21 agosto 2019

Traumatic Impact of PASO Results on the Labor Market

In his memoirs José de San Martín wrote: “Arrogance is a disability that usually affects poor and unhappy mortals who are suddenly given by a bit of power”. Autism, overvaluation, isolation, deaf ears are some of the defects that have led to ignoring or misunderstanding citizens’ needs, especially those of the most vulnerable sectors.

Published in El Cronista on August 20, 2019
The retired, the unemployed, people who are excluded or below the poverty and indigence line, the disabled, small entrepreneurs, SMEs with less than ten workers, retail businesses, those who have lost their middle-class status and fallen into poverty, all of them -and many more- have been hit by the decisions taken by the current Administration, driving them into poverty, forcing them to shut down their businesses, or simply causing them to lose their jobs or do precarious and occasional work.

Industrial companies in general have continued to reduce their workforce and production with the opening of imports, increasing tax pressure, and today those that have survived have more than 50% idle installed capacity.

The economy is completely stagnant, and the subsequent shrinkage of the labor market has undoubtedly influenced the vote that the citizens finally cast in the primaries (PASO, for its acronym in Spanish). They will have to go to the polls again in slightly more than two months’ time. It was even said that citizens voted incorrectly, and therefore it is not at all surprising that the markets reacted adversely; those who took part in pre-ballot surveys have lied or changed their mind when casting their vote.

The good moves by the National Government -Argentina’s return to the international fold, the end to the restrictions to buy or sell foreign currency (“the clamp”), full disclosure of the real figures of the economy, the process of transferring subsidies to utility rates, investment in infrastructure and macroeconomic achievements- have never reached those damaged by this model.

It is clear that the two majority tickets have retained their firm supporters, a third of the total voters each; and the middle class, employees under employment relationship, SMEs, who make up the remaining third by and large voted in favor of the presidential ticket Fernández-Fernández based on their decreased purchasing power, job loss, and shutdown of small enterprises in a context of recession, tax pressure, volatile foreign exchange, inflation and credit crunch.

When the Department of Labor was demoted to a Secretariat of Labor, it was widely perceived as a disregard for human labor. The government officials’ effort to keep the leading role of the Secretariat was and still is commendable, but it has not changed the image that was created when it became dependent on the Department of Production. The same happened with the Adjustable Minimum Living Wage: the amount of ARS 12,500 is not enough to reach minimum subsistence levels, and its increase was well below inflation rate and a third of what the basic market basket is worth. INDEC data, together with UCA report on social debt, show that there has been an increase in poverty, indigence, unemployment and underemployment, and work off the books where precarious jobs prevail.

These undeniable facts and the dichotomy president-candidate are reflected in the actions taken to compensate for this new devaluation and increase in prices. All of these measures are extremely costly for the State, temporary and ephemeral, and with doubtful positive effects.

Furthermore, the fact that the effective term of these measures coincides with the elections date adds to the lack of trust and has the opposite effect to what is intended.

The appointment of the new Finance Minister raises hopes that the Government will continue in its direction and improve its image so that it can get fresh air, provided PASO results are interpreted correctly.

It is not enough to take rushed actions through welfare plans; it is indispensable to show political, institutional strategies, and recognize mistakes that should be corrected. The statement that the Government will continue in its direction so far is one of the key reasons why the middle class voted in favor of a Peronist ticket.

In other words, sticking to the so-called right direction has meant high inflation, recession, destruction of job positions and SMEs, out-of-control indebtedness and financial speculation. In addition, none of the official promises were fulfilled, and the green shoots, growth and waves of investments have not come to fruition.

Center-Peronist voters implore that if they win in the next presidential elections it is Alberto Fernández who will actually lead the country and Cristina will limit herself to presiding over the Senate without interfering in State political decisions.

The Executive on the campaign trail has little hope, but if any it is indispensable to admit their fault, it’s time for a mea culpa, and correct the State policies to have a rational reduction of public spending, and in particular a general policy for development and growth that may allow all of us to recover our dignity through work, entrepreneurship and initiative.

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

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