The INDEC labor indicators for the 3rd quarter of 2024 give clear signs of the lack of employment. Comparing the same quarter of the previous year, it appears that the number of people who are inactive, unemployed, underemployed and fully employed job seekers increased. Among the employed, those who increased are the self-employed. This is not surprising considering that the economy is going through a contraction as a result of the adjustments being made to lower inflation.
The government’s confidence is that next year the economy will recover and that this will drive the expansion of salaried employment registered in private companies. Some economists project this improvement based on assuming an employment-product elasticity of 0.7. That is, for every 1% of economic growth, salaried employment registered in private companies rises 0.7%. If production recovers quickly, the very degraded labor situation would begin to be reversed.
The proposal assumes that there is an automatic relationship between economic growth and formal job creation.. By observing the movements of the labor market in the last year, one can inquire how close this relationship would have been. According to the Ministry of Labor, in the third quarter of 2024 it is observed that:
– The Gross Domestic Product (GDP) fell 2.1% compared to the same period of the previous year.
– Registered salaried employment in private companies fell 2.6% compared to the same period of the previous year.
– The real salary showed an increase of 3.1% compared to the previous quarter.
These data suggest that Formal employment not only depends on economic activity but also on real wages. In the 3rd quarter, job destruction tended to be greater than the fall in GDP, just when real wages began to show signs of growing. This trend has been observed for a year. Between the 3rd quarter of 2023 and the 1st quarter of 2024, production and real wages fell, while employment remained stagnant. Starting in the 2nd quarter of 2024, the economy eased its decline and real wages began to recover, while registered private salaried employment began to fall.
These trends are not conclusive, but they warn that formal employment depends not only on GDP but also on real wages. Assuming that the decline in inflation continues next year, it is foreseeable that real wages will recover and, therefore, that job creation will be weak. In other words, If there are no changes in labor institutions that allow companies to adapt to the environment without inflation, there is a high risk that economic growth will occur with low employment growth.. The risks are enhanced by a low real exchange rate and openness that promotes the import of capital-intensive technologies. In the jargon of economists, with stability and poor labor regulations, the employment-output elasticity can be well below 0.7.
Congress made progress in some areas of labor law. Among the most important points, it eliminated the multiplication of severance pay and extended the trial period. But the context demands more ambitious reforms. An essential one is to establish an order of priority that makes the individual agreement and at the company level above the collective bargaining of the central union. This implies that the Ministry of Labor allows the disengagement of companies from the sectoral collective agreement to negotiate their own working conditions with their workers. Thus, companies will be able to expand their production, simultaneously increasing both employment and wages.
The union of truck drivers is very exemplary. The business chambers and the truck driver union agreed at a centralized level on increases that conspire against the stabilization plan. This led to the paradox of a libertarian government interfering in an agreement between private parties. Much more conducive and consistent is to allow disengagement. That is, giving each company the freedom to negotiate their own salary conditions with their workers outside the truckers’ agreement.
You may also be interested
by Jorge Colina
