Prices and wages

Elimination of deficiency between prices and wages…

a necessity for economic reform

Dr. Kadri Jamil

The lecturer focuses on the increasing gap between prices and wages, and between profits and wages. In the period from 1975 through 2000, consumption goods prices have increased almost 7185%. Meanwhile, Minimum wages have only increased 883%. This means that the living standard has decreased 813%. The minimum wage does not represent more than 12% of the consumption panel. Currently, daily food consumption per capita requires 51 Syrian pound (equivalent to 2400 calories), which equals 1530 SP per month. That is practically equivalent to the poverty line (1500 SP according to Central Bureau of Statistics and the UN). So, a family compound of 6 persons needs 9180 SP for food spending.

In 1985-2000, the spending on food increased 544% (270-1400 SP monthly) and minimum wage increased 342% (890-3045 SP monthly) making a gap of 200%. By adding other spending requirements on essential goods (housing, clothes, transport, fuel, etc.), which approximate 1500 SP, the minimum wage should attain 3030 SP (the sum of spending on food 1530 and the other mentioned essential goods 1500). In a family of 6 persons, minimum wage must be 18180 SP. Having two workers, the minimum wage become 9090. This prove that the gap has increased up to 300% given the current minimum wage is 3045.

Despite the increasing of 7% in the annual GDP during 1975-2000, the income share per capita has decreased 50%. This decreasing is not only due to the demographic growth, but to the bad income distribution. Wages have increased 10%. Meanwhile, profits have increased 36%. The gap between prices and wages, which leads to irrational profit increases, affects extremely the whole economy, and is reflected in:

• Eroding labor force (deterioration of health conditions) and its gradual collapse.
• Prolonging work day.
• Increasing corruption.
• Limiting investment opportunities.

Any genuine economic reform must imply:

1. Increasing the minimum wage up to the living standard.
2. Amending wages periodically with respect to prices fluctuations.
3. Financing wages increases not by prices ones, but on the expense of profits through the fiscal policy and by rationing non investment government spending.