The Dilemma of Labor-Management Commitees under the Social Pact

Combative unions oppose salary freeze and have started to question a general pay rise for a 6-month period, in part sabotaging the social pact with the President Elect.

Published in El Cronista on November 26, 2019
What’s more, there is already disagreement between the Workers’ General Confederation [CGT] and those who demand a year-end bonus, which has given rise to an ambiguous statement indicating that each sector is free to seek it by reaching an agreement with the business organizations, or with each company.

More than 80% of the economic activity is in state of emergency or trying to survive after more than ten years of stagflation, under intense tax pressure and seriously affected by the credit crunch. In addition, the last resort for many sectors in crisis is to design a 6-month temporary stand-by plan to wait and see what to do based on the measures that the new administration will take.

In short, the business world in general, with a few exceptions, is entering a new chapter after December 10, in a quite fragile position, with great expectations for a model of growth, investment, savings and reasonable credit.

The salary panorama for workers under collective bargaining agreements offer a broad spectrum that will be affected by the President Elect’s initiative to strike a social pact with a number of actions, including a uniform pay rise for all groups, and in the best-case scenario a staggered pay increase scheme proposed by the Executive.

Under Macri, unions have managed to attain a number of goals that impose conditions on the Social Pact proposed by Alberto Fernández.

The most significant models include:

  1. Several unions have agreed on a quarterly pay rise with a number of mechanisms that are basically subject to indexation or designed to keep up with inflation in advance or in arrears;
  2. Most agreements are valid for twelve months and do not match the calendar year (April thru March; June thru May), and therefore some agreements expire in 2020 and contain agreed and approved pay rises.
  3. There are partial salary agreements containing pay rises every four months or every six months, and the parties need to agree on the remaining months for the 12-month term.
  4. Crisis agreements that are usually lagging behind inflation have quite varied terms, and pay rises are granted considering the recession and inflation rate;
  5. Collective bargaining agreements at the public sector are quite varied, including the agreements reached with the most combative unions such as those representing teachers, civil servants in general, and in particular those who managed to get pay rises above inflation and others that renew their increases in general with the calendar; there are others that have a real tangle of retroactive mechanisms because they reached an agreement late, and others with proactive schemes that have truly mortgaged the future public spending.

The National Government has no authority to take charge of labor-management meetings or reach a social pact, and therefore will have to seek the approval of an Emergency Act at Congress granting extraordinary powers, similar to what Eduardo Duhalde and then Néstor Kirchner did.

As to a Social Pact for a general pay rise with no labor-management committees, the Government will have to face a heterogeneous front and in order to do so it should find a solution establishing a minimum and maximum amount so that the rights that have been gained do not vanish, with a differentiated scheme for SMEs and companies in crisis.

One measure has been left aside, even if it was extremely efficient in Kirchners’ times: resort to the Adjustable Minimum Living Wage adjusted for inflation to “push” base salaries under collective bargaining agreements that cannot establish their wages below minimum wage.

Alberto Fernández inauguration is not far off and there are many challenges to face before reaching the so-called Social Pact, which is some sort of a truce to take office with a number of measures, including many drafts but few specific provisions, and the few announcements that have been made are subject to considerable questioning.

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