Socio-economic situation in Argentina / April, 2007

The economy grows, but it creates too few labor posts

Even though Argentina’s economy has growth almost 8% in average during the last 4 years, the levels of precariousness that can be seen in the labor market are still very important.
In 2006 the unemployment rate was 12,3% of the economically active population. While official statistics showed a lower level of unemployment (10,2%), they include as employed those people who receive a social benefit of 150 pesos (less than 50 dollars) a month in exchange for 4 hours of daily “labor” in community activities (the social program for unemployed heads of households, “Plan Jefes y Jefas de Hogar Desocupados”). Of course, while these activities may be socially useful, they cannot be considered as employment. In February 2007 more than 1 million people were beneficiaries of this program. The majority were women (71,9%) and relatively young (65,3% of beneficiaries have between 26 and 45 years of age).
Even when the economy is globally in its highest point, outreaching the previous peak (the GDP was at the end of 2006 15% higher than in 1998), the unemployment rate is only slightly lower than in was back then (12,4% in October 1998). This accounts for the poverty of the employment creation process of Argentina’s economy. While the economy has grown 36,2% since the last quarter of 2001, total employment has only grown 23,3%.
This is important since while the economy has grown rapidly in the past years due to increased utilization of installed productive capacity and record international prices of Argentina’s main export commodities (soy and petroleum), in the near future its ability to generate employment will be seriously threatened. In fact, as well as the economy returns to “normal” growth rates (5% annually, which is a high growth rate from Argentina’s historical experience), the capacity of employment generation will fall below the growth of the economically active population. As soon as the economy slows down a little, it will not create enough jobs to absorb the new members of the labor force and those already unemployed (today, still more than 1.965.000 people).

Argentina’s capitalism creates precarious jobs

Not only does the economy generate few jobs for the size of the occupational problem of the country, but also the quality of the jobs it does create is very poor. This is a characteristic of Argentina’s capitalism in the phase of consolidation of the neo-developmentism: it has installed an extreme precariousness in the working conditions as part of the model of capital accumulation.
Employment precariousness implies that most labor posts created are “not-registered” (called “in black”: jobs where the employers do not make the mandatory social security deposits for their workers), they are badly paid, in flexible contractual conditions (possibility of cheap firing of workers), without insurance for labor accidents and high labor intensity (with high proclivity to accidents), extreme shift flexibility (for example, rotating work shifts) and functional flexibility (one same worker has to perform several different and varied tasks, at the bosses’ will), extreme working days (very long, 10 or 12 daily hours), etc. This situation that characterizes salaried employment is replicated with peculiarities in the unchecked expansion of self-employment, which works as a refuge for many workers that cannot find adequate salaried employment or no salaried work at all. These activities are characterized for showing high levels of hourly under-employment: workers cannot find enough hours of work so as to obtain a sufficient income.
As we stated, despite state officials declarations to the contrary, more than 44% of salaried workers are employed “in black” (un-registered). This means that their employers do not make the mandatory deposits for social security. This implies that in the future millions of workers will not have any benefits for old age (pension benefits). On the other side, while this proportion has gone down from 49,5% in 2003, the reduction has been minimal if we consider that the economy has grown at an unsustainable rate in the medium run. Synthetically, the policy for reduction of “black” labor can be deemed a failure.
Regarding the conditions in which labor activities are performed, in the recent years the number of labor-related accidents has increased greatly. Between 2003 and 2005, the number of workers that have suffered accidents at work has grown by almost 600.000, more than 37%. For each percentage growth in GDP the rate of labor accidents has increased two percentage points. This accounts for the pressure that workers are suffering in their jobs to warrant the profitability of enterprises.

Argentina’s capitalism pays low wages, which do not sustain people’s human rights (basic needs).

The purchasing power of wages of salaried workers is lower today than before devaluation of the peso at the beginning of 2002. Even with strong economic growth real wages are today 4% lower than at the end of 2001. This value represents an average for the totality of salaried workers but we must indicate that for informal workers (“in black”) real wages are 19,5% lower than in 2001 and for state employees wages are 26,7% lower than in 2001 in real terms. That is, for almost 70% of all salaried workers (informal and state employees) their incomes are still at least 20% lower than before devaluation.
While historically in Argentina poverty has been related to unemployment, today there are millions of employed workers who are poor. The evolution of wages has taken the country to a situation in which half of salaried workers earn less than 690 pesos (221 dollars) a month, while the basic consumption basket (that which makes a family exit income poverty) tops 949 pesos (304 dollars) a month of the typical family (2 adults and 2 kids). This means that the income of these workers (5,5 million people) should increase at least 37% just to allow them to escape poverty.
The one million people that receive the social benefit of the program “Jefes y Jefas de Hogar” have incomes that represent only 15,8% of the value of the basic consumption basket: they are poor. On the other hand, since June 2002, when the program was created, the beneficiaries receive the same amount of money (150 pesos a month, less than 30 dollars, per family). Due to inflation, the purchasing power of the benefit has been reduced by 33%. The state is sustaining an income-support program that maintains people in absolute poverty.
While a high proportion of the population has incomes below the poverty line, there is an even higher proportion that lacks incomes to buy the family consumption basket, that is the bundle of goods and services that provides for a decent standard of living in Argentina. The value of such a basket is today 2400 pesos a month (769 dollars) for a typical family. Given that the average wage for salaried workers is of only 854 pesos (274 dollars), even when two adult members of the family work, in average the households obtain incomes that are 29% inferior to the family consumption basket. Meanwhile, self-employed workers (non-professionals) have average monthly incomes of 700 pesos.
As a whole the data presented explains why the incidence of poverty and indigence are still one of Argentina’s main problems. While, as already stated, the level of economic activity has surpassed the peaks of the nineties, the levels of social marginality are huge, even greater than in those years. 26,9% of the population (about 9 million inhabitants) lives below the poverty line in early 2007. Besides, 8,7% of the population of the country is indigent, with incomes that do not exceed the 330 pesos (100 dollars) a month for a typical family.
A further significant datum is that not only absolute poverty is a problem in Argentina, but also inequality (relative poverty) is. While in the previous economic peak (1998) the wealthiest 10 percent of the population appropriated of 22,8 times more income than the 10 percent with the lowest income, in 2006 this ratio has grown to 27 times. Besides, the poorest households (20% with the lowest income) have seen their participation in total income reduced in the same period. The appropriated 4,5% of total income then, while now they receive only 3,8%.

Argentina seems rich (the GDP has reached its highest point in 8 years) but its people are poorer, marginalized and fragmented.

  • Salaried workers earn only 73% of what they need for their home to exceed the poverty line through their own labor effort.
  • For most wage earners, the purchasing power of their labor incomes is 20% lower than in 2001.
  • Almost 9% of the population of the country (3,3 million people) lives with little less than 1 dollar a day.
  • Almost 27% of Argentina’s population lives with less than 3 dollars a day.
  • One million unemployed receive a subsidy of 150 pesos from the program “Jefes y Jefas de Hogar Desocupados”, which allows them to buy only 15% of the basic consumption basket.
  • Income inequality remains high. The richest receive 27 times more income than the poorest.
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