How to respond to an emergency

Production: Natalí Risso

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Get out of the well

By Mara Pedrazzoli

The poverty indicator released by Indec weeks ago highlights the dramatic situation experienced by almost 19 million Argentines on a daily basis. That social fragility has been exacerbated is not news for any inhabitant of a large city who circulates without distraction: the poor are seen in the streets, there are more people begging and sleeping in the street, people psychically broken because they cannot lead a dignified life . Only an adequate exercise of public policy will be able to create alternatives so that these people can reintegrate into the labor system.

At the base of poverty is the lack of employment. And this is related to the stagnation suffered by the economy for almost a decade and with the sectoral specialization of our productive matrix that imposes limits on the creation of more and better jobs.

Between 2012 and 2017, the Argentine GDP grew at an average rate of 0.4 percent per year, followed by two years of crisis and the collapse caused by the pandemic. The economy dwindled. What little there is is not enough for everyone. And the prospects – not only in Argentina but in the region – are not very promising: the average growth for next year will be 2.9 percent in Latin America and just 2.2 percent in Argentina according to ECLAC data (considerably lower to budget forecasts).

This endemic difficulty and financing problems condition public policy, which has nevertheless been ingenious in recent weeks. In addition to advancing the increase in the minimum wage (which between April 2021 and February 2022 would rise by 52.8 percent) and the family allowances of registered workers (between October and December, before folding into a more virtuous retirement adjustment), The government’s initiative seems to focus on eliminating the incompatibility between social assistance (AUH and Tarjeta Alimentar) and access to registered jobs in low-productivity sectors. And even more, to reconvert those plans as part of the salary payment.

The State gets into the fine print of the agreements between business chambers and workers’ organizations to speed up hiring: a correct decision, in crisis contexts more and not less State is needed, not to remove the labor protection that involves compensation. Workers will also be trained and public works will be expanded. The initiative began with construction workers and rural laborers from the regional economies (fruits) and later it is planned to add the textile industry and gastronomy. A dynamic that in fact emulates Empowering Work but reversing roles: the private sector complements the plan.

The structural problems of our economy to absorb labor are long-standing, and are accentuated in the most dynamic sectors that offer better conditions – registration and average remuneration – but generate comparatively less employment: for example, petrochemicals, the automotive industry, the mining and metalworking versus commerce, teaching, construction and care tasks, to name a few. There are also sectors that make up a “gray” of relatively high productivity and greater job creation, such as public administration and real estate and business services. The data comes from an investigation of the Center for Studies for Production that allowed updating debates. The government’s policy is correct in this sense: to focus instead of waiting for a spillover effect (which never occurs) of growth (which will be meager) in leading sectors.

Finally, it is worth mentioning that the poorer a country is, the more asymmetric the distribution. An example of this was that Argentina occupied the third position on the podium of countries with the most beneficiaries of offshore companies in the Pandora Papers. Another necessary policy is to monitor the speculative and elusive strategies of large millionaires or economic groups that harm the entire population and in that direction pointed the changes in regulations led by the BCRA last week. It is a long road but we are going the right way.

Member of the Dto. of Political Economy of the CCC and of Parity in the Macro.

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Uneven recovery

By Valentina Castro, Luca Giovacchini and Hernán Letcher

There is broad consensus about the regressive effect of the pandemic in economic and social matters. Globally, the differences between those who have more and those who have less have deepened. This effect derives not only from the differential impact of the pandemic on each of the sectors but particularly from the heterogeneity in the recovery of income.

The evolution of the incidence of poverty emerges as an illustrative case of this same situation. The data are eloquent: 40.6 percent of Argentines are below the poverty line, having decreased slightly compared to the previous semester. Faced with this scenario, it is imperative to ask what factors explain why poverty has not returned to pre-pandemic levels in the first semester and has remained at high levels? When analyzing the evolution of income it is possible to observe:

The second wave of covid-19 prevented the recovery of activity in the first half of 2021, particularly in informal sectors. At the same time, it delayed the recovery of employment.

On the other hand, the increase in the SMVM (with an impact on social plans and informal salary) reached 24 percent, that is, it remained below the CBA, which reached 25.3 percent, with an aggravating factor: the increases in the SMVM They only occurred in the months of March, April, May and June, while only between January and February 2021, the increase in the CBA reached 8.4 percent.

In the case of salaries, in the comparison of the average of the ISem21 in relation to the IISem20, while the registered private sector almost equaled inflation (-1 percent), the unregistered salary fell 5 points in real terms.

Likewise, employment recovered in the year-on-year comparison by about 70 thousand jobs. However, it has not yet returned to pre-pandemic levels. The update of the AUH (as well as the AUE) and the pensions added only 13.5 percent between the increase of December (5 percent) and March (8 percent). The announcement of the extension of the scope of the Alimentar card to the universe of boys and girls up to 14 years of age had an impact only as of June.

Regarding expenses, it should be mentioned that the CBA’s increase in food prices negatively affected the evolution of poverty, which amounted to 25.3 percent (a monthly average of 3.8 percent). In the case of CBT, the variation was lower: 22.7 percent, largely due to the slight increases in services in the period.

Now, has the scenario changed in the second semester?

The vaccination campaign is advancing rapidly, which allowed the reopening of economic activity as a whole, including, among others, informal trade (fairs), which improve the situation of the lower-income sectors. Likewise, a significant increase in the SMVM was ordered, starting in July 2021: 6.4 percent (July), 3.2 percent (August), 10.8 percent (September) and 2.7 percent (October ), adding 25 percent in the semester. It is preliminary to estimate the evolution of real wages, but the parity reopening could mean a change in the behavior observed up to now. The extension of the Alimentar card is a positive differential compared to the first semester. And the mobility increases (relevant in minimum retirement and AUH / AEU), reached 12.12 percent and 12.4 percent in June and September, that is, an increase with an impact in the semester of 26 percent. On the expense side, the significant increases in the first semester are more moderate. Both the CBA and the CBT increased between July and August only 2.8 percent.

Based on the aforementioned evidence, it is feasible to understand that there are objective conditions to affirm that poverty levels could return to prendemic levels but it would be difficult to pierce that threshold in the coming months. Among the possible variables to pay off this social debt, the recovery of the real wage emerges as a necessary condition to homogenize the economic recovery.

CEPA.

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