ABSTRACT
This chapter addresses the issue of labor’s falling real income and its impact on the domestic market. The analysis focuses on Argentina, a nation where the decline in real wages has been one of the most severe in Latin America. The chapter discusses some aspects of Argentine economic strategy since 1985 and reviews the adverse evolution of labor’s income and the increasing income concentration after 1975. It analyzes how those changes affected the level and structure of consumer demand and manufacturing production. In Argentina, apart from the constraints shared with other Latin American countries, the starting point for increasing manufacturing exports is particularly unfavorable. Trends in manufacturing production not only provide some indirect evidence of consumption trends but in fact should also reveal how the decline of consumption, along with other factors, affected production. The enduring decline of real wages and the growing proportion of households with low income expanded the demand for social services.
