For the government, the vote has already been taken. Weekly debates, the result of multiple meetings held by the brand-new Interior Minister Diego Santilli, who has no firm official residence, would appear to confirm that the number of hands raised in the House and Senate will reach the numbers needed to implement labor reforms. And most importantly, perhaps by the end of 2025, “criminal taxation and tax procedures” will be implemented in special cases, in conjunction with the budget. This is also referred to by the executive branch as “fiscal impunity,” or better known as mattress dollar laundering. However, as is known, since October 26, the government is doing everything in its power to take advantage of the current great political star. And, according to the old social science adage, economics follows politics, not the other way around. And if politics function, it will be possible to tackle economic reforms that have been postponed, such as labor reforms.
The initiative is expected to be presented to the public in the coming weeks, with the project’s final letter being submitted to Congress and legislative treatment to begin in an unusual legislative extension period starting December 10th. And if possible, we need to enact legislation by the end of 2025, or if not, no later than the second half of January. The push and pull continues in February as the government prepares for tax reform. I’ll leave my predictions for later. Or even Javier Millay’s eventual second term. The intention is that the labor reforms addressed in the approved projects and the inclusion of around 3 million workers in full-time or semi-regular status will improve contributions and reduce the pension deficit.
Considering the big picture, the main reform of Javier Millei’s government at this stage, which should be passed through the budget and the National Assembly, is labor reform. And if all the cannons that are in store for labor reform are included, these will be the major chapters included in the project that will see the light of day in a few days. And that will spark controversy.
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- Super active. This is an idea that has been around since Carlos Menem’s time, but it never saw the light of day. And it shows the core of union power. The end of hyperactivity in labor reform means significant changes to the way collective agreements work when they expire and no new agreements are negotiated. Until this era, even if a collective bargaining agreement expired, it was automatically valid until the union or company signed a new one. And since the union position was generally stronger than the private sector position, negotiations were almost impossible, so what was done was an indefinite extension of the old agreement. In this way, activities maintain agreements that are more than 40 or 50 years old, surviving very poorly or being decisively buried by modernization. The decline of super-activity will mean that, if not negotiated, agreements will terminate within a certain period of time, and if no new agreements are signed, what will govern is respect for the minimum legal rights (LCTs) already built into employees’ and workers’ personal contracts.
- Prioritize labor. The Government will propose to abolish the principles that today define which collective agreements (or standards) apply preferentially. For example, collective agreements for each company and agreements for each activity. Current Argentine law provides for the principle of always applying the rules most favorable to the guild or central union. Current rules prohibit locally negotiated agreements by company, sector or region from providing terms that differ from those set out in more general, national agreements. The Government proposes to change this priority to give priority to enterprise-specific agreements over activity-specific agreements, and to provide as much flexibility as possible with the possibility of applying regional and smaller-scale conditions rather than those applicable in national collective agreements. According to the reform logic, company-specific agreements may be prioritized, even if they are less ‘profitable’ than general collective agreements. This would allow employers to negotiate “more flexible” agreements at company level with “dynamic” wages based on productivity.
This is beneficial for governments and some employers, as it allows them more freedom to adapt working conditions to the realities of each company. For trade unions, especially large national trade unions, this is a fatal blow to their ability to act. It weakens them and robs them of their effectiveness and ability to react. And ultimately it will take away the great power they currently hold. A change in priorities could lead to greater decentralization of trade unions. Since each company can negotiate on its own, there is a possibility that collective agreements will be fragmented. Unions have points of attack. Changes in priorities can lead to widening pay disparities between workers in different companies (or in the same sector), depending on agreed ‘merit’ or productivity.
From a workers’ perspective, there are concerns about the potential for instability, with fewer rights guaranteed by general agreements and increased reliance on “less favorable” individual agreements. Companies are defending themselves. They argue that this type of change will allow them to negotiate better terms for productivity and labor flexibility, which will lead to increased sales and a better distribution of profits. Major labor unions have criticized the chapter, saying the smaller the company, the less protection it will have for employees.
- Capitalist trade unions. The government’s intention is to push ahead with the Bases Act II legislation, which has already been in force since June last year, and which means the creation of the Suspension Fund. The idea comes from the laboratory of Federico Sturzenegger’s Ministry of Deregulation and aims to fundamentally change the dependency relationship between the government, the trade union world and workers, away from a vision in which the executive branch is seen as “money”, the point of contact between the parties. And the way to fundamentally solve one of the most complex problems that private companies consistently point out is how to solve the extremely costly layoff system, which is a major obstacle when evaluating the hiring of new employees.
The purpose of these new redundancy funds is to replicate the apparently successful experience brought about by the forces of the Construction Workers’ Union (Uocra) and the Argentine Chamber of Construction (Camarco). Camarco flexibly regulates the moments when union workers are left inactive due to the completion of work.
This “redundancy fund” mechanism, protected by law, replaces compensation for seniority and is funded by monthly contributions from the employer. 12% during the first year of the employment relationship and 8% after the second year. In case of dismissal or termination of work, the worker can withdraw the accumulated money. This requires at least eight months of contribution activity in the past two years.
And this is where the newness of “capitalism” appears. It is managed through an Open Common Investment Fund (FCI) or Financial Trust (FF), with trade unions directly participating in decisions. In other words, trade unions can be integrated with society to determine financial or real investments to control funds that workers and individuals contribute to trusts, which will then be used to pay future compensation. They will be able to decide, for example, whether to invest these funds in infrastructure works, companies with growth potential, or promising private ventures. Or, failing that, you can take part in financial bets such as fixed term, stocks, bonds, negotiable debt, public notes, or some “carry trades.” Especially in the libertarian era, everything is done in a trust guaranteed and overseen by the CNV. And in open countries, even if there are traditional trade unions and “fats” as shareholders. And for some reason, I’m leaning left.
- federated democracy. The government is considering whether to include this fundamental and controversial chapter in the labor reform, which New Democracy’s first president, Raul Alfonsin, was unable to advance in his memorable Mucci law. Examples include abolishing “unicart” (the idea that there is only one representative union per branch) and prohibiting union leaders from being re-elected indefinitely. They also proposed that workers be given more freedom to elect their union representatives, breaking what they saw as “union apartheid” and a highly entrenched leadership structure.
For some ruling party officials, this reform is fundamental, important and essential. In addition to capitalizing on a political moment that won’t be repeated for at least the next two years. For others, the intention to raise awareness about the potential for progress in ‘trade union democracy’ is a way to open negotiations with the CGT trade unions, approving super-activities, priority funds and redundancy funds in exchange for no further democratization of trade union representation.
It will be seen. and so on.
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