Doing Business In Argentina

Labor Return to top
Argentine workers are among the most highly educated in Latin America. Argentine
workers were relatively well paid by international standards prior to the peso devaluation
in January 2002. While high inflation following the 2002 devaluation significantly eroded
the purchasing power of wages, sustained government-promoted increases in public and
private sector nominal wage levels from 2003 have reversed this trend. Wages in dollar
terms remain competitive, even taking into account Argentina's relatively high social
security charges and other taxes. As of the third quarter of 2007, the unemployment
rate was 8.1 percent, down from a 21.5 percent peak in 2002, but this number excludes
recipients of government assistance to unemployed heads of households. If those
recipients were included, unemployment would be approximately 8.8 percent. According
to the Ministry of Labor, about 44 percent of workers 14 years and older work in the
informal sector.
Organized labor continues to play a strong role in Argentina. Sector-specific
negotiations between unions and industry, although largely market-driven, have often
been influenced by government suasion on behalf of unions. In the 2002-2004 period, a
number of general wage increases were mandated by presidential decree.
Argentine law provides unions with the right to negotiate collective bargaining
agreements and to have recourse to conciliation and arbitration. The Ministry of Labor,
Employment, and Social Security ratifies collective bargaining agreements, which
covered roughly 75 percent of the formally employed work force. According to the ILO,
the ratification process impeded free collective bargaining because the ministry
considered not only whether a collective labor agreement contained clauses violating
public order standards but also whether the agreement complied with productivity,
investment, technology, and vocational training criteria. However, there were no known
cases during the year of government refusal to approve any collective agreements under
these criteria. There are no special laws or exemptions from regular labor laws in the
foreign trade zones.
With the unemployment rate now below nine percent, employers have begun to
comment about the increasing tightness in the labor market, especially for some kinds of
skilled labor in high demand. The GOA passed a modest labor reform law in 2000 to
address rigidities in the labor market (i.e., increasing collective bargaining flexibility,
extending trial employment periods, and lowering payroll taxes for new permanent
hires). However, the anticipated growth in employment did not materialize, as the
reforms coincided with a deepening of the economic recession produced by foreign and
domestic factors. Following the acceleration of the financial crisis beginning in
December 2001, many workers left the formal labor force and instead began to work
informally, as employers sought to avoid high pension, social security, and other taxes
on formal employment. In an effort to avoid massive layoffs during the 2002 financial
crisis, severance payments were doubled. This "double indemnification" labor
termination policy was ended in September 2007 when official unemployment dropped
below ten percent. According to the World Bank’s “Doing Business” survey compiled
before this double indemnification policy was ended, the cost of terminating an employee
in Argentina averaged 139 weeks of wages, almost double the Latin American average
of 59 and more than four times the OECD average of 31.
3/4/2008