The Labor Reform, Not on the Electoral Agenda

Our model of industrial relations and regulatory framework is archaic, and reforms have taken it back in such a way that it fell into disuse by more than 80%, preannouncing its terminal decadence.

Published in the magazine Consejo Digital on June 11, 2019
Our labor and employment law does not make any reference to new technologies or the gig economy.

This also adds to the crisis in employment, stagflation (inflation + recession), the fall in activity levels, inadequate investment rates, credit crunch, austere currency policy, financial speculation, and in particular SME shutdown or downsizing. As to wages under collective bargaining agreements, they have lost more than 15% purchasing power in average in the last eighteen months.

Gross costs in Argentina are twice or three times the costs in other Latin American countries. Argentina has the highest payroll taxes in the world, and a perverse scheme of severance pay, penalties and charges for work off the books. Its low productivity rate is especially linked to union actions. And the latest reforms have systematically failed, in particular because they are constantly blocked by the opposition.

The labor, social security and tax reform has become a key issue for the future electoral platform, and nobody is drawing up an agenda that is indispensable for re-launching a new Argentine matrix.

Today we are paying the price for mistakes from past years. Between April 2018 and April 2019 some 266,000 registered jobs were lost. The most marked fall is found in industry 5.8%; commerce and repair 3.09%; transport and communications 3.3% and construction, as compared to March 2018.

Registered employment fell 2.6% year on year with 6.16 million registered employees. Data gathered by the Department of Labor in April reveals that in the private sector the fall in employment is still 2.6% for the aggregate urban agglomeration, and it is even sharper in Great Buenos Aires (2.9%) than in the provinces (1.7%) mainly due to the reactivation of production in the agricultural economy in La Pampa region and in the energy sector thanks to the exploration of Vaca Muerta reservoir.

This is the seventh consecutive fall both on a month-on-month basis as adjusted for seasonality and on a year-over-year basis, accumulating fifteen months below the maximum amount in December 2017. In this context more than 6 million minors are living in poverty and almost 1.5 million are starving. (Deuda Social, UCA).

Every month for a year and a half employees have been losing their jobs, and potentially new hires are working off the books or have become economically dependent self-employed workers or freelancers, are providing services in breach of the public employment act [ley de empleo público], or have turned to the sharing economy to work for apps such as Uber, Rappi, Glovo, PedidosYa and Cabify.

It is clear that we are undergoing a real emergency situation in employment, coupled with a process where human labor is changing based on new technologies, and in particular due to the need for new horizons opened up by the sharing economy.

There are no candidates or political parties with an agenda for structural and institutional reform. So far there has been political intrigue and electoral campaign games without any ideas, projects or proposals.

Expected changes include: 1. Working with new technologies such as telecommuting and the knowledge economy both in the digital era and the post-digital era with digitation, automation and AI; 2. Modernizing core institutes such as hiring methods, working hours, rest breaks, compensation and in general parties’ rights and duties; 3. Creating alternatives for paying and funding severance pay due to employment termination, and reformulating unemployment insurance; 4. Establishing a special scheme for companies with less than 50 employees; 5. Regulating the right to strike, including workers’ meetings; 6. Modernizing collective bargaining according to the priority of laws, and prevalence of company-wide collective bargaining agreements over industry-wide agreements; 7. Democratizing the union model and employee involvement and participation in unions’ internal structure; 8. Reformulating social security and payroll taxes, especially social security contributions and income tax; 9. Designing a wide array of actions to combat the clandestine economy, even at the State level, and promoting online banking services for wages and social security contributions at all levels.

As a matter of fact, luck is what happens when preparation meets opportunity (a quote from Seneca), and maybe this is a big opportunity for the next Administration in a context of pressing needs for job creation like today’s, which will burst out as a top priority because of widespread social demand.

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