Linking salaries to productive results: The recipe they propose in Cuba to combat inflation

The Cuban regime blamed its workers for the crisis in the national economy. They claim that salaries are insufficient because employees are not productive enough, and prices do not decrease because "socialism is still under construction."

That was the explanation given by economists Carlos Enrique González García and Guillermo A. Sarmiento Cabanas on the television program Cuadrando la Caja, broadcast on October 5 by state television, hosted by Arleen Rodríguez Derivet.

Both officials defended the thesis that the development of Cuban socialism relies on linking wages to productivity, a slogan that grandparents heard in the 80s and is now reappearing as a justification for low incomes and rampant inflation in the country.

"The salary is the price of labor."

González, a professor at the Center for Cuban Economy Studies, was straightforward: “Wages are the price of labor within a society.” In theory, if someone contributes more work, they should earn more, and if they contribute less, they should earn less. However, he acknowledged that this relationship has never functioned in Cuba.

"There are people who contribute a lot and earn little," he admitted, confirming what millions of Cubans say every day at a counter or in line. Effort and responsibility do not guarantee a better standard of living.

For González, the root of the problem lies in the fact that “salaries continue to be paid when there is no production or when the quality of what is produced is not suitable,” which creates contradictions within the economy.

However, he did not mention that the lack of production does not depend on the worker, but rather on the collapse of the state system, the energy crisis, the shortage of raw materials, and the political control that prevents companies from making their own decisions.

Social funds versus real salary

One of the most revealing points of the debate was the acknowledgment that salaries in Cuba have never been sufficient to support consumption.

In González's view, historically, the population has relied more on what are known as "consumption social funds" (education, health, and subsidies) than on money earned through work.

According to him, "between 55% and 60% of all the value consumed within society came from those social funds," and only 40% of consumption depended on wages.

That statement indicates that the Cuban salary does not guarantee subsistence, and the socialist model only sustains itself as long as the State subsidizes part of consumption. However, those funds in Cuba, which have been reduced year after year, are no longer sufficient to contain the crisis.

Nominal wage and real wage: Earning more vs buying less

Sarmiento Cabanas, director of labor organization at the Ministry of Labor and Social Security, provided figures that, far from demonstrating progress, reveal the deterioration of the purchasing power of Cubans.

“The average salary shows an increase of about 16%, and in the business system, it has risen by 19%,” but the annual inflation is around 20%. In simple terms: Cubans earn more, but their money is worth less.

“If you have an average salary of 7,300 pesos and inflation has increased by 20%, you won’t be able to purchase the same goods and services as before,” Sarmiento acknowledged.

The official himself explained the difference between nominal salary (what is paid in pesos) and real salary (what can actually be purchased). What he did not mention is that this gap widens every month, as prices in the informal market, where people actually shop, are beyond the reach of most.

Business autonomy without real autonomy

Both economists also discussed the supposed "modernization of business management" and a decree that would allow state-owned enterprises to set their own salaries based on results.

Sarmiento stated that "powers to approve payment systems have already been decentralized," and that around 200 companies are implementing this model. However, he himself acknowledged that "between 27% and 30% of the companies are experiencing losses," leaving them with no room to raise salaries.

González admitted another contradiction. "We can give a socialist state enterprise all the capabilities we want, but if we force it to sell below its value, what salary will it be able to pay?"

The State demands productivity but imposes prices that prevent state-owned enterprises from covering their costs.

From the State to SMEs: Silent Flight of Workers

In the midst of this crisis, more and more workers are leaving the state sector to work in small and medium-sized enterprises or private businesses, where they can at least hope for a real income in hard currency.

The massive loss of talent and experience from state-owned companies to the private sector has become the main economic refuge for professionals. However, state executives "cannot double the salary" to retain their employees, as the system does not allow it.

This reality reveals that the State does not compete, but rather controls, and that the so-called "business autonomy" is merely rhetoric as long as companies remain subjected to imposed prices, administrative limits, and political decisions that stifle any incentive.

The television debate concluded by blaming global inflation, the "process of building socialism," and inherited distortions.

"If productivity does not rise, wages will not rise," experts assert, but they do not mention that the country is facing an energy crisis that halts production across all sectors, and that the primary culprit of this harsh reality is the Cuban government.

What the regime does not say is that without economic freedom or real autonomy, productivity will never rise. And as long as that does not happen, the Cuban salary will remain the same as always, just a number that does not add up.

Frequently Asked Questions about the Economic Crisis in Cuba and the Link between Wages and Productivity