SME MUST BE FREED FROM CENTRALIZED COLLECTIVE AGREEMENTS

The government is concerned about the possible impact on inflation of wage increases in the private sector. In the current context, it is logical for unions to aspire to recover the loss of real wages suffered during the inflationary stampede. But it is also legitimate for officials to strive to ensure that wage increases are not at the expense of price increases.

A very relevant labor institution in wage dynamics is collective bargaining. In Argentina, negotiations prevail in which a central union (activity, branch or occupation) negotiates with one or several business chambers agreements applicable to all employers and workers, regardless of whether or not the employer and/or the worker are members of the signing chamber and union. Hence, collective bargaining agreements generate labor regulations –including wage scales– that are determined at highly centralized levels.    

How consistent is the centralization of collective bargaining with the wage structure of the economy? According to data from the Ministry of Labor, as of March 2024, the average salary of all categories of the main collective agreements was AR$730 thousand. According to AFIP, remunerations by size of companies present the following differences:

• The average salary of companies with more than 500 workers was $960 thousand.
• Companies with 26 and 500 workers paid salaries of $660 thousand.
• In companies with 25 or fewer workers, the average salary was $460 thousand. 

These data show a large dispersion in wage levels according to company size. This is dysfunctional to the centralized bargaining scheme. In centralized bargaining, large companies have greater influence imposing homogeneous wage scales on a very heterogeneous productive environment. As a result, wages are relatively low for the largest companies and relatively high for SMEs where productivity is lower. 

The main consequence of centralized bargaining is that it has no possibility of being sensitive to the dispersion of productivity throughout the country in each of the sectors governed by collective bargaining agreements. The worst part goes to the SMEs, which generally have lower productivity and, therefore, greater difficulties in fully complying with the remunerations and other regulations set forth in the collective bargaining agreement of their sector. This leads to the fact that many jobs are not generated, others are generated “in gray” (partially evading the provisions of the agreement) and others –the vast majority– “in black” (not complying with all labor legislation and the collective bargaining agreement). 

The solution is to allow the “disengagement” of the SMEs from the collective bargaining agreements of activity, branch or occupation. This means giving SMEs the freedom to have their own labor agreement with their workers, defining work organization and wage levels in accordance with their situation. Germany, Spain and Brazil provide for this type of exit from sectoral collective agreements, giving preeminence to company and individual agreements. In this way, without dismantling the current collective bargaining agreements (a process that would require a great deal of time and political effort), SMEs can be given the freedom to choose to enter into their own agreements with their workers.

Only one-third of the workers in Argentina are employed salaried in private companies. The rest are public employees, unregistered salaried workers or self-employed. This is not a recent reality but a drag coming since a decade when the international bonanza ended in 2012. It explains, to a large extent, the increase in poverty, the defunding of social security and the low productive investment. To reverse this process of decline, it is essential to modernize labor regulations. As evidence from other countries shows, a key step is to enable the “disengagement” of SMEs from old and outdated sectoral collective agreements.