24 abril 2019

In the Race Between Prices and Wages Collective Bargaining Started With Revision

Labor-management negotiations have just begun and unions are claiming quarterly pay rises under a quarterly revision clause, with initial installments to recover the purchasing power loss of 2018 and forecasts that surpass any official provisions so far. They are willing to break the mold and handle each and every conflict that may arise in their attempt to get a fairly reasonable increase.

Published in El Cronista on April 16, 2019
Apparently at the first meetings between unions and corporations, CGT [Workers’ General Confederation] has agreed on a uniform strategy based on requests that are grounded on the 2018 model but with changes in the frequency of pay rises to keep pace with inflation.

By and large collective bargaining begins in March or April and the agreements reached are effective for twelve months, so according to unions the first pay rise should be given in the period March-May or April-June. In turn, thirty days before the expiration of each quarter there will be another pay rise according to prices and inflation rate.

This model is already in place at SMATA car terminals in the form of an escalator clause whereby wages are automatically increased based on a combination of indexes, including INDEC official rate.

Unions are claiming pay rises based on a 20% for the pending, retroactive difference from last year plus the forecast inflation rate, meaning pay rises will be around 50% – 60% if we take the cumulative twelve months of the negotiation period. Those who have managed to get a pay rise based on the whole inflation rate under the revision clause from last year will only negotiate based on the forecast inflation. Some people, like Moyano, are making claims out of context, seeking payment of a year-end bonus.

Curiously enough, the official stance is quarterly pay rises around 8% for the first quarter forecasting an inflation rate on the decline, considering that the annual forecast of 23% has already been surpassed -now 32%- in a clear restraining trend, knowing that this year the rate will be similar to that of 2018. According to the official stance, inflation is slowing down; the economy is cooling off, thus having negative impact: jobs are gone and usually do not come back. As a matter of fact, if the proposals brought forward by the Department of Production and Employment [Ministerio de la Producción y el Empleo] are accepted, this year the rate of pay rises could be around 10% similar to last year’s.

Like in previous years, each union will act according to their circumstances, most of which are going through a crisis and restructuring processes. Their representative leaders have taken a traditional stance: agree on the highest pay rise possible and those who cannot afford it will have to handle the subsequent conflict or design a payment plan on a case-by-case basis.

The government is holding great expectations on the stabilization plan with price control mechanisms and a currency exchange band to control peso fluctuation through the involvement of the Central Bank with a new cap on ARS 51 to the dollar, knowing full well that prices have been dollarized. Hopefully, the successful harvesting season of this year in addition to a number of encouraging regional exports will help bring confidence back on the community of consumers in general, who are adversely hit by the lack or decline of work, low wages, utility hikes, high inflation, recession, loansharking and tax pressure.

There is a vast welfare system for the most vulnerable sectors, pensioners and retirees, and a whole array of supplemental resources and assistance programs at soup kitchens and schools.

Companies usually take their stance based on traditional parameters arising out of an annual pay rise below inflation rate, also with an annual revision clause at the end of the twelve months of negotiation and once INDEC CPI is disclosed, undergoing big restructuring processes, suspensions at very large sectors, and a systematic fall in the economic activity. Many companies are tapping their reserves and selling at deficit prices, with loans at usurious rates that hinder any progress amidst these catastrophic economic indicators.

Wage negotiation begins in an electoral year, on the verge of a general strike proposed by Hugo Moyano and left-wing groups on April 30, and a CGT demonstration on May 1, in an economy that does not react in a context of credit crunch and non-existing investment, and where people find dipping into their savings.

Pay rises should be granted and viewed in context, and the National Government should play the active role of an arbitrator in the social conflict that may get as intense and tough as the electoral campaign or even more.

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

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