Informal Employment In Argentina: Will It Motivate A Labor Reform?

Author:Mr Hernán Kogan
Profession:TMF Group

Labor cost in Argentina exceeds by far the salary received by the employee, in comparison to most of the countries of the region. The situation generates disagreement in employers and employees, and sometimes encourages the informality of labor relations. The Argentine administration aims at a labor reform to address this and other issues, although it may not fulfill the expectations of the business sector.

According to the Inter-American Development Bank (IDB), most jobs in Latin America and the Caribbean remain informal and highly unstable. The situation is a chain reaction in which high turnover discourages the education and training of the employee, resulting in low productivity, which in relation to the costs of the formality, influences a high informality. Likewise, some courts' biased interpretation of labor law (e.g., termination with good cause) sometimes lead to irrational costs.

On the other hand, the cost of occupational risks has increased significantly in Argentina, basically due to the high degree of litigation related to sickness and disability benefits; the increase in the number of trials initiated by work-related injuries, well above accidents at work, is remarkable. In this regard, Law 27.348 came into force on March, and seeks to improve the working conditions of employees and disrupt the judicial scope. This law requires the support of the provinces to extend its impact to the national territory.

It is also challenging to update wages affected by inflation. In recent years, there have been many situations in which employees belonging to collective labor agreements have received salary increases higher than those obtained by colleagues outside the scope of collective agreements. This could be exacerbated in cases of middle and high management which are subject to the income tax.

Generating formal jobs in Argentina

Paradoxically, it is the formalization of unregistered employment that would improve the sustainability of the system, allowing a significant reduction of overcharges.

Within the current labor environment in Argentina, it is necessary to adopt measures that generate more sustainable employment and better employability. The high labor cost affects the international competitiveness...

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