Real wages have exceeded rising consumer prices over the last fifteen (15) years

Dear Editor,

In the debate and discussion of cost of living at a national level, inflation and cost of living are all too often confused. Although they are related, there is a slight difference between the two measures. The inflation rate is measured using the Urban Consumer Price Index (CPI), which is used to measure price changes over time. A cost of living index (COLI), on the other hand, is used to measure price differences in different regions, and the basket of goods in a COLI may differ from the basket of goods in the CPI. In Guyana, it is worth noting that we do not have a COLI.

Source: Author's calculation based on Bank of Guyana data and budget estimates.

The base year of the Consumer Price Index is 2009 (where December 2009 = 100), according to the Consumer Price Index data published in the Bank of Guyana's 2023 Annual Report. After taking into account the estimated inflation rate for 2024, the Consumer Price Index will close the year with an index of 143. This means that consumer prices have increased by 43% since 2009. Conversely, it is interesting to note that real wages have increased by 6.5 times or 539% during this period (2009-2024).

In absolute terms, real wages based on income tax data amounted to around $40 billion in 2009. They rose to $237.4 billion at the end of 2023 and are expected to reach $265 billion by the end of 2024.

Source: Author based on data from the Ministry of Finance

As shown in Figure 2 above, real wages as a share of GDP increased by an average of almost 7% per year over the period 2009-2023/24. It can therefore be concluded that real wages at the aggregate level have increased significantly more than consumer prices over the last fifteen (15) years.

Sincerely,
Joel Bhagwanth