Regulation of teleworking will increase self-employment - IDESA

Report Nº: 86916/07/2020

Regulation of teleworking will increase self-employment

The lockdown led companies to remote work. In response, Congress is ready to approve a special labor regulation for teleworking. This legal initiative bears a deficient conception of what distance working is. Thus, the main result will be to encourage self-employment, instead of wage relations, in teleworking.

Mandatory confinement forced companies to send employees working from home. Some companies, in particular, the more technological ones, already had the modality. The vast majority of companies did not contemplate home-office, and they had to adopt it abruptly without preparation.

The accumulated experiences are short but intense. In general, it became evident that the occupations that require high human capital are the easiest to telework (analysts and professionals). Furthermore, high productivity gains can arise from this modality of work. Another evidence is that it can be economically more convenient. Saving may come from infrastructure costs (rent, energy, cleaning, lunches, coffee, etc.) and monitoring costs (presentism, shirking, work climate, etc.). In other words, at least in occupations with high human capital, teleworking is viable and convenient. Therefore, it may remain after lockdown.

What is the magnitude of the change in the labor market if occupations of high education tend to move to the remote mode? It may help to analyze the composition of formal waged-employment in private companies by level of education to shed some light on the answer. According to data from INDEC’s household survey, it can be seen that

  • 43% have a high level of education, i.e. tertiary or university.
  • 34% has medium levels of education, i.e. complete secondary education.
  • 23% have low levels of education, i.e. incomplete secondary education or less.

These data show that most of those working in formal private companies are highly educated. That is, they are occupations with the potential of being transformed into a distance mode. This evidence suggests that the change in the formal labor market with the introduction of teleworking could be great. It is foreseeable, then, that in formal companies teleworking will become widespread. The face-to-face mode will be maintained for occupations that demand lower levels of education. At the same time, the current tendency for people with low levels of education to obtain employment in the informal sector will be accentuated.

A particular feature of telework is that it can be arranged as a non-wage relationship. This legal framework makes it possible to avoid the considerable cost (many spurious) imposed by a wage-earning relationship. In other words, formal companies will tend to hire the services of the most qualified workers, via distance work in non-salaried formats, instead of salaried ones.

The would-be Teleworking Law ignores this reality. Its conception is to transfer home all the labor rules that apply in the office. If these rules are already difficult to apply in the office, they are inapplicable in the home environment. The general Employment Contract Law presupposes that the worker put her workforce available to the employer for instructions. In the case of remote work, the worker does not put her workforce available. She takes the compromise to deliver a product, regardless of how, when, and where it was made.

The teleworking Law will accelerate the process of transforming wage-contracts into self-employment. There is a precedent. The number of Monotributos (simplified self-employment tax forms) has been growing steadily from 2012 to the present. Meanwhile, wage-earning employment in private companies shows stagnation and a sharp decline with the lockdown. Saving the wage-contract requires a revision to eliminate the labor regulations obsolescence.  Otherwise, fewer people will work under its mandates, and more people will telework as a self-employed or work in informality as is currently occurring.


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