A new pact linked to electoral politics

This article was published in El Cronista on June 28th, 2021.

By moving away from the agreed target of a 29% pay rise for 2021,unions have broken the original pact. They now aspire to reopen collective bargaining in order to beat the inflation as measured by the INDEC’s Consumer Price Index. This is a new pact closely tied to the electoral needs of the ruling party, because according to public opinion surveys, salary, income and the economy are the biggest concerns. Thus, pushing corruption, insecurity and Covid-19 pandemic to the second or third position in the list of people’s worries.

As a matter of fact, the aim of the original plan was to hold back pay rises so as not to trigger an anticipated repricing. The model failed, as it has been failing systematically.

Since the 1960s, when two parties negotiate and have the same tools and the same limitations, results tend to strike a balance based on the fact that both parties have the same available resources. This is one of the applications of Nash’s equilibrium.

In everyday life, discussions, negotiations, and conflicts between parties share a common goal: keep up with the inflation as measured by INDEC. As a result, salaries always end up striking a balance between the loss of purchasing power and the rate necessary to recover it. In Argentina, there are no pay rises but adjustments for inflation in an attempt to preserve workers’ purchasing power.

Now, unions have an additional argument: midterm elections are approaching and the ruling party needs to make every effort to get decent election results, and Peronist unions could exert pressure on the business sector in order to put more money in workers’ pockets.

Let me remind those who believe that markets operate according to the will of the authorities that the only way to increase real wages is not by beating inflation but by promoting investment and improving productivity so that companies are more competitive and achieve greater profitability.

Some observers say that the need to recover people’s confidence and gain votes is so important that the Government is willing to take measures that may represent a time bomb ready to explode after the elections. Suffice to say, the value of the dollar is increasing every month at a rate below inflation, and at some point, a peso devaluation will occur to recover values.

In any case, the agreed pay rises of around 29% are not sustainable with a forecast inflation rate of 45-50% for 2021, and unions cannot accept that their grassroots’ wages lose purchasing power. That is why a number of cases quickly moved away from the government guidance and turned such 29% suggested rate into a twofold claim: first pay rises are now around 40-45% according to inflation, and second a revision clause is expected to be enforced before year-end or early 2022, possibly after mid-term elections. Even though this is not an escalation clause strictly speaking, which automatically triggers an increase, it is clear that it is a protection clause casually included for the period following the elections just in case the coefficients escalate again.

This is how the Teamsters’ Union agreed on a non-cumulative 45% increase in three installments (20% in July, 12.5% in November, and 12.5% in February 2022) and a year-end bonus. The Union of Private Security Officers managed to agree on a 45.4% pay raise in three installments (July, October and January 2022). Congressional staff also reached a 40% pay raise agreement. PAMI [public health insurance agency for pensioners and retirees] personnel also agreed on a 43% raise and an ARS 20,000 bonus.

The Banking Association, led by Sergio Palazzo, reached a similar agreement in regards to a revision clause, and has similar aspirations. So does the Food Workers’ Union, run by Hector Morcillo and Rodolfo Daer. The Union of Commerce Employees agreed on a 40% raise and FOEVA [Federation of Wine Industry Workers] representing wine industry workers agreed on a 57% in salary and non-salary installments plus a bonus. State workers in Neuquén, who are represented by ATE, agreed on a 53.09% raise to be paid in installments from May to December; ANSeS [National Administration of Social Security] workers accepted a 45.5% raise in four installments; SUTERH [Janitors’ Union] agreed on a 44.8% raise in four installments and a bonus; domestic service agreed on a 42% rise in four installments, and the union of television personnel and producers agreed on a 41.5% raise in installments plus a fixed amount of ARS 25,000; UOCRA [Union of Construction Workers] agreed on 35.8% raise in four installments and a revision clause, and other adversely-hit sectors such as UTA [Union of Transport Workers], plastic workers and State employees agreed on lower raises but all of them with revision clauses. If we take into account that many sectors have agreed on a retroactive amount to 2020, plus a general bonus or a Covid-19 bonus, or a fixed amount payable around vacation time, this year pay rises will be above 50%, putting us on the edge of an abyss in any reasonable evolution of the economy operating under such parameters. With this new setback, we have a strong sense of déjà vu, threatened by new economic disasters, where the economy cannot react following its own rules. Bertrand Russell used to say “Why repeat old errors if there are so many new errors to commit?” Insist on failure again and again, and failure will finally come.