Report Nº: 108929/09/2024
Welfare programs cannot prevent the increase in poverty because the main source of income for the poor continues to be their jobs. To improve the social situation, it is not necessary to keep adding and overlapping welfare programs, but rather to go ahead with transformations to make employment more dynamic.
Urban poverty rose to 53% of the population in the first semester of 2024, a level similar to that of 54% during the 2002 crisis. Poverty was not measured between 2007 and 2015 due to manipulations of official statistics at INDEC. As of 2016, it is measured again, registering 27% in 2017, 36% in 2019 and 41% in 2023. Beyond the statistical problems and the recent acceleration of inflation, it is clear that the increase in poverty is a problem as serious as chronic.
It is a paradox this is happening in the context of a lot of welfare aid. Until the end of the last century, welfare programs were quite limited. But since the crisis of 2002, there has been an exponential growth in welfare. A very important milestone was the creation of the Universal Child Allowance (AUH). This process was fed by the creation of hundreds of other welfare plans at the three levels of government.
A key evidence to understand the persistence of poverty in the context of increasing welfare spending is the source of household income. According to INDEC among urban households in 2024, it is observed that:
These data show that the main source of household income is work. Other sources of income –transfers from the State (pensions and welfare benefits), savings, rents, food quotas, etc.– play a complementary role. Even among poor households, more than half of their income comes from their jobs. A decisive particularity is that informal employment prevails among poor households. Fifty-five percent of households are supported by a head of household or spouse who are, both, informal or unemployed, and among the informal 82% are in the lowest 5 deciles of wages in the labor market.
The main factor explaining chronic poverty is the persistent labor deterioration observed so far in the 21st century. In the 2002 crisis, 35% of the working-age population was formally employed, 25% was informally employed and 40% was unemployed (inactive and unemployed). In 2024, only 32% are formally employed and another 32% are unemployed, but the informal sector now accounts for 35% of the working-age population. The scarce generation of quality jobs explains this expansion of informality.
The degradation is the result of wrong policies perseveration. On the one hand, there is a broad consensus around the idea that changing labor laws and collective bargaining agreements is against workers. The persistence in this strategy –which transcended the political cycle of the last decades– explains why the jobs created do not respect these laws and the outdated collective bargaining agreements. On the other hand, there is broad consensus in favor of alleviating the consequences of high informality by multiplying welfare programs.
It is necessary to replace these wrong consensuses with others that contribute to boosting good jobs. This requires eliminating inflationary emissions and the infinity of anti-competitive regulations, putting the tax system in order and adapting labor laws and collective bargaining agreements to the demands of the market, technological progress and the economic possibilities of each company, especially SMEs. At the same time, it is essential to transform the educational system in order to promote high educational quality.
This public policy agenda is set out in the May Act that the national government signed with most of the provincial governments. This is an unprecedented first step in the right direction. Now comes the most difficult part: its implementation.
