Crises are part of Argentina’s daily landscape. The tools to navigate them, not so much. The counter-cyclical labour policies available today are scattered and ineffective. We propose the creation of an Employment and Production Stabilisation System (SEEPRO) that unifies and introduces policies of regulation, wage subsidies and vocational training to protect companies and workers in times of recession. This system allows companies to reduce working hours, temporarily suspend or renegotiate conditions in times of crisis, with the aim of preserving employment.
Illustration: Papanika.
Why are counter-cyclical labour policies necessary?
In recent decades, the world of work has undergone major transformations at the global level due to the internationalisation of trade and new technological developments. These changes accentuated the exposure of national economies to global crises that rapidly impacted on local employment and production. Examples of this were the 2008-2009 financial crisis and the COVID-19 pandemic, during which state intervention was crucial to cushion the negative effects on labour and preserve enterprises.
In Argentina, the state developed tools to deal with these crises, such as the Productive Recovery Programme (REPRO) and the Emergency Assistance Programme for Work and Production (ATP). However, these measures were implemented in a fragmented and restrictive manner. This resulted in a volatile and ineffective counter-cyclical labour market policy.
There is a need to coordinate tools, pool resources and respond comprehensively to future crises. SEEPRO seeks to balance the difficulties faced by companies during crises with the preservation of employment by offering a more predictable and effective system. This proposal seeks to offer a system of “controlled flexibility” in which employers can reduce working hours, suspend contracts or adjust working conditions under tripartite agreement and control of the state, companies and trade unions on the condition that jobs are preserved.
What did developed countries do to protect themselves from international crises?
Not all G7 countries were equally impacted by the 2008-2009 financial crisis. While employment in the United States fell by almost 4 per cent, in Germany it remained stable. Crisis procedures were the differentiating factor in preserving employment in times of recession. These mechanisms allow for temporary reductions in working hours or the suspension of jobs on condition that jobs are maintained.
During the pandemic, all EU countries adopted or expanded these systems. Crisis procedures absorbed almost 80% of the income shocks and drastic increases in unemployment were avoided. And Germany and France covered more than 30% of their labour force at the height of the crisis.
Two prominent cases: the Kurzarbeit system in Germany and the Expedientes de Regulación Temporal de Empleo (ERTE) in Spain
Germany 🇩🇪 implemented the Kurzarbeit in 1927, which allowed companies to reduce working hours with state support for lost wages. This measure was crucial in crises such as 2008 and 2020. Variants exist to suit different contexts, including seasonal arrangements and for teleworkers. During COVID-19, the Kurzarbeit was enhanced by collective agreements that achieved higher levels of wage coverage.
Spain 🇪🇸 formalised ERTE in 1980. Following reforms in 2010 and 2012, and with the creation of the RED Mechanism in 2022, ERTEs have evolved to allow for both reductions in working hours and suspensions, as well as including special mechanisms for long-term affected sectors.
Both models proved effective in mitigating increases in unemployment during the pandemic and serve as an example of “controlled flexibility” in which companies and the state cooperate to stabilise employment.
What counter-cyclical labour policies does Argentina have and how did they work in times of crisis?
In Argentina there are several procedures and instruments designed to mitigate the negative effects on employment and enterprises. The two tools with the greatest impact are the Preventive Crisis Procedure (PPC) and the Productive Recovery Programme (REPRO).
The Preventive Crisis Procedure (PPC) is intended for situations of mass dismissals or suspensions in companies, especially when the problems are caused by economic, technological or force majeure reasons. Although it has been a legal instrument since 1991, it is mainly used as a last resort, when a crisis has already occurred in the company. It does not encourage firms to act in anticipation of the crisis, nor does it provide effective incentives to maintain employment. Moreover, it lacks complementary tools, such as wage subsidies or tax exemptions, that would make it more useful for firms in times of difficulty.
The Productive Recovery Programme (REPRO) offers wage subsidies to help companies maintain employment. During the 2008 and 2020 crises, the REPRO was highly relevant. However, the programme did not always respond effectively to the crises as there was no direct correlation between the levels of allocation of the programme and the magnitude of the crises, and it does not provide for regulatory instances such as those of the CFP. In addition, there are practically unused tools such as the Productive Restructuring or the untying of the collective bargaining agreement.
The most relevant problems of the current map of local tools are: their lack of coordination, the mistrust of the actors (both employers and trade unions), and the insufficient incentives to anticipate and prevent crises. Moreover, these procedures are often reactive rather than preventive, which has led to a lack of effective employment protection and adequate support for companies during periods of crisis.
What do we propose? The Employment and Production Stabilization System (SEEPRO)
The Employment and Production Stabilisation System (SEEPRO) offers a comprehensive and anticipatory response to crises, overcoming the limitations of current mechanisms through a centralised and flexible system that prioritises employment sustainability and productivity support.
The system proposes a reform of the labour system that operates in two stages:
Stage 1: Regulation
Se permiten medidas de flexibilidad controlada como reducción de la jornada, suspensiones y convenios de crisis. Esta puede durar seis meses o un año dependiendo del tipo de crisis. En esta instancia el salario de crisis es financiado por el empleador. Esta etapa debería ser suficiente para una recuperación pronta de la crisis.
Stage 2: Conversion
If the crisis continues, the possibility of applying for a wage subsidy is added to the reconversion phase. If approved, the crisis wage can be financed jointly by the employer and the state.
