19 febrero 2020

Flexicurity to Close the Circle of Inclusion

Argentina has virtually closed the circle of inclusion by covering its entire population as salaried workers or independent contractors, public servants at the municipal, provincial and national levels, unemployed people receiving aid programs, welfare recipients with expense reporting and ex gratia payments scheme participants.

Published in El Cronista on February 18, 2020
As a result, a part of the Argentine population gets income from the production of goods and services, and the rest are financed by welfare programs, public and private medical assistance, free education and food aid. The Supreme Court ruled in favor of extending welfare coverage to mothers of children under 5 who are under arrest with final sentence or in preventive detention.

This process of systematic inclusion is called “Flexicurity”, and the aim is to provide income to the entire population of a country through different subsystems so that nobody is excluded or marginalized. To this end, a flexible labor market is promoted with great upward career mobility, a very effective training and education program, an effective unemployment and outplacement scheme, in a context of growth (The Netherlands, Ad Melkert 1995). This development model is used in Denmark, Norway, Sweden and Finland. Please note that these countries have the highest per capita income rate in Europe and very small populations with the best quality of life.

The model, arising in Socialist nations and now enforced in Populist countries, has to deal with the issue of each group’s proportion and the systematic struggle against poverty, indigence and in particular inequality.

Give or take some obvious differences and considering that Argentina is still in recession, it is crucial to survive decadence and deal with social issues.

When the productive sector that gets income in return for their work and effort accounts for less than 30% of the population, like in Argentina, taxation and social security are extremely high, coupled with great tax pressure. Default is the limit to such an elephantiasic State, with regressive and even confiscatory taxes that continue to increase in a stagflationary domestic economy (inflation + recession) without strong bases to encourage confidence, saving, investment and sustainable growth.

In Argentina a little more than ten million economically active people finance more than thirty million people who do not produce or are not productive for different social, economic or age-related reasons.

As the proportion of the population who produces paid goods and services increases, taxation gets moderated and wealth distribution among vulnerable groups becomes more reasonable.

The same happens with social inclusion programs whereby all excluded groups can receive aid provided they get trained in an art, craft or trade with job opportunities that allow them to compete for a suitable paid position in the market. With flexicurity the State should focus on a key policy: education linked to new technologies with job opportunities and development of applied research by promoting organizations such as Fundación Leloir or specific projects at CONICET.

In Argentina welfare programs were first created under Raúl Alfonsin with the delivery of Cajas PAN (National Food Program), then continued under Carlos S. Menem with Planes Trabajar, later on quite largely increased under Néstor Kirchner and Cristina Fernández, then substantially raised in terms of amount and coverage under Macri administration by Minister Carolina Stanley, and now supplemented by the Food Aid Card under Plan Argentina contra el Hambre promoted by Minister Daniel Arroyo under Alberto Fernandez.

The foundations that have been built for the so-called flexicurity offered by the State are strategic and fundamental. The effects of the most basic needs have been mitigated, and welfare programs continue. It is reasonable to take action to discourage lay-offs and help those companies waiting for reactivation through a clear State definition of policies, like in the case of Vaca Muerta, and advertising campaigns to foster tourism or new investment in unicorns or technological advances. However, there should be a policy to deal with this present time and the time investors should endure without definition. It seems indispensable to face the most urgent need for an external debt refinancing agreement and at the same time relaunch the economy aiming at a near future of sustainable growth.

Now that it is essential to lay the basic groundwork for kick-starting the economy, it is vital to take care of companies’ needs and provide education and training for workers of the future. It is also crucial to set out the conditions for a labor market without the current constraints that go against the most elementary principles of productivity, adapting to new technologies and sharing economy.

The Workers’ General Confederation, the National State and employers should work in an integral reformulation of collective bargaining agreements dating back to 1975 with minor amendments, and reanalyze a new model of industrial relations that are fit for the times to come.

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

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