Brief analysis: Why do people in Venezuela earn so little?

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I was talking about this topic today and came to a few conclusions that make it easy to understand why people can earn $5 a month while there are shops that sell a box of cereal for $8.

Why do people in Venezuela earn so little? Inequality in a dollarized economy

  • Less money available: While people in other countries have a lot of money, there is much less money running on the streets of Venezuela.
  • Same production cost + additional transportation and regulatory cost: If the same product being imported in the US is being bought in Venezuela to sell here (most products are imported nowadays due to low production), the same production costs apply + national taxes, transportation, permits and many other things.
  • Forced smaller price: Due to there being less money available, products can't be sold for too much money, because the average buyer will have less money than in the US. This means that companies have to forcefully lower the price of products while paying the same amount (previous point).
  • Forced efficiency: Forced smaller prices require companies to make their costs more efficient. This means lowering the income of their disposable workers. Due to the situation of people being so desperate and there being so little money, people will take any job and free-market dictates that an over-supply will be met with lower prices (lower pay because workers are replaceable).
  • Difference in costs: The cost to produce and sell an imported box of cereal is much different than the cost to sell a specialised service. As specialised service providers are less in number, they can charge smaller-than-international but higher-than-average commissions, but general unspecialised workers are replaceable and charge much, much less ($5 on average) per month.
Brief analysis: Why do people in Venezuela earn so little? | Ecency