The utility-rate adjustment implemented by Javier Milei’s government has significantly diminished the purchasing power of lower-income households, thereby hindering the recovery in domestic consumption — and consequently, in economic activity. Utilities have experienced a significant increase, surpassing the average inflation rate since Milei assumed office. The Interdisciplinary Institute of Political Economy has projected that from December 2023, the month Milei assumed office, to June 2026, there will be significant increases in utility rates: water rates are expected to rise by 555%, electricity by 494%, transport by 1,354%, and natural gas by 2,073%. In contrast, the Consumer Price Index for the same timeframe stood at 312.7%. The above-inflation increase has persisted over the past year. The think tank Fundación Capital observed that although the CPI increased by 33% over the past year, in the Buenos Aires metropolitan area, electricity and gas rates surged by an average of 55% year-on-year, while public transport experienced a rise of 49%. The report indicated that the average expenditure on utilities in June accounted for 10.8% of the average income of registered wage earners in the AMBA, an increase from 9.1% in June of the previous year.
This figure is in proximity to the IIEP’s own estimate, which placed it at 15%. “It’s worth noting that, at the start of the current administration, the ratio was 4.3% of income,” the Fundación Capital report recalled. For the Institute of Thought and Public Policy, the situation translates into “severe pressure on real incomes compared with historical levels, structurally altering the pattern of consumption of goods and services.” It noted that “the average for registered wages tends to hide uneven realities,” as the pressure on lower-income families with informal jobs “is as much as double that of the formal sector.” Fundación Capital concurred with the assessment and determined that for a household earning the equivalent of two minimum wages — 735,600 pesos in June (approximately US$ 500 at the official exchange rate) — utility expenses would account for 22% of the family’s income. That represents a rise of 5.7 points compared to the previous year, and is four times the 5.3% noted in December 2023.
For middle-income households, the impact is less severe. A family with an income of 1.5 million pesos spent close to 14% of its earnings on utilities. That level is 1.7 points higher than a year earlier and more than double the figure from December 2023, when it stood at 7%. For a household with two middle-range formal-sector incomes — the equivalent of 4.5 million pesos (around US$ 3080 at the official exchange rate) — utilities represent merely 6% of total expenses: a year-on-year increase of 1.6 percentage points, significantly higher than the 2% recorded in December 2023. Finally, for a household earning the average income of Argentina’s richest 10% — nearly 7 million pesos (approximately US$4800) — utilities would account for 3% of income, maintaining the same proportion as in 2024 and 2025, which is double the level observed in late 2023. The registered private-sector wage index increased by 4% month-on-month in April, resulting in a real gain of 1.4% due to a deceleration in inflation; however, it was still 2.3% lower compared to the same month last year.
As we approach the latter half of the year, Fundación Capital has indicated that the “most likely scenario” entails “a moderate real recovery in wages, but with disposable income still constrained by the path of utility rates.” Local demand for mass-consumption goods “could show a bit more momentum, though still in a limited way.” It added: “We see the real recovery in wages, then, more as ‘no longer losing ground’ than as a genuine driver of activity.” The research firm ACM projected a gradual recovery in real wages of approximately 0.5% for 2026. It cautioned, however, of two challenges on the horizon. The first is that “the recovery in activity doesn’t take hold and sectoral unevenness persists, especially among the more labour-intensive industries, which would limit the room for wage recovery in the formal segment.” It was observed that “slower disinflation or episodes of greater exchange-rate tension could speed up the pass-through to prices and erode nominal increases, even within the band scheme.”