The high cost of living in Uruguay is a constant concern for its citizens, but the official explanations do not withstand even basic economic analysis. According to the economy minister from Frente Amplio, the country is expensive due to its small size and high wages.
These statements are economic fallacies that divert attention from the real problem: the excessive weight of the State.
This article debunks the official myths, explaining the causes of rising costs and the path to improving purchasing power.
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The myth of size and wages
Contrary to what the minister claims, small countries are not inherently expensive. Switzerland or Singapore demonstrate that a small size can be an advantage. Likewise, blaming high wages is a mistake that confuses cause and effect.
The three elements at play here are: wage value, cost of living, and productivity.
The value of wages
Real wages matter more than nominal ones. More than half of their income is absorbed by the State, disguising confiscation as "solidarity" or "social justice."
The cost of living
The cost of living is not due to high wages, but to the weight of the State reflected in artificially inflated prices by state monopolies such as ANCAP, UTE, and OSE.
Additionally, the 22% VAT, the progressive IRPF up to 35%, and the IASS punish those who work the most and retirees. All this is accompanied by tariff barriers and regulations that prevent competition.
