LABOUR-ARGENTINA: New Law, Old Flexibility

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 3 2004 (IPS) - Argentina passed a new labour law Wednesday, replacing the one enacted four years ago amidst a corruption scandal. But critics see little progress in protection for workers’ rights in a context of high unemployment and widespread poverty.

With 215 votes in favour and 23 against, the Chamber of Deputies, the lower house of Congress, approved the law that begins by overturning the one passed during the Fernando de la Rúa administration (1999-2001) in which a group of senators was suspected of having been paid to vote in favour of the labour flexibilisation reform.

“The balance indicates that this law is a step forward, but a very limited step,” said Senator Rubén Giustinianni, of the opposition Socialist Party, and the only one to vote against the initiative when the Néstor Kirchner government sent it to the upper house in February.

“With an army of the unemployed struggling to enter the labour market, the principal law on labour flexibilisation is reality itself,” Giustinianni said in comments to IPS.

Numerous lawmakers shared that opinion, though grudgingly voted in favour of the bill, aware that it reflects only meagre progress in defence of workers’ rights.

“Labour flexibility” is a loosening of state regulations and contract provisions with the ostensible aim of adapting the workforce to the quantity and quality of economic production.

Unemployment is the leading concern among Argentine adults, according to several polls. The jobless rate fell from 17.8 to 14.3 percent in the past year, but excluded from the tally are unemployed heads of household who receive government subsidies. If the subsidy recipients are counted, the unemployment rate jumps to 21.4 percent.

Furthermore, more than 60 percent of wage-earners have been hired under illegal terms: the employer does not provide the workers with social security benefits. And more than 18 percent of the workforce is underemployed, working fewer than six hours a day although wanting to work more.

A survey by the Equis polling firm shows that wages are so low that 54.7 percent of the Argentine population of 37 million continue to live in poverty, “whether or not they have work,” because the average household income is not enough to cover basic expenses.

The National ‘Piquetero’ Bloc, a movement of unemployed workers led by the leftist Partido Obrero (Labour Party), tried unsuccessfully to convince the Labour Ministry to eliminate the flexibilisation aspects of the previous reform law, arguing that they did not foment the creation of jobs, but rather worsened the conditions of the labour market.

The Argentine Industrial Union backed the bill that the Senate approved in February and which became law on Wednesday. This association of employers said the law does create a space that “favours job creation,” although it criticised aspects of the legislation that it considered a step backwards from the 2000 law.

Labour flexibilisation has gradually been adopted in Argentina, as it was in many developing countries in the 1990s, with the argument that it would improve the ability of companies to compete by loosening their obligations to the worker and to the state, although it limits labour rights.

Flexibilisation, said its promoters, would create more lenient conditions for hiring, which ultimately would contribute to the creation of more jobs.

In Senator Giustinianni’s opinion, the new law maintains many of the core aspects of the flexibilisation of labour relations that reigned in the 1990s with the rise of the neoliberal economic model.

But, he noted, it is an advance with respect to the 2000 law in two areas related to labour agreements, the accords negotiated between workers and employers.

The new legislation allows an agreement to remain in effect until a new one is negotiated, unlike the previous law, which considered the agreement expired after two years, thus obligating a situation of almost constant renegotiations on working conditions, wages and social benefits.

“Now the worker can negotiate a new agreement while protected under the old agreement still in effect,” said the senator.

The new law also defends labour agreements that have been negotiated for specific sectors of the workforce.

The previous legislation established that a company could negotiate less favourable agreements with its employees than those in force for a given industry, generally reached between trade unions and employers associations.

Now sector or company-specific agreements will be permitted only if their conditions entail more benefits for the workers.

Giustinianni criticises the new law, however, because it maintains the “probationary period” and the reduction of employer contributions to the pension system, two institutions that became part of the Argentine world of labour in the 1990s, when unemployment reached 18.4 percent of the economically active population.

The probation measure allowed an employer to hire a worker for a certain amount of time and then fire him or her without having to pay layoff compensation. That period, which the law had set at six months, has now been reduced to three, but critics say it should have been eliminated altogether.

“The probationary period is an emblematic institution of labour flexibilisation, which reached Latin America with the excuse of reducing unemployment, but only helped make jobs more precarious,” said the senator. Leaders of the National ‘Piquetero’ Bloc agree with that assessment.

The 30-percent reduction in employer contributions to the social security system for new hires in companies with fewer than 80 employees is another controversial issue. The law states that this employer benefit will remain in effect until the end of the year, and then the Executive branch has the option to extend it.

Legislative Deputy Alicia Castro, of the opposition Front for Change, told IPS she considers this type of benefit a hidden subsidy for businesses and instead of contributing to job creation, it reduces the cash flow for social security and fiscal revenues..

Opposition lawmakers also questioned the Kirchner administration’s proposal for setting the limit of 80 employees for a company to benefit from the tax reduction.

Deputy Claudio Lozano, who is also the economist for the CTA (Argentine Workers’ Union), said that 96.5 percent of Argentine companies today have fewer than 50 employees on their payrolls.

Lozano and other legislators said that figure is even considered low because there are other ways of getting around the officially set numbers.

For example, the big companies turn to contractors – intermediaries between employer and worker – to take the responsibility of hiring a group of workers for a certain job, thus reducing the labour costs of the company for which the work is being done.

The new labour law does little in terms of enforcing layoff compensation, though it does recognise worker’s right to one month’s wages for each year worked. The Kirchner administration did not accept a proposed minimum of two months’ wages in case of layoff.

Other aspects that remain unchanged under the new law are the internship system, which allows businesses to hire inexperienced young people for short periods of time and without paying a salary, and the requirement that workers must maintain a minimum of essential services even during strikes.

One of the changes is that Labour Ministry now has the authority to go after illegal hiring practices throughout the country.