ARGENTINA: Government Denies Labour Reforms Would Reduce Wages

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Oct 1 1996 (IPS) - Only two days after a recent 36-hour general strike that shook Argentina, it was reported that a World Bank document predicted that proposed labour reforms would lower unemployment through a drop in real wages and a reduction in the power of unions.

The government of President Carlos Menem denies those are its aims, and plans to send the proposal – which would deregulate the labour market – to Congress this week.

The proposed reforms have triggered howls of protest, especially from the General Labour Confederation (CGT) – the main labour union – which on Sep. 26-27 called the hardest-hitting strike in the seven years since Menem took office, to protest the government’s structural adjustment programme.

In a survey by the Centre on Public Opinion Studies, 64 percent of those polled said the government proposals would not create jobs. More than a third said the initiative would be harmful to workers.

The government disseminated part of the World Bank report two weeks ago, to demonstrate that its proposals to pull unemployment down from 17 to 12 percent had international support. But only those paragraphs that pointed to the positive effects its programme would have were circulated.

This week, the daily ‘Clarin’ published other parts of the report, which recognised that a reduction in the cost of labour was to come from a drop in real wages and an end to union control of labour negotiations, with workers dealing directly with employers.

“A sharp drop in relative wages” combined with low productivity in the late 1980s contributed to important gains in employment, according to the report, which was released just when the Menem administration was about to seek a renewal of dialogue with the CGT.

The head of the cabinet, Jorge Rodriguez, denied that the labour reforms were aimed at a drop in wages or an attack on the power of unions. He said that what the government wanted was “to reduce the cost of labour and improve the functioning of collective labour agreements.”

The proposed deregulation would replace the system of severance payment to fired employees with funds that would be formed with employers’ contributions – although the business community also wants workers to contribute.

Work schedules would also be deregulated, allowing 12-hour workdays alternated with periods of no work, depending on companies’ needs. Employers would have complete control over vacation scheduling, and a portion of wages would vary according to productivity.

With such measures, the government aims to reduce the cost of labour and create conditions for the incorporation of unemployed workers into the private sphere, at least in a temporary manner.

But the proposed deregulation has sparked an outcry, and even those who back it say it is insufficient.

The general secretary of the CGT, Rodolfo Daer, said unemployment did not drop despite a “de facto flexibilisation” in many sectors through some thirty laws and decrees issued in recent years.

“The reforms would bring Argentine families enormous instability,” said Daer, referring to the fact that schedules and wages would vary from month to month, and vacation periods would be unpredictable.

He also underlined that there would be no security, because many workers would be hired on a temporary basis, while the possibility that professionals and high-earning employees could be contracted out was being studied.

The head of the governing Justice Party deputies, Jorge Matzkin, said Monday that “the flexibilisation is a necessary but not sufficient condition to lower unemployment…Without economic growth, the goals will not be met.”

The opposition and many labour experts agree. Economist Claudio Lozano said deregulation would not generate employment: “In the past five years the cost of labour dropped 18 percent while unemployment tripled.”

According to economist Javier Lindemboin, high levels of unemployment are not linked to the level of protection workers enjoy.

Labour sociologist Adriana Marshall argued that investment policy and growth have a much greater impact on the creation of jobs than deregulation of the labour market.

But while the Argentine economy grew at an average of seven percent a year from 1991-94, unemployment increased threefold in the same period, from six to 18.4 percent.

The recession that gripped Argentina in 1995 in the wake of the Mexican crisis led to a 4.4 percent shrinking of production. Unemployment currently stands at 17.1 percent, while around a quarter of the economically active population of 16 million is under-employed.

The chief opposition parties, the Solidarity Front and the Radical Civic Union, have invited the government and other sectors to study the proposed labour reforms in a special meeting on Wednesday.

The governing party has announced it will not participate. “As a majority bloc, we have the right to take the initiative,” said Matzkin. “We ourselves will set the time for debate when the bills are sent to parliament.”