January of this yearIt reaches 12 million people, according to the latest data from the International Institute for Statistics and Information.

The number of informal workers is 38.5 million – equivalent to 40.4% of the working population. There are still 4.8 million frustrated, who have given up looking for work.

Workers, when they move, get lower wages or go to the informal market. The worker lost a lot of bargaining power in the meantime. Even with inflation rising, he is unable to negotiate a wage increase.
Rafael Saulo Marques Ribeiro, from UFMG

Prospects are still uncertain

The two experts have heard before UOL They say that it is difficult to make predictions, because the decline in prices depends on many domestic factors, such as the correctness of public accounts, and external factors, such as the war between Russia and Ukraine and exchange rate changes, which directly affected fuel prices. , for example.

According to Andre Braz, the measures recently announced by the federal government to encourage consumption, such as the release of FGTS withdrawal (Service Time Guarantee Fund), and IP . reduction (tax on industrial products) and Exemption from import tax on ethanol They are merely “populist,” “elective in nature,” and should have little or no practical effect on controlling inflation.

“But I am more optimistic [para 2023]. I think there is potential for improvement. interest [Selic] higher, so it is possible that we will be able to bring inflation closer to the target. I think it all depends on the war.”

Rafael Saulo Marques Ribeiro, of UFMG, also mentioned the consequences of the conflict between Russia and Ukraine in the international market and four other factors that should affect the growth of the Brazilian economy in the coming years and restore the purchasing power of the medium. Category: Increased consumption, reduced household indebtedness, resumption of investment by businesses, and federal government spending.

“But it is complicated. Increasing consumption is difficult, precisely because of this inflation. Indebtedness of households? We did not have such amount of indebtedness. Even if people pay their debts, this does not move the economy, because debt is consumption in the past. Investments depend On the expectation of profit, and in this moment of uncertainty, companies do not feel stimulated.Government spending is stagnant, largely due to restrictions imposed by tax rules.So external factors are left.It is the point with the greatest potential,because the domestic factors I mentioned earlier They are all confined.”