Even though there might be certain interesting measures, formalization must lead into a more modern, dynamic and inclusive labor market. The promotion of a diversity of contracts and private employment services are key to enhance formalization.

Experts in the Argentinian labor market claim that 40% of workers are under informal conditions.

After a successful money laundering process, President Macri’s administration is now pursuing labor formalization.

The concept on which the formalization process will be developed is considering labor taxes as payments on account of other taxes, such as the income tax.

There are 4.5 million workers who do not have access to social security nor to pension contributions.

Businessmen agree that, in order to expand formalization, labor costs must be reduced. They suggest reducing employers’ contributions and having special arrangements in provinces.

The key points would be the following:

Reduction of Employer’s Contributions

The government would offer businessmen to pay for the employer’s contributions for three years of new employees who come from the informal economy. The idea is that 300 thousand workers become formal per year; reducing the unbalance of the pension system; and preventing the growth of unemployment (the current rate is around 10%). Financing would come from contributions of the Public Treasury and the elimination of tax exemptions, which are being analyzed.

Beneficiaries

The measure will focus on SMEs and young workers. Nevertheless, the idea of expanding the support is being debated, thanks to the suggestion of leaders of the main business chambers and the leaders of the Unions Confederation. The limit for calculating the benefit would be ARS12,000 gross monthly wages.

Transformation of subsidy plans

The modules Labor administrates, which would include 2,800 thousand people, would become a sort of wild card, in other words, it will facilitate the placement of a worker who receives a subsidy into the formal labor market. By employing a person who receives a subsidy, the contribution is larger than expected. In these cases, the State shall provide an allowance to an unemployed or an informal worker.

Vulnerable sectors

The Government is focusing on specific sectors such as construction, the rural sector and the textile Industry. The plan will be implemented in those sectors first and then expand to others.

Control and inspections

Labor inspections will be reinforced with the support of union leaders, who will be working together with the Confederation of Labor Unions (CGT).

Integral Revision of the Pension System

It is the most controversial point, as the goal is to rise retiring ages of women (currently 60 years old) and men (currently 65 years old).

Unfortunately, these items do not seem to be conceived from a modern perspective of labor. These are necessary but insufficient measures as they are based on a concept of work from the 1940’s. The Argentinian government has tools that should be included if it aims to achieve a successful labor formalization that tends to the future of work: ratifying ILO Convention 181 and promoting the diversity of labor contracts to guarantee decent work would be key elements to add to the points already mentioned. Besides, this initiative, should include a re-design of training for labor, particularly during transitions in order to guarantee formal working careers.