8 mayo 2019

The Most Irregular Labor-Management Negotiations In the Past Few Years

The most irregular wage negotiation in the past few years is heating up, and most people take inflation rate as the only factor to regulate the purchasing power loss of our currency.

Published in El Cronista on May 7, 2019
Everything that is going on is being thought in terms of stagflation, where the domestic market has collapsed due to credit crunch, lack of investment and a general loss of confidence.

By way of reference corporations are adopting the stance to dodge Unions’ blows by granting one annual pay rise only, and eventually another increase when the period ends. In some cases, corporations are filing crisis prevention procedures [procedimiento preventive de crisis] as they cannot discuss wages under the current circumstances.

As to the stance adopted by Unions when bargaining, there is a wide array of alternatives between extremes.

At one extreme, there are those who know that their salary will be increased gradually, lagging behind inflation because the economic activity is still on the decline. Pay rises will be granted in installments, with enough room for revision, and any further increases as a result of such revision will also be paid in installments.

At the other extreme, there are those who say that salaries should be adjusted through indexation to beat inflation, ignoring the adverse effects that this will even have on its apparent beneficiaries.

It is widely known that giving pay rises with the sole aim of keeping pace with inflation will translate into job losses and unnecessarily worsen today’s crisis, causing more damage, forcing many companies to keep afloat by restructuring their business and undergoing major reorganization processes.

For instance, let’s take the plan of the Government in the Province of Buenos Aires to solve the conflict with the teachers’ union: a quarterly pay rise in advance or in arrears according to INDEC CPI, and an advance payment to cover the difference still owing from last year.

CGT [Workers’ General Confederation] is seeking the application of the same model, with four quarterly pay rises and one initial compensatory payment. Pay rises may be granted using varied formulas: percentage once inflation rate is disclosed, a rate based on forecast inflation, a combination of both, and finally quarterly adjustments according to market and expectations in each sector.

In a context like today’s, the stabilization plan should also include a plan related to wages, collective bargaining and employment emergency.

Under the National Employment Act No. 24013 the Executive gets enough authority to declare the employment emergency, determine wages to keep up with the times, and deal with the present crisis with viable alternatives for companies, employers and workers who account for a significant part of the local economy and domestic market, and who are now undergoing an emergency situation.

Keeping the status quo as if there has been a return to normality, stability, competitiveness and growth is a ridiculous disregard for the reality where day after day more people fall into despair and for whom it will be really hard to recover.

New technologies, the economic crisis, the heterogeneity of our domestic and external market, the free enterprise system that is seized with stagflation are here to stay for now and for many years to come. It is time to free ourselves from the electoral trap and do what needs to be done with the pending reforms and a new leap forward into the next level that will allow us to get on our feet and make progress.

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

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