Report Nº: 103722/10/2023
The possibility of reducing the legal working day to generate more employment is being discussed. Evidence shows that people already work less. Not because they do not need to work more, but because of the scarcity of jobs. It is necessary to reorganize the State and labor institutions to grow creating good jobs.
In the National Congress, several legislative initiatives propose to reduce the legal working day. The underlying idea is that by reducing the working day to less than 8 hours a day or 48 hours a week currently in force, companies will be compelled to demand more workers without negatively affecting salaries. In this way, it is believed, there will be more work for everyone.
The idea of reducing the working hours is neither new nor specific to Argentina. In the developed world it is also at the labor policy agenda. But the particularity in these countries is that they are more focused on improving the workers’ quality of life than on increasing employment. In developed countries, the sustained growth of labor productivity raises the dilemma of whether this should continue to translate into higher wages or increase the free time available to workers, leaving them to choose between higher wages or more free time.
For a good diagnosis of the Argentine situation, it is useful to find out how much Argentines currently work. According to data from the INDEC’s Permanent Household Survey, referring to the year 2023, it is observed that:
These data show that in Argentina 2 out of every 3 workers already work reduced hours. In most cases associated with poverty due to low wages and high informality. The problem, then, is not that workers are working too much taking jobs away from others, but that there is a severe shortage of good jobs. Therefore, the main challenge is not to share the few existing good jobs, but to multiply employers and productive investments. This is the way to create more jobs, with higher labor productivity, therefore, high wages and reasonable working hours.
Lowering the legal working hours while maintaining wages requires an unprecedented increase in productivity. For example, if a daily working day of 6 hours instead of 8 hours were to be established, production per worker would have to be increased by 33% to compensate. If production does not increase (i.e., productivity does not compensate for the increase in costs), the company will opt to increase the prices of the products it sells, hire employees informally, or directly suspend production and not hire at all. Given the decades of stagnant productivity levels, it can be affirmed that, under current conditions, reducing the legal working hours will be associated with more informality and more inflation.
In order to multiply formal jobs, it is necessary to address a comprehensive reorganization of the State and the modernization of labor institutions. Increasing investment and the capacity to generate high-quality jobs depends crucially on a simpler and more rational tax system. It also depends on the State increasing its efficiency levels to produce good quality in public services and provide better infrastructure. The revision of labor institutions, on the other hand, should aim at simplifying labor registration, reducing wage taxes, providing for new forms of employment relationships adapted to current dynamics, and making severance pay more predictable.
Production has been stagnant for a decade, inflation is very high, and high-quality jobs are not being created. Private companies barely hire 6 million people in compliance with the regulations, when there are almost 20 million people employed. This is the consequence of a long time of only informal job creation (either as unregistered employees or as self-employed) and public employment. Furthermore, the very high rates of labor inactivity help to disguise the lack of jobs. In the context of such deep productive and labor degradation, providing by law for the reduction of the working hours will not provide solutions, but rather it will bring more problems.