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Labor Policies in Times of Crisis

Argentina 2003 – 2009. Labor Policies in Times of Crisis. July 2010. Marta Novick Under Secretariat for Technical Programming and Labor Studies. 1. Presentation Topics. Context to the Argentine crisis (2001–2002) Policies for addressing the domestic crisis (2003 – 2008)

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Labor Policies in Times of Crisis

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  1. Argentina 2003–2009 Labor Policies in Times of Crisis July 2010 Marta Novick Under Secretariat for Technical Programming and Labor Studies 1

  2. Presentation Topics • Context to the Argentine crisis (2001–2002) • Policies for addressing the domestic crisis (2003–2008) • International crisis (2008–2009) • Labor policies in Argentina • Final thoughts 2

  3. The 1990s & the 2001-02 Crisis The 1990s 3

  4. Post-Convertibility 2003-2008 • Industrial policy • Withholdings • Promotion regimes (software, automobiles, electrodomestics) • Promotion of non-traditional exports • Non-automatic imports • Macro policy • Competitive and stable exchange rate • Budgetary and external surpluses • Encouragement of domestic demand and investment Decent work as a policy objective • Labor policies • Labor institutions • Employment policies • Income policies • Social Security • Social policies • More universal criteria • Direct transfers for vulnerable families • National Food Program • Remediar: free access to generic medicines 4

  5. Labor policies • Labor institutions • New legal framework (employment reordering law) • Promotion of collective bargaining • Recovery of labor inspection – PNRT • Mediation of labor conflicts • Income policies • Wage increases: fixed amounts, minimum wage, and promotion of collective bargaining • Increases in retirements and pensions (mobility) and in family allowances • Increases in socio-labor plans (families, etc.) • Increase in social security coverage (Welfare Inclusion Program) • Employment policies • PJJHD  Training Program (SCE) • Employment programs for vulnerable groups (youth, etc.) 5

  6. Between 2003 and 2008, employment reported record levels of improvement Formal waged employment Fall in registered employment Unemployment rate Registered employment and number of companies 6

  7. Wages and collective bargaining Minimum Wage 2003-2009 1400 1200 1000 800 600 400 200 Growth 520% 0 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Ene-03 Mar-03 May-03 Sep-03 Nov-03 Ene-04 Mar-04 May-04 Sep-04 Nov-04 Ene-05 Mar-05 May-05 Sep-05 Nov-05 Ene-06 Mar-06 May-06 Sep-06 Nov-06 Ene-07 Mar-07 May-07 Sep-07 Nov-07 Ene-08 Mar-08 May-08 Sep-08 Nov-08 Ene-09 Average wage level Coverage of collective bargaining Number of agreements 7

  8. Active training policies Evolution of professional training (PT) numbers (provincial, municipal, and sectoral) $150,000,000 134,931  110,058  13,550  Source: DNOyFP, SE, meta 2009.

  9. The international crisis July 2010 9

  10. Magnitude of the crisis • Worst crisis since 1930. • World unemployment rose by 11 million last year, and around 40 million more jobs could be lost by the end of 2009. • In the USA, 650,000 jobs were lost during January 2009 alone, raising its unemployment rate from 7.6% to 8.1%. • The IMF recently estimated (July 2010) that global output fell by 0.6% in 2009 (–3.2% in the developed nations and +2.5% in developing countries). Estimates forecast global growth of 4.6% in 2010. • Global trade also reported a significant fall (–11.3%). The IMF predicts an increase of 9% this year. 10

  11. First thoughts on the crisis • Traditional indexes, such as GDP or other indicators of well-being, are not enough and cannot prevent catastrophes or disasters of this kind. • The recent work by Stiglitz, Sen, and Fitoussi states that these traditional indicators do not highlight what is most important to us: the well-being of the citizenry, their quality of life, their dignity, and, ultimately, their happiness, which do not necessarily correlate with GDP growth. • This underscores two essential issues: • Intervention in public policy matters • The role of income distribution 11

  12. Argentina: Policies during the international crisis July 2010 12

  13. ANTI-CRISIS Policy Permanent labor market observatory International Crisis 2008–09 • Macro policy • Public infrastructure investment program • Tax incentives for formalizing workers • Nationalization of the retirement system • Industrial policy • Production credits conditional on maintaining employment • Support for SMEs • Credits for consumption and commerce • Non-automatic imports • Social policies • 1st phase: Increases in social program transfer amounts and in the budget of the National Food Program • 2nd phase: Universal per-child allowance • Labor policies • Use of existing institutions • Policies to protect jobs • Income policies 13

  14. Labor policies for tackling the crisis • Protecting jobs and incomes • Using existing institutions • Clear strategy to maintain labor relations • Crisis Prevention Procedure • Wage subsidies for companies affected by the crisis (REPRO) • Various strategies to extend SCE coverage • Greater effort (and incentives) for training policies • Income policies: • Continuance of collective bargaining • Increased minimum wage • Once-off fixed amount increase in income (for retirees and minimum-wage earners) • Increased family allowances • Retirement mobility 14

  15. Maintaining employment: Major expansion in coverage after the crisis 200.000 182.495 180.000 Other job maintenance programs Interzafra and other seasonal programs 160.000 Productive recovery 140.000 129.411 120.751 120.000 100.000 80.000 60.000 40.000 16.910 20.000 12.853 7.950 6.973 6.768 - 2004 2005 2006 2007 2008 2009 2010 TOTAL 2003-2010

  16. Expanded coverage of social protection: Elderly and youth 86% 90% 84% 80% 69% 70% 60% 50% 37% 40% 30% 20% 10% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Percentage of beneficiary children and adolescents in the under-18 population Percentage of retirement and pension beneficiaries in the senior population

  17. Countercyclical policy in figures 17

  18. Impact of external crises on employment in Argentina 22 Productive model Convertibility regime 2003 - 2009 20 +4,4 18 +1,3 +1,4 16,6 16 14 14,5 13,8 13,2 12 12,4 12,2 +0,8 10 8,8 8 8,0 6 Mexican Crisis Russian Crisis Brazilian Crisis Global Crisis Pre-crisis rate Rate during crisis 18

  19. Final thoughts (i) • Change in how responses to the international crisis are oriented (first stage) • The role of public policies / state • Greater emphasis on employment (maintenance, improved coverage, unemployment, and training) and expanded social protection • New role of “non-traditional” institutions (Labor Ministries / ILO) • Heightened role of developing countries (G20) and a broader outlook on the economic crisis 19

  20. Final thoughts (ii) • Second stage (European crisis) • Some return to adjustment policies (Greece, Spain) • Adjustments in labor affairs and reduced spending • Potential impact on demand and activity levels • Fiscal and monetary policies as sole macroeconomic strategies • G20 Toronto, “transition” 20

  21. Final thoughts (iii) • Need to coordinate public policies • Ffrench-Davis states that the type of macro-level focus adopted has a decisive impact on the degree of stability, and on how that affects the path of growth and influences the level of equality or inequality found in domestic markets. • Recovery from a crisis is impossible if social and labor objectives are not placed at the center of economic policy. 21

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