26 abril 2022

Management-labor negotiations take a dangerous turn claiming wage indexation under collective bargaining agreements plus an additional amount. Published on Cronista.com

From the start, the Executive has encouraged pay rises around 40-50% as a result of management-labor negotiations, and following this guidance the Union of Metallurgic Workers (UOMRA) made its collective bargaining agreement. In a span of less than 30 days everything has taken an unexpected turn with claims seeking 60% up to 80% pay increases.

Article by Julián A. de Diego published on Cronista.com on April 26, 2022

Gradual scales and caps have been abandoned for an indexation system, an almost automatic adjustment mechanism for pay rises tied to the CPI reported by INDEC plus an additional amount aimed at recovering workers’ purchasing power.

The term «indexation» and the verb «to index» was coined in Brazil in the 1990s to refer to the use of a mechanism that protected the value of the legal tender during an inflationary process through a cost-of-living index. For the Royal Spanish Academy, this word means registering and ordering data in an index or coefficient.

Indexation under collective bargaining agreements has certain peculiarities that make it a mechanism that can «trigger» inflation instead of just adjusting wages, as intended.

INDEC usually discloses and publishes indexes after day 15 of the following month. And other entities and private consulting firms also elaborate estimated rates, which more often than not are totally different from the official numbers. Suffice it to say that Argentina’s economic growth in 2021 exceeded 10% the estimated rates by private consulting companies, which by and large forecasted less than half that rate.

During the internal negotiation process, many unions have depicted the worst-case scenario where they adjust wages according to INDEC official IPC in addition to an estimated amount for the upcoming months, including two or three revisions and new payments, such as a supplement, the reimbursement of telework expenses, day care, Union’s day, a Covid-19 bonus and year-end rewards, extraordinary contributions and agency fees.

These claims are quite frequent but we can also mention the additional payment for happiness, profit-sharing systems, incentives determined by raffle, mutual cooperatives financed by unions, rewards for good behavior or additional payments for non-existing or anachronistic reasons (holding samples, cash shortage and others).

If we make anticipated projections and forecast inflation for the first quarter, adding periodic adjustments progressively, no union or industrial sector will be claiming pay rises below 60%, in an attempt to ensure indexation with review clauses that guarantee retrospective analysis and comparison of increases granted according to real inflation once it is officially disclosed by INDEC.

In parallel, the Telework Act sets forth the requirement to determine reimbursement for Internet connection and other expenses, in addition to pre-established payments and any new costs brought about by the New Normal.

The same applies to the universalization of day care for both working fathers and mothers, whereby companies need to have in-house day care facilities or reimburse expenses for day care for children under 3 according to Executive Order No. 144/2023, which ends up being included in wage negotiations.

All these mechanisms are just a smoke screen: they are not even palliative measures because if you want different results do not do the same things (Albert Einstein). There are those who insist in failure so much that they always end up failing (Juan Carlos De Pablo).

Naturally, the key is not to patch up, which has proved to be inefficient to combat the scourge of inflation, for which there is not a one-fits-all solution because it is simply a phenomenon with multiple factors.

The lack of an economic plan to outline a series of basic rules, and the heavy public expenditure, high fiscal deficit, the State’s greed for capital and the profitability of developing companies through new taxes, retentions or withholdings on future forecast gains, currency printing and subsidies that do not build bridges for the excluded to enter the job market, are just a tiny part of the big crisis that forces businesses to resist, entrenched in a framework where the Government and the Opposition propose policies that do not give any serious reliable solutions.

The destructive power of inflation escalates at all levels, and to beat it, it is essential to build confidence, reliability, and clear rules that help lower public spending, achieve fiscal efficiency, reformulate taxation, especially when it comes to distortive and regressive taxes, and promote economic growth.

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