Real wages lag far behind inflation reflecting worsened living conditions

Sri Lanka’s wages are rising at the fastest pace in the country’s history, but they still lag far behind the pace of the red-hot inflation leaving scores of people financially worse off   than they had been a year ago, the recent wage data showed. 

According to the wage rate indices calculated monthly for informal private sector employees and the public sector workers showed that wages had grown by 26.3 percent and 16.1 percent respectively in October from a year ago.
The real wages have been sagging for months since the country’s inflation spiralled out of control from early this year forcing people to forgo their consumption which took a massive toll on their lifestyles. 
Sri Lanka’s official consumer prices peaked at just under 70 percent in September before trending downwards in both October and November towards 60 percent level.
Runaway inflation has eaten into the real incomes of the people by more than a half over the last year, creating the worst living standards in the country’s history. 

There were initial concerns whether runaway prices could trigger wage spiral inflation as employees pinched so hard by the hotter inflation tend to ask for higher wages due to higher inflation expectations just to maintain their real wages and thereby their living standards. 
Such a scenario could have fed further into already hotter prices as people with higher wages demand more goods and services sparking a perpetual cycle of higher inflation until the demand is curbed through tightening the monetary policy. 

However, the 700-basis point jumbo policy rate hike by the Central Bank averted this scenario by killing the demand in the market place. 
Meanwhile, a study conducted through October by the World Food Programme has found that three in ten Sri Lankan households have become food insecure; over seven in ten households are adopting food-based coping strategies such as eating less and eight in ten households turning to livelihood-based coping strategies such as selling their productive assets.
Sri Lanka’s worst ever cost of living crisis has triggered a mass exodus of people seeking better living conditions elsewhere.