Report Nº: 106914/05/2024
The CGT declared two general strikes against the new government. The fall in real wages has deepened in recent months, but the fall has come on for a long time. Real wages will not recover by questioning the ideas promoted by the government, but by deploying more technical and political capacity to implement them.
In barely 5 months of the new government’s administration, the General Confederation of Labor (CGT) called two general strikes. The main argument to justify this intensity of protest is the deep deterioration of real wages. The CGT is explicitly pressuring Congress not to sanction the “Law of Bases and Starting Points for the Freedom of the Argentines”.
The draft of the Law of Bases, as approved by the Chamber of Deputies, contains a series of changes in tax, labor, social security, administrative and regulatory matters, as well as a regime of incentives for large investments (RIGI). The chapter closest to the interests of the CGT is the one referring to labor legislation. On this issue, partial progress has been made regarding the need for institutions that favor the massive generation of good jobs. Several of the provisions that were contemplated in previous versions of the approved bill directly affected the interests of union leaders (for example, compulsory contributions to unions). But they were eliminated.
As regards the deterioration of real wages, it is pertinent to analyze the phenomenon from a broader perspective. According to wage data from the National Labor Secretariat and corrected for INDEC inflation it is observed that:
These data show that formal workers represented by the CGT have lost a quarter of their income in the last 6 years. In this perspective, the protests are more than justified. But the evidence also shows that the real wage fall has been going on for a long time. Since the 2018 crisis, during the Cambiemos government, formal real wages have not grown. Therefore, there are plenty of reasons for discontent. But there is no argument to justify the vindication of what was done in previous years, as the CGT puts forward.
To promote a sustained recovery of real wages, it is essential to generate a favorable context for productivity growth. This is an enormous challenge in the face of the generalized and profound institutional deterioration that Argentina suffers. It should be noted that the enthusiasm and support that the President is generating abroad and the possibility that the Law of Bases will be passed in Congress are only the first steps in a long and complex process of economic transformation to recover the real wage.
A very illustrative example is given by the RIGI. This chapter of the Bases Law contemplates special tax, customs, exchange and regulatory treatments for investment projects exceeding USD 200 million and complying with certain requirements. The RIGI is questioned for generating privileges against the rest of the investment projects. The government argues that it expects to extend similar treatments to the rest of the economy when it can do so. However, incentives for large projects must be made compatible with the rest of the productive sectors. For example, by establishing for SMEs a non-taxable minimum on the wage bill for employer contributions and the disengagement of the sectoral collective bargaining agreements that are ultra-active (expired, but in force) and have not been updated since the 1970s and 1980s. Thus, large investment projects in oil, gas and mining will have positive social impacts due to the spill-over they will generate through the SMEs.
Calling general strikes to maintain the status quo reflects a lack of affection towards workers. The worst scenario for Argentina is to maintain the old policies. On the contrary, change is urgent and essential. This government has good ideas. But it still lacks the technical and political capacity to implement them.
