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23 marzo 2021

The Salary Race Begins: How to Keep up with Inflation. Published in El Cronista

The National Government has set inflation rate at 29% for 2021, indicating that there is no cap for raises under collective bargaining agreement. Unions may start negotiating with this minimum rate but they wish to recover the purchasing power lost in 2020 and ensure + 2% or 3% over real inflation. The business sector is bearing the heavy burden of a 2020 with significant losses, and the economy in 2021 is surrounded by uncertainty, ambiguity, and moderate optimism at some sectors.

Article by Julián A. de Diego published in El Cronista on March 23, 2021

The three parties should take on the civic responsibility of acting within reasonable parameters at this key moment in time to redirect the reconstruction of the productive apparatus and recover the jobs destroyed, whose objective numbers are not known but in the core countries, it is said that the job loss rate is around 15%.

The scenario is heterogeneous, and in order to better understand the motto of the Unions’ claim it is crucial to highlight that except for some cases, most wages under collective bargaining agreements could not keep up with the 36.2% inflation rate in 2020, and now they are trying to recover their lost purchasing power as much as possible with an advance or additional payment.

Even though it seems that the economy is the main concern for the community in general, and the issue of the Covid-19 outbreak has lost relevance and preventive measures may appear relaxed, the truth is that the pandemic has impacted and still conditions the future, and as it is taking longer than expected, it will keep on affecting the economy during this present year and the next one at least.   

The panorama in general for the business sector is very fragile in the context of a pandemic that is wreaking havoc, where the menace of a return to Stage 1 of mandatory lockdown is always latent to resist and face a second surge, and the State proves to have incurred many errors, contradictions and a significant lack of efficient organization to manage the logistics of mass vaccination.

As to collective bargaining, some agreements have been reached so far and become precedents that try to set a trend.

Last January 28, the Federation of Commerce Employees [Federación de Empleados de Comercio] agreed on a 21% non-salary raise in three installments of 7% each in January, February and March, calculated based on December 2020 to be added to wages April 2021 (Homologation 7/2021 by Secretary of Labor). This negotiation is the preamble of labor-management meetings for this year.

The Banking Association [Asociación Bancaria] has agreed to recover a 2.1% for inflation 2020 and grant a 29% raise in three non-cumulative installments: 11.5% in January, 11.5% in April and 6% in October with a revision clause in September and November.

In the Province of Buenos Aires, the Teachers’ Unions United Front [Frente de Unidad Docente Bonaerense (SUTEBA, FEB, UPCN, ATE, among others] has agreed on a 32% raise in September plus an increase for connectivity and a rise for the Teachers’ Incentive Fund [Fondo de Incentivo Docente]. At the national level, the agreed raise amounts to 32% in September in three installments and with a revision clause. 

The Janitors’ Union [SUTERH] agreed on a 32% raise in four non-cumulative installments: 7% in April, 10% in July, 10% in October and 5% in February.

The Federation of Electricity Workers [Federación de Trabajadores de Luz y Fuerza] agreed on a staggered increase of 29.5% with Nucleoeléctrica (State-owned company), which preannounces an agreement of around 30% with the rest of the companies at the sector.

AYSA (running water and sewer services) agreed on a 32% in four installments with a revision clause in November, as signed by José Luis Lingieri on behalf of water supply and sanitation workers’ union and Malena Galmarini de Maza on behalf of the State-owned company.

This overall picture may allow us to form an idea of unions’ aspirations, namely:

  1. Recover the purchasing power lost to inflation 2020 for base wages
  2. Agree on a 29%-32% raise to keep up with the inflation rate foreseen in the National Budget
  3. Reach collective bargaining agreements that include a revision clause at the end of the year to keep up with inflation
  4. Increase any additional payments, non-salary benefits, incentives in the same proportion than the main raises
  5. Try to add other raises in addition to the agreed terms with tricky, deceitful or camouflaging maneuvers,

On the other hand, the expectations of the business sector include:

  1. Give gradual raises according to actual inflation, and not to forecast inflation that may actually trigger it in the future
  2. Do not take into account past inflation during the pandemic in 2020 in a context where losses are significant
  3. Make payments in installments with no revision clause. Revise wages in the following annual period.
  4. Do not have any other original resources that may create distortion in company results, such as bonuses, supplemental payments or new unexpected items.

The National Government is trying to avoid any disproportionate raises under collective bargaining agreements that may actually trigger inflation, which may be the case if raises are granted based on forecast inflation. In this regard, the most combatant unions should follow this guidance so that the variable of wages under collective bargaining agreements does not adversely impact an emergency scenario. 

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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