1 octubre 2018

The Rising Unemployment Rate Anticipates Social Difficulties for the End of this Year

Amid general unrest, the unemployment rate has been disclosed, reaching 9.6% in the second quarter of this year (April-May-June 2018), as informed by INDEC when the effects of the currency devaluation, the inflation rate or the activity levels have not been felt yet.

Published in El Cronista on October 1, 2018
Stagflation -the combination of recession and inflation- inevitably causes job losses and destruction. Even if some signs of recovery were seen, jobs are lost forever because they are largely replaced by new technologies.

There are some 250,000 new jobless people. It is worth mentioning that neither the third quarter nor the remaining months of this year have been computed yet, and these are the most dramatic periods for the most vulnerable sectors, and for each and every Argentine, actually.

Such average means that there are provinces like Mendoza with an unemployment rate around 4% whereas in the Greater Buenos Aires it reaches 14%, 18% or more.

If we take the unemployed together with the underemployed, there are at least 2 million people looking for a job unsuccessfully, and almost 7.5 million people who are having trouble to make ends meet because of their precarious jobs or insufficient incomes.

Another interesting fact that shows the adverse effects of devaluation on the most vulnerable sectors according to INDEC data is that the rate of those who are actively searching for work while employed increased from 14.7% to 16%; they are the ones who have an income below the basic market basket worth ARS 21,000.

As to job hunting in the first half of this year, some 641,935 people looked for work, of whom 398,384 managed to land a job while 250,000 are newly unemployed.

INDEC report also showed that the unemployment rate for young women aged 14-29 is still very high. In one year it rose from 19.8% to 21.5%.This rate is also high among young men: it increased from 15.4% to 17.3%. In addition, informal employment reached 34.3%.

The highest rates of unemployment are found in 24 districts in Greater Buenos Aires (12.4%) and in the area Rawson-Trelew (11.7%). The lowest rates are found in La Rioja (2.3%) and Posada (2.5%).

In other words, this means that the number of employed people increased by 2.2% whereas the jobless soared by almost 14% on a year-over-year basis. The unemployment rate of 9.6 reached its highest peak in twelve years: a record high rate can be traced back to the second quarter of 2006 when it reached 10.3%.

No doubt there is tax pressure and incidence. It is widely known that everything that we buy at least pays 50% taxes for a huge array of contributions and charges of any kind and nature. That is why most sectors tend to go to the informal market, directly or indirectly. Work off the books will systematically rise considering the current tax pressure.

The National Government is breaking all records in spending thanks to taxation. It is quite striking that there is a sharp divide between the speech that the Government should only spend what it collects, and the lack of efficient measures to reduce public spending. This shows a magical thinking that includes fantasies where there is no real content.

The State will have to inevitably deal with a reduction in the level of activity, which in turn will cut its revenue inevitably. Reorganization and austerity will be imperative, which is not convenient in times of elections.

The employment level requires investment, job opportunities, challenges that may be coupled with actions encouraging labor intensive activities. Tourism and related services, store chains and shopping tours in bordering provinces, short getaways for the countries in the region, sales tax refund for tourists are all actions that should be considered today as an efficient step to improve the social situation but for unknown reasons have not been assessed by the Executive as a matter of State policy.

By Julian A. de Diego
Director of the postgraduate course on Human Resources at the School of Business at UCA.

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