ONCE AGAIN: THE AGE OLD STORY OF THE WAGE INCREASE.

Ecuador

Lisímaco Velasco

lisimacov@yahoo.com

Propaganda Minister, Pension & Retired Trade Union International of the World Federation of Trade Unions

 

On September 18, 2019, we wrote an article entitled “Reform of Remuneration Unified Basic ”in which we made reference to another previous article that had the title "Fanesca de Reformas Legales" as things are in Ecuador. More than a year ago we made reference to the fact that the National Federation of Chambers of Commerce of Ecuador, together with the Guayaquil Chamber of Commerce, presented the proposal: "40 reforms to the Labor Code", reform 40, referred to the Unified Basic Remuneration and they proposed that “… the basic remuneration unified taking into account inflation based on the retail price index.consumer (CPI) and real gross domestic product (GDP) growth; so heThe increase in unified basic remuneration will be calculated as the sum of the inflation of the previous year and real gross domestic product (GDP) growth for two the previous calendar years:

 

Δ% 𝑆𝐵𝑈𝑡 = Δ% 𝐼𝑃𝐶𝑡 − 1 + Δ% 𝑃𝐼𝐵𝑡 − 2

 

This is what the private employer's association presented in 2019; in 2020 the public employers association was presented with a proposal, through Ministerial Agreement MDT-2020-185 , a new “formula and technical procedure for the calculation of the annual variation to the unified basic salary ”in which the following is stated:" Art. 4. From the formula for calculating the variation of the Unified Basic Salary - The formula for the calculation of the variation of the Unified Basic Salary will be determined by the following variables:

 

% ∆𝑺𝑾𝒕 + 𝟏 = 𝜷𝟏% ∆𝑰𝑷𝑪𝒕 + 𝜷𝟐% ∆𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒗𝒊𝒅𝒂𝒅 𝑳𝒂𝒃𝒐𝒓𝒂𝒍𝒕 + 𝜷𝟑 ∣% ∆𝑬𝒎𝒑𝒍𝒆𝒐 𝒕 ∣ - ∣𝜷𝟒% ∆𝑬𝒎𝒑𝒍𝒆𝒐 𝒔𝒆𝒄𝒕𝒐𝒓 𝒊𝒏𝒇𝒐𝒓𝒎𝒂𝒍𝒕 ∣

 

This means that: “the calculation of the annual variation to the Unified Basic Salary is determined by: The weighting factor 𝛽1 times the variation of the price index rate the consumer, plus the weighting factor 𝛽2 for the variation in labor productivity,parameters that allow negotiation between the parties; plus the elasticity of employment with with respect to wages 𝛽3 by the absolute variation of the global participation rate and minus the absolute of the product of the elasticity of informality with respect to wages 𝛽4 with the variation of the employment rate in the informal sector ."

 

We have repeated it every year that the Constitution of the Republic says in Art. 328 that: “The remuneration will be fair, with a living wage that covers at least the basic needs of the working person, as well as those of her family; " and that the same Constitution in the 25th Transitory Provision which states that: “The annual review of the basic salary will be carried out with progressive character until reaching the living wage in accordance with the provisions of this Constitution. The basic salary will tend to be equivalent to the cost of the family basket. The universal retirement for the elderly will be applied progressively "

 

This time we are going to add a new argument, the Universal Declaration of Rights Humans, which says in Article 23 number 3. “Every person who works has the right to an equitable and

satisfactory remuneration that ensures you, as well as your family, an existence in accordance with human dignity and that will be supplemented, if necessary, by any other means of social protection ”.

This time we are going to add a new argument, the Universal Declaration of Rights Humans, which says in Article 23 subsection 3. “Every person who works has the right to an equitable and satisfactory remuneration that ensures you, as well as your family, an existence in accordance with human dignity and that will be supplemented, if necessary, by any other means of social protection.”

 

There are other considerations, but it seems more than enough, for now, to rely on an article and a transitory one of the Constitutional Charter, and the Universal Declaration of Human Rights, to demand their compliance, and we do not require them to comply with next month, but we agree on what time we are going to fulfill the constitutional obligations of multiplying by 1.6 to make believe that the salary reaches, because it is false and openly unconstitutional, since the salary is for the worker with his family, without multiplying by anything, we have explained it in several other written, years ago, when that happened.

 

The reality is that the salary is in 400 dollars and the basket with official figures "generous",It is at 710 dollars, that is, the salary covers 56% of the basket and 44% remains to be covered to comply with what is ordered by the Constitution of the Republic, we agree to give compliance with the constitution of the republic in 5 years, and then 44 will have to be divided to 5 which gives 8.8% each year, above the inflation of the previous year. In 5 years the salary will be equivalent to the family basket and only that is constitutional.

 

Consequently, our real and simple workers formula is:

 

Δ% SBUt = Δ% Inflation t-1 + 8.8%, or simply, SBU =% Inflation + 8.8%.

In dollars it would be: % Inflation + 62 dollars each year.

 

To understand this easier, the same percentages, translate into monetary equivalents; a salary of 400 dollars after adjustments amounts to 710 dollars, the figure is missing cover 310 dollars to comply with what the Constitution of the Republic orders,we agree to comply with the constitution of the republic in 5 years, and then we will have to divide 310 by 5 which gives $ 62 each year, above the inflation of the previous year. In 5 years the salary will be equivalent to the family requirement and only that is constitutional. Any other formula is unconstitutional.

 

The inflation percentage only replaces what was lost, it does not increase anything, that's why the 62 dollars is the real increase, which will allow us to reach the family requirement in 5 years. When using the example with an inflation rate of 0 (zero), when there is inflation, this percentage is added to the 62 dollars and nothing changes.

 

YEAR SBU% INFLATION $ INCREASE

2020  400                  0             62

2021 462                   0             62

2022 524                   0             62

2023 586                    0            62

2024 648                    0            62

2025 710

 

Lisimaco Velasco