Thursday, March 30, 2023

The “Pollo Index” versus the cost of the basic basket

In his accountability speech on February 27, President Luis Abinader referred to a measurement presented to him by several “friendly economists” on the purchasing power of the minimum wage in 2011 compared to 2022, but taking as a reference a single product: chicken. Therefore, the measurement was identified as the “Pollo Index”.

He was referring to the fact that, with the average minimum wage in 2011 and taking the then price of chicken meat as a reference, 138 pounds could be purchased, while in 2022, with the current average minimum wage, 193 pounds could be purchased. even when the product is more expensive.

The detail with the indicator cited by President Abinader is that it takes as a reference a single product from a basic basket, even when it consists of around 25 goods and services that Dominican families consume, even with limited resources. This is to avoid giving the impression that Dominicans wake up eating chicken, spend the day eating chicken and before going to bed they also eat chicken.

The fact of using a single product from the basic basket as a reference takes away weight from the argument; but, in addition, there is the detail of the comparison. The president is referring to the year 2011, ignoring the following years, especially 2018 and 2019, prior to the pandemic and his coming to power. This detail politicizes the analysis, since it gives the impression that what he wanted was to respond to one of the opposition presidential candidates, who was President of the Republic in 2011 and has been a constant critic of price increases in this administration, especially the chicken.

Ideally, the President would have compared the minimum wage and its purchasing power with the current basic basket, which would have given it a more technical and less biased or politicized analytical character than the one presented in the speech.

And, in fact, when the comparison is made, then the purchasing power of Dominicans is currently lower than in 2011. This is so because in 2011, assuming an average minimum wage as the one cited by the president: RD$7,583 per month, and taking into account that the cost of the basic food basket for quintile 1, the one with the lowest income, was RD$11,265, it is clear that with that salary you could buy 67.3% of that set of products.

However, at the end of 2022, with an average minimum salary of RD$16,262 per month, as the President cited, and knowing that the basic basket of quintile 1 is at RD$25,725, the purchasing power of that salary is a 63% of the reference product set.

In fewer words, in 2011 the average minimum wage was enough to buy 67% of the lowest basic basket, while in 2022 the current salary only allows buying 63% of the same basket, in the same quintile or population segment.

That must be the reason why President Abinader’s economist friends preferred to present him with a “chicken index” and not a real comparison of the minimum wage versus the basic food basket, in order to show the population a truth that, whatever they want, they already know. , because it is enough to go to grocery stores, stores, supermarkets and ventorrillos to realize that currently the products of the basic basket are much more expensive than in the past and that the proportion in which wages have been adjusted is slower.

In any case, the fact that no ruler wants the prices of products to increase to the detriment of the population is not in dispute. These are internal and external circumstances that nobody wants, so instead of making “political” comparisons, the authorities should focus even more on their efforts to avoid further price increases.

President Luis Abinader himself had already said it in a recent political speech: “Dominicans, don’t look back.” But now he is the one who is sending the population to look back, with the risk that they will realize that, perhaps, those times in the past were better than now. Careful!


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