1.3 millon jobs can be created by decentralizing collective bargaining - IDESA

Report Nº: 78409/12/2018

1.3 millon jobs can be created by decentralizing collective bargaining

In Spain, after a severe fall in employment, an accelerated recovery was achieved. The key was to allow companies to negotiate labour rules that differed from those provided in sectoral collective agreements. Adopting a similar scheme in Argentina could make it possible to multiply formal jobs. Registered private employment reached a historic peak in March […]

Registered private employment reached a historic peak in March 2018 of 6.32 million people. But from April, when the crisis broke out, the fall in production is impacting negatively over formal employment. Between March and August 2018 (the latest available), approximately 100,000 registered salaried jobs in the private sector were lost.

This trend has probably deepened in recent months due to the damage that very high interest rates are causing to the economic activity, the increase in input costs caused by the devaluation and the corrections in public service fares. The crisis increases the need to provide companies with tools for dialogue with their workers so that they can mitigate the most negative effects of the recession.

An experience that shows analogies with the current fall in formal employment in Argentina is that of Spain after the 2008 crisis. According to data from the Ministry of Labour of that country, wage-earning employment registered in Spain had the following behavior from the 2008 crisis to the present:

  • In 2008, registered salaried workers were 14.5 million.
  • By 2013 it had fallen to 12 million workers, meaning the destruction of 2.5 million registered jobs.
  • In 2018 registered salaried workers returned to 14.5 million.

These data show that the employment crisis resulting from the 2008 financial crisis in Spain lasted for 5 years, causing a severe loss of registered jobs. But in the following 5 years an abrupt reversion is observed, going on to recover all the formal salaried jobs lost in the previous 5 years. The breaking of the trend from 2013 onwards is very shocking.

Many factors were involved in the recovery process. But a particularly important one was that in 2012, the possibility that employers, with their workers agreement, could “disengage” from sectoral collective agreements was established. This solution was suggested and emulated from the German collective bargaining model, where there exists what in that country is known as an “opening” clause from which companies –mainly SMEs– can separate themselves from sectoral collective agreements with their workers consent. The mechanism allows companies to adapt wages and other conditions of work organization to the prevailing context. In Spain, enabling this mechanism did not generate a massive “disengagement” of companies from the sectoral agreements, but greater incentives for business chambers and unions to react and adapt the sectoral agreements to the new reality. This better adaptation of labor regulations spurred a strong increase in formal employment without a drop in real wages.

If Argentina could embark on a similar process as Spain’s, in 5 years it could create 1.3 million registered wage jobs without a drop in real wages. For this, a legislative change is not necessary. The current SME Law sanctioned in 1995 establishes that it will be a requirement for the official homologation that collective agreements must have a specific chapter for SMEs and that during the term of their validity they cannot be affected by higher level agreements. This means that in order to implement this healthy and democratic policy of social dialogue between employers and workers at the SME level, all that is needed is the political will to comply with the regulations in force.

Sectoral collective agreements in Argentina are sclerotic. They date back to the decades of the ’70s and ’80s and, protected by ultra-activity, will remain in force beyond becoming increasingly archaic. Enabling SMEs to move away from this perverse regulatory scheme is the way to reverse the job destruction generated by the crisis and take advantage of the future recovery.


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