Wage negotiations escalate and another war against inflation.

JULIÁN DE DIEGO PARA EL CRONISTA – The negotiation of wages has a twofold goal for 2022: pay raises should not trigger higher inflation but should surpass the annual inflation rate by one or three percentage points, including a final revision clause in October or November. In other words, negotiations are aimed at reaching two seemingly incompatible objectives: do not trigger inflation but increase workers’ purchasing power.

In a scenario of selective reactivation with inflation (“Reactiflation”), quite different from the stagflation period while Cristina Fernandez de Kirchner and Macri were in office (recession + inflation), the economy is walking on the tightrope with large currency printing, the fiscal deficit with agreed targets under IMF directives, and the need to implement anti-inflationary mechanisms, such as a cut in subsidies and an increase in utility rates.​

Collective wage negotiations should focus on pay raises aimed at an inflation rate below the economists’ forecasts (50% – 65%) while ensuring unions there will be a revision before the end of the calendar year, or in the worst-case scenario, when the final inflation rate for 2022 is disclosed.

The reference percentage is 40%, as suggested by the economic area of the National Government, and therefore, the Minimum Living Wage should be increased by that same percentage by the National Council of Employment, Productivity and Minimum Wage.

In 2021, FATSA (Union of Health Workers) and the Pharmaceutical Industry agreed on a 2% increase over inflation rate, based on the respective index for each accrued quarterly period. Other unions managed to keep year-end bonuses, such as the Union of Truck Drivers who agreed on a ARS 48,000 non-salary bonus payable in four installments. The same happened in the oils industry where workers at this privileged sector received significantly high bonuses.

There are also two factors that should be applied to all industrial sectors: the advance and development of exponential technologies, and the impact of the COVID-19 pandemic with its new variants and with the relative effectiveness of the different waves of mass vaccination. Both components are transforming the form workers work, adjusting to the new habits and demands of customers, and to telework or remote work arrangements in all areas of services, increasingly affecting all industrial sectors and enterprises.

The scenario for the business sector is quite heterogeneous, not only in relation to the level of reactivation, where many companies have already reached or exceeded their activity levels before the pandemic. However, the three major concerns include:

  1. The raises claimed by unions are more often than not incompatible with the companies’ financial losses during the pandemic, and increase their burden of crippling debts with suppliers and especially with banks;
  2. The most combatant or leading unions based on the level of reactivation at their sector not only demand traditional raises but also the payment of advance amounts, bonuses, and additional sums, and in particular, profit-sharing plans, (see the cases of oils producers, Bridgestone, and others); and
  3. There are at least two rounds of union complaints. First, a general raise for all workers, and then claims by members of works councils and shop stewards, who are usually in line with the union leadership, so the general raise for the whole industry, activity or service sector is not final.

In the context of collective bargaining, additional costs continue to arise, such as unions’ claims for employers’ and employees’ contributions to social health care providers who have been badly hit by the pandemic, agency fees, aid for mutual or cooperative institutions, and other non-traditional additional expenses that have an impact on costs.

Remote work, hybrid or mixed working arrangements, and in general the different forms of teleworking are a source of conflict when it comes to reaching collective bargaining agreements, because companies are expected to bear higher costs and there is a particular tendency to strict development, when in fact today these work models are the most important source of employment across the globe.

Finally, it is said that no labor reform will be introduced, but at the same time job promotion mechanisms are mentioned, which not only affect labor standards but also tend to reduce the cost of payroll taxes, which are still the highest in the region.

Growth with Inflation is not a struggle between two demons but rather between good and evil. For left-wing sectors, it is devoured by currency devaluation, fiscal deficit, an elephantine State, administrative inefficiency and governmental political errors. For right-wing sectors, it does not encourage reactivation, growth or the relentless pursuit of a better world.