Combating inflation in Argentina…a deliberate collapse in workers’ wages

On paper, the numbers look staggering: Argentina’s annual inflation rate fell from 211% in 2023, to 31.5% by the end of 2025.

President Javier Milli takes much of the credit for the decline, spending time on Wall Street last month touting his approach to public spending as a victory over inflation.

But as a political economist who follows the history of Argentina’s cyclical economic crises, I see a much darker story unfolding: falling inflation is certainly not a victory for “Argentine productivity,” but rather a byproduct of a deliberate collapse in workers’ wages.

Argentine President Javier Meli did not repair the engine of the Argentine economy. He simply shut it down. Since he took office in 2023, the country’s industrial production has declined dramatically, with more than 2,000 companies closing and 73,000 jobs lost. And these are not just dry statistics. Real wages have collapsed so severely that demand for Argentine goods has vanished. If a factory is using only a third of its machines because no one can buy its products, it loses its ability to raise prices. Inflation rates stop rising.

By reducing demand sharply, Millie did not solve the inflation puzzle, but merely made some adjustments, by making the population too poor to participate in the Argentine economy.

Moreover, the fear of “mass unemployment” means that workers have no choice but to accept a smaller share of the country’s economic “pie,” and once again low wages serve to prevent a spiral of rising prices, so the supposed victory over inflation is actually the institutionalization of lower wages and the standard of living for most people.

A recently passed law, officially called “Work Modernization,” reinforces this new reality, as it has actually increased the working hours of many workers and reduced the protections afforded to them, making labor cheaper and more dispensable.

The new legislation has been criticized as a return to labor practices prevailing in the 19th century. Instead of modernizing the labor market, this legislation aims to normalize the declining share of wages in GDP, and to ensure that the diminishing share of national income received by the Argentine worker is not just a temporary emergency, but rather a permanent feature of this model.

While the government highlights a 4% GDP growth forecast for 2026, this growth is concentrated in sectors such as agriculture, mining, and lithium production, which create very few jobs. For the average urban worker, the economy has not recovered, but has simply bottomed out at a new, lower standard of living. This is not to say that lower inflation means nothing. There has been a real sense of relief after the chaos of triple-digit inflation rates in 2023.

Simply being able to shop at the supermarket without the prices of goods changing significantly, within days, would constitute a profound psychological transformation for many Argentines. But this transformation is not based on a solid foundation, as inflation has not been curbed thanks to a more efficient economy, but rather has been forced to “surrender by starving it.”

Surprisingly, however, President Milley’s “miracle” is already being prepared for export, and from Trump’s extreme fiscal cuts in the United States, to nationalist programs in Hungary, and the Vox party in Spain, the Argentine president and his method are being promoted as a model for other economies struggling with inflation.

But what appears to be a victory to some is actually a worsening social crisis. Argentina under Milley is not a model to follow. It is a warning of what happens when the cure for inflation is more deadly than the disease itself.

*Economist

About “The Conversation”

. Industrial production in Argentina declined dramatically with the closure of 2,000 companies and the loss of 73,000 jobs.