The contradiction of a minimum wage.

Lawyer. Employment advisor of companies and chambers of business. Academic Counselor for Libertad y Progreso.

Article by Julián A. de Diego published in El Cronista on May 4, 2021

A Minimum Wage should be the lowest wage that workers are paid to ensure their livelihood, and therefore, based on the definition provided by law (Section 116 of the Employment Contract Act) it should be similar to the market basket.

As a matter of fact, the Employment Contract Act [LCT, for its acronym in
Spanish] provides a definition of “adjustable minimum living wage”: the lowest pay in cash that workers should receive without family allowances in exchange for the statutory working time to ensure adequate food, decent housing, education, clothing, healthcare, transportation, recreation, vacation and provisions or savings. The Minimum Living Wage is a monthly wage in exchange for an 8-hour workday or by the hour (one month’s pay divided by 200).

In addition, family allowances are paid regardless of workers’ right to a
Minimum Living Wage, as provided by the Employment Contract Act, whose
payment is guaranteed to all eligible workers under the Family Allowance Act. Wages shall by no means be below the standard set in compliance with the Employment Contract Act, except for reduced pay for apprentices or workers who work reduced hours, though not due to their qualification, in accordance with the provisions of Section 200 LCT about after hours or unhealthy work.

Finally, the Minimum Wage shall not be garnished in such portion as set forth in the regulations, except for the payment of overdue child support (Executive Order No. 484/87). The limit to the amount of workers’ monthly wages and each installment of the thirteenth salary that may be subject to garnishment is one month’s minimum wage, as defined in Section 116 et seq LCT.

Wages above minimum wage may be garnished in the following portion: 1. For salaries below twice the minimum wage, the amount that may be garnished is limited to ten (10) per cent of the amount in excess of one month’s minimum wage; and 2. For salaries above twice the minimum wage, the limit is twenty (20) per cent. The same happens with severance pay.

Quite below the legal targets and even in utter contradiction with them, the
Council on Salary, Employment and Productivity [Consejo del Salario el Empleo y la Productividad] approved by 29 votes in favor and one abstention a progressive increase in seven stages accounting for a 35% total pay rise from April 2021 to February 2022, reaching ARS 29,160. There has been only one dissenting voice, that of Hugo Yasky and Ricardo Peidró, who on behalf of CTA [Argentine Workers’ Central Union] claimed an increase to reach a minimum wage of ARS 60,000, which is the average price for a month of food for a typical family.

It is worth mentioning that up until March 2021, the Minimum Wage amounted to ARS 21,600, and based on the decision by the Council, it is now increased by 9% in April, 4% in May, 4% in June, 3% in July, 5% in August, 5% in November 2021, and 5% in February 2022. With this schedule, the Department of Labor manages to keep the 29% rise, as expected in the 2021 Budget, consistent with the guidelines laid down by the government.

The Minimum Living Wage is also a benchmark for welfare programs; that is why the Executive is really focused on keeping it within compatible parameters.

Observers say that in the informal, shadow economy, with at least five million workers, the Minimum Wage is a price floor to determine how much to pay “off the books”. This statement is unfounded, and according to the latest data, it is the minimum market basket to avoid indigence that serves as a reference, with values ranging from ARS 20,000 to ARS 60,000 depending on who is estimating it.

The Minimum Living Wage has also lost all relevance in collective bargaining. Remember that under Nestor Kirchner administration, the guideline was to increase it above inflation rate, so in a short period of time it was higher than the lowest base salary under collective bargaining agreements, thus forcing the parties to rearrange their pay scales beyond the minimum wage, above 25%. Today taking the non-cumulative rates for April and May, it amounts to ARS25,408, and most base salaries are twice this amount in average.

In other words, the minimum wage is not compatible with base wages under collective bargaining agreements, which is the lowest pay for workers in such art, craft, trade, profession or activity.

The Minimum Wage as a national policy is just another example of the
inconsistencies that the current scenario presents. In fact, there is a legal
definition that is not respected in practice, does not harmonize with the rest of
the subsystem of employee compensation, loses all relevance in the shadow
economy, exposes workers to wage garnishments for debts, and does not help
improve the situation of those who live below the line of poverty or indigence, and worst of all, affects other benefits that condition its payment. In other words, instead of bringing benefits for workers, it perpetuates poverty, inequality and lack of social mobility.