7 diciembre 2018

Stagnant Employment and the Threat of Unemployment

For more than six months now registered employment at the private sector has remained at a total of 6.2 million job positions, and as you will see, it is inexplicable how the unemployment rate is still at 9.6% when some 200,000 jobs per year are necessary just to cover natural increase, meaning the young people entering the job market minus those who leave it.

Published in El Cronista on December 4, 2018
In September, the number of jobs fell to 6,185,900 even though there was a 1% increase in the registration of the self-employed while the rate of freelancers dropped 0.7% and the percentage of registered domestic servants rose by 4.5%.

At the public sector, where hiring should have been frozen and unified ministries should have been reorganized, the employment rate remains unchanged with a record of more than 3,160,000 civil servants. Just considering vacant positions due to retirement, resignation, death, and the like, the State general staff should decrease at a rate of 7% per year, i.e. roughly 200,000 employees per year. However, the level is still on the rise and staying strong without any improvement in terms of quantity and efficiency. The so-called austerity at the national, provincial and municipal State levels is conspicuous by its absence, with a few honorable exceptions.

Employee suspension due to a lack or decline of work has increased significantly at the private sector in 2018, predicting the fall in employment that can now be checked in SIPA registries [Argentine Integrated Social Security System]. Data and surveys show that one of the greatest fears is job loss, in the current circumstances where rehiring can take more than one year.

In addition, in a context of stagflation (inflation + recession), the inevitable effect that can be expected is the fall in employment, together with the loss in purchasing power, which is lagging behind inflation by more than 12%.

According to the most well-known consulting firms, the clandestine economy has somehow grown. This is where SMEs can find refuge when they do not have the means to afford wages, social security contributions and taxes, and tax pressure is at its peak and does not stop.

Today what’s most striking is that labor-intensive industries, such as IT or national and international tourism, have failed to take specific actions to promote motivation and speed up the decision-making process to attract investment. For instance, encourage and promote short-term training with immediate job opportunities; regulate tax-free schemes like many countries have done where taxes are not levied or VAT is refunded to foreign tourists; promote off-season travelling in destinations that can welcome visitors during the four seasons; create other incentives for those who live in bordering countries in an attempt to reinforce the trend.

As a matter of fact, the different areas of the Government act on the needs and requirements of each sector late or after the fact.

There are some sectors where they are clearly concerned about their image and not about the negative effects that certain decisions may have on the people or the community. The image is the direct effect of real, everyday life events. The truth is difficult to conceal or cover up by some political subterfuge, camouflage or circumstantial maneuver.

For rebuilding the domestic market it is necessary to have trust, keep the rules of the game in the medium term, promote incentives to increase motivation and achieve general goals, in labor and employment matters as well.

Therefore, with the labor reform crushed by the comings and goings of labor and employment policies, the new indexes to update pension and retirement benefits, the deferred minimum non-taxable income for social security purposes, the impact of Income Tax 4th Bracket, the arbitrariness with which certain allowances are administered and granted late, the fall in employment,  the obvious rise in unemployment, the loss in the purchasing power of wages under collective bargaining agreements, and the virtual disappearance of the Department of Labor, all this shows that today the labor and social segments are being left behind and are not a priority for the State general policies.

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

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