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23 diciembre 2020

Job promotion calls for simple reforms, published in El Cronista

Subsidies, welfare programs, food relief packages and Christmas boxes, additional support, community events and other forms of aid have been successfully rolled out by the National Government, and in part by the provincial and municipal governments. Parishes and the Catholic Church Caritas, Christian and Protestant groups and other social organizations, together with NGOs, have joined in this solidarity effort.

Article by Julián A. de Diego published in El Cronista on December 22, 2020

However, this commendable task only helps mitigate the devastating effects of the crisis that have adversely hit our country, and the whole Latin American region in general.

Employment can only be boosted if the economy starts to grow again after hitting rock bottom.

We all know that in these last ten months we have lost more job positions than in the past ten years, as a result of the stagflation and other measures that have been taken by the National Government to deal with the effects of the pandemic but that have paralyzed our economy.

There is no point in holding government-v-opposition discussions and judging decisions, which for better or for worse are accomplished facts. The scenario gets no better. It is no use, either, encouraging self-destructive and cannibalistic conversations inside the ruling party among the different groups that make up the political alliance.  

The energy used in debates, distracting maneuvers, campaigns linked to personal political interests will not solve the near future or make any positive contribution to the phase of reconstruction and reemergence of the economy, which is the major challenge for 2021.

It is well known that as a result of power struggles, it has been decided to accept that we do not need a labor reform, a term that contains two words that have lost prestige for most citizens. What’s more, distinguished specialists are convinced that a labor, social security or tax integral reform will not solve the serious issues of unemployment that this whole year has caused.  

Basically, the premise is to promote economic growth, which is impossible with the tax structure that we have today, which seems a vampire sucking the blood of people or companies showing signs of reactivation. Instead of focusing on encouraging investment for growth, taxes are used for subsidies that not only do not create wealth but also attend to an army of poor and indigent people whose numbers continue to raise like never before in the past ten years.

If the priority is job creation, labor costs –the highest in Latin America- should be reconsidered, offering an alternative that does not require any reform. For instance, each new hire in excess of the registered payroll at the time when the lockdown was declared, should be exempt from employees’ and employers’ contributions for one year, provided the employment contract continues for one more year at least. A measure like this could create countless job positions at SMEs, who would recover all the positions lost in six months. This action only needs rules to be passed by the Executive, without involving Congress.

Likewise, for other modes of hiring, including the new remote work arrangements, companies may be exempt from employees’ and employers’ contributions in order to encourage hiring, provided they create new job positions above the registered number of employees at the time the Mandatory Preventative Social Quarantine was ordered, and for new companies, this exemption may apply from the very first employee.

In addition, more than half of the employees who lose their jobs are never paid statutory severance package, so a bifocal system of unemployment and severance pay could be channeled into a trust at Banco Nación, only redirecting employers’ contributions to the Unemployment Fund from retired employees’ contributions to the same Fund, and one percentage point from the family allowances scheme, which has surplus.

All European countries, mainland and islands, the US and Canada, who have been badly hit by the pandemic, with a second and third surge, are still especially supporting companies so that they can make it through the crisis because employment is only possible if the source of work is preserved, which in the value chain is the only thing that can generate growth. Restrictions to the Emergency Aid Program and the new REPRO II (Production Recovery Program) have anticipated the return to the new normal and may cause irreparable damage if they are not flexible again.

If we think of reconstructing and reviving the economy, which has already begun with some kind of heterogeneous and selective reactivation, promoting growth, in particular for exporters, should be necessarily coupled with incentives to recover genuine quality jobs in an attempt to revalidate the culture of meritocracy and work ethics. 

Por Julián A. de Diego
Por Julián A. de Diego

Fundador y Titular del estudio “de Diego & Asociados”.  Abogado, Doctor en Ciencias Jurídicas.

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