LABOUR-ARGENTINA: The ‘Black’ and ‘Grey’ Economy

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Oct 6 2005 (IPS) - In Argentina, nearly five million people work in the black economy, nearly double the proportion registered in the 1990s. That includes workers employed by the state in the “grey” economy.

As in other countries of Latin America and the Caribbean, informal sector employment ballooned in Argentina as unemployment climbed. The National Institute of Statistics and Census reports that 47.2 percent of workers in Argentina are active in the informal economy, lacking social security coverage and labour rights. Although the proportion has shrunk slightly, from 49.5 percent in 2003, it remains high.

Meanwhile, a grey economy also began to emerge in the 1980s as a way for the state itself to justify hiring professionals who were paid high fees.

Although workers in the black economy often receive a monthly income that they can count on, they are not officially employees in the companies that contract them, which thus do not make contributions to the social security system on their behalf. They also depend entirely on the goodwill of their employers for other rights like paid vacations or holiday bonuses, to which workers in this South American country are entitled by law.

The Labour Ministry warned this year that there will be “heavy sanctions and fines” for companies that fail to put all of their employees on the payroll, but it said nothing about the various loopholes used by a number of state entities.

“There is a lot of hypocrisy here, because the state, which is in charge of applying and enforcing the regulations, clearly violates them as an employer,” Ernesto Kritz, head of the Labour Studies Society, told IPS.

He estimates that around 100,000 people in this country of 37 million are in this situation, including administrative workers, artists and teachers who receive part of their wages under the table, which means no social security contributions are made on that portion of their salary, with the subsequent effect on the pensions they will eventually receive.

Thousands of employees of the Buenos Aires city government have brought a lawsuit to demand the payment of the social security contributions that have not been made on their behalf since 1992.

This year, the city government began to regularise the situation and make the under the table wages an official part of the employees’ salaries. But it still owes the social security payments not made on that portion of their wages for the past 13 years.

The federal government also launched initiatives this year to regularise the situation of workers in the grey economy, especially those who work steadily for companies but figure as “self-employed”.

Under this arrangement, employees sign a “contract for services”, which is renewed over and over again, often for many years, said Kritz.

“It is a dependent labour relationship that is concealed by a precarious contract,” he added.

But these nominally self-employed workers are not part of the black economy either, since they themselves must assume the cost of registration in the social security system and make the payments towards their retirement pensions as a condition for receiving their professional fees, which consist of a previously agreed-upon sum.

“I have been working under a contract for services with the city of Buenos Aires government for six years,” a professional who preferred to remain anonymous told IPS. “My mother has worked in another area for eight years, just like me, under a contract that is renewed every six months or once a year.”

Because this kind of labour relationship means the employees do not have access to paid vacations, the workers must organise themselves and their work to be able to take at least a few days off a year. Nor do they have the right to sick or maternity leave, and they do not receive the mandatory payments to which employees are entitled when they get married or have or adopt a child.

Thus, there are workers on the payroll with stable jobs, good salaries, holiday bonuses, paid vacations and the right to severance pay if they are dismissed, and others who are supposedly “self-employed” but carry out the same functions, without social benefits and labour rights, and under the constant threat that their contracts will not be renewed.

To alleviate these contradictions, the centre-left government of Néstor Kirchner and several provincial governments are attempting to get those hired under a contract for services included on the payroll.

But there are legal hurdles, such as a Buenos Aires city statute that makes it necessary for posts in the public administration to be filled through a call for applicants.

To get around that barrier, the city government decreed this year that all workers contracted up to December 2004 will be put on a “transitional roster” of staff members who will enjoy nearly all the same benefits as the permanent functionaries. Those who are working under contracts for services will no longer have to make their own social security payments and will have paid vacations and receive holiday bonuses.

The assistant secretary of the Association of State Employees in Buenos Aires, Rodolfo Arrechea, told IPS that “the solution is not a definitive one,” because by being placed on a transitional payroll, the contract employees will still be dependent on the renewal of their contracts every year. “It’s just a small step,” he said.

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