Report Nº: 108715/09/2024
The accumulation of welfare benefits on families receiving the AUH discriminates against families of similar income with formal jobs. This is inequitable and discourages job formalization. The child allowance system must be unified and benefits must be defined on a family income basis instead of job characteristics.
The family allowance system was created in the 1950s and managed by private sector entities to cover dependent workers. In the 1990s, the system was nationalized and merged into what is currently the National Administration of Social Security (ANSES). In 2009, the Universal Child Allowance (AUH) was added, granting the same allowances to informal, unemployed and inactive workers. In 2016, the Monotributo (simple tax) workers were incorporated.
As of 2020, additional welfare benefits were granted only to AUH recipients. The Alimentar plan and the 1,000 Days Law, two other welfare benefits, were added and, at the end of 2023, with the current government, the amount of the AUH was doubled with respect to the child allowances of formal wage earners and mono-taxpayers. In a striking coincidence, Cristina Kirchner supported President Milei’s decision to increase the benefits received by informal workers (doubling of AUH, Alimentar and the 1,000 Days Law).
What are the implications for the labor market of increasing the AUH over the amount of the child allowance received by formal workers? Taking as an example two families, one with formal employment and the other with informal employment, with 3 children, one of whom is under 3 years old, the amounts received are as follows:
These data show a strong loss of the real value of the child allowance received by formal workers due to inflation and a strong increase in the allowance received by informal workers. This generates, on the one hand, the inequity of households with similar incomes that receive very different amounts of assistance for their children just because they have different job characteristics. On the other hand, it is a powerful disincentive against formal jobs, whether as an employee or as a single-tax payer. In other words, the family allowance system induces workers with lower qualifications to remain in the informal sector.
The trend in recent years, both with the current and previous governments, is the accumulation of benefits in the population that does not have formal employment. In 2020, it was stipulated that the food card (Alimentar) will be automatically assigned to AUH beneficiaries. Then, in 2022, it was stipulated that AUH beneficiaries with children under 3 years old will automatically receive an assistance supplement for the purchase of milk for the mother (1,000 Days Law). The process intensified in 2024 when the amount of the AUH was doubled. The accumulation is inefficient from a management point of view (for having a child, families receive three overlapping monetary transfers), inequitable and distorting from the point of view of the functioning of the labor market.
This public policy error is a derivation of considering that social vulnerability is associated exclusively with the AUH. It overlooks the fact that families whose working-age members are salaried or formal self-employed in the lower brackets have similar incomes to informal workers. This leads to the fact that, in many cases, a lower-skilled worker has a loss of income in terms of family allowance just because his employer registers her or she registers in the Monotax. In other words, concentrating resources on the AUH and neglecting the child allowance for formal workers promotes structural poverty since it discourages people from migrating to better-quality formal jobs.
It is urgent to unify the amount of the child allowance. In other words, regardless of the type of employment of the adults in the household, the amount they receive for their children should be the same up to a certain level of family income. The amount of the child allowance could be lower only for middle and high-income families. This would be a very positive signal to stimulate formal employment, a key factor in the quest for social mobility.
