As part of a problem which has been slowly but steadily evolving throughout the past four to six years, in 2014  the inflation rate in Argentina continued its upward climb. Analysts currently estimate the annual inflation rate to be 40 percent. The increasing inflation rate, together with a 20 percent devaluation of the Argentine Peso in January 2014, has resulted in a significant loss of the purchasing power of workers.

It is not surprising that during the past decade, collective bargaining agreements have thrived like never before.  Difficult negotiations and collective conflicts have been the result.

While the deepening of the economic crisis is now seriously jeopardizing not only the purchasing power of the workers' salaries, but also, and more importantly, the employment rate in Argentina, in this article we take a look at the world of collective bargaining agreements at a time of increasing conflict.

Stabilization of high levels of conflict

In the second quarter of 2014, a total of 317 conflicts were registered, seven of which occurred in the informal sector and 310 in the formal one.

The evolution of the total number of conflicts reflects a stabilization of conflicts in relation to the prior quarter, and an increase of 37 percent if compared to the same period in 2013.

In the private sector, there was also an increase in the number of conflicts compared to the first quarter of 2014.  The first quarter of 2014 has been the most active conflict period of the last four years. The reasons behind this increase may be found in both claims for salary increases (regardless whether in the public or private sector), and debts in companies.

The disputes that involved both sectors are a direct result of the demands of all unions insisting on a modification of the income tax.

Increase of conflict at a company level and in the Provincial Government

In the private sector, the annual growth of the number of labor conflicts is explained solely through an increase in conflicts at the company level.

Conflicts occurred mainly in the manufacturing and transportation sectors and focused on the pursuit of higher wages, income tax elimination and the opening of union salary negotiations.

In companies, disputes were focused mainly on crisis measures (suspensions, layoffs, salary debts, bankruptcy), followed by salary increases. Within the manufacturing industry, establishments engaged in the metallurgy and automobile businesses protested against dismissals and suspensions while companies in the food business initiated conflicts targeted at better wages. In transportation, disputes were more homogeneous. Almost all conflicts are related to pay debts and layoffs.

Wages disputes in the public sector and for crisis measures in the private sector

Conflicts tend to respond to more than one cause. Therefore, the number of causes herein considered is greater than the number of conflicts depicted.

During the second quarter of 2014, conflicts were primarily associated with salary increases (increases, union salary negotiations , elimination of income tax over salary, etc.).

In the private sector, the main reasons for claims arose out of conflict crisis. This reflects the preponderance of conflicts in the automobile and metallurgic-engineering industries where, once again, claims were focused on dismissals and suspensions.

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Unions as basis for main subject of conflict, and more presence of federations in the private sector.

Decentralized sectors (primary unions and other sections) still remain as the main cause of labor conflicts at a general and sectoral level.

In a quarterly comparison, the private sector shows a sustained increase in the presence of trade unions and federations in such conflicts. In turn, linking the subject of the conflict to the type of demands therein and to its scope, shows unions being at the forefront of both demands for wages and crisis within the company. A significant decrease in the number of conflicts initiated or carried out by workers without representation should also be noted. The decrease could be interpreted as an increase in the institutionalization of conflicts through unions.

Conflicts with strikes and communicative actions

A conflict may be composed of one or more collective actions. For purposes of this article, "multiple conflicts" are those in which more than one collective action takes place, and "simple conflicts" are those wherein only one collective action occurs.

In the past quarter, 639 collective actions were registered, 274 of which occurred in the private sector, and the remaining 323 in the public one. In the former, the number of multiple conflicts amounted to 49 percent of the total conflicts, while in the latter, this number stood at 44 percent.

The main actions carried out by the workers were publishing strikes, street blocks, mobilizations and demonstrations. These actions accounted for 63 percent of the total number of actions. A year-over-year comparison of these actions shows an increase in every single type of action except for the street blocks frequently known as "piquetes." What may also be construed as a tendency change can also be observed: while communication actions increase, strikes decline.

If divided by sector, more strikes (23 percent) followed by demonstrations (18 percent) were registered in the public sector. In turn, workers in the private sector were responsible mainly for communicative actions (28 percent) and strikes (19 percent).

Increase of collective bargaining by activity and company

The number of collective bargaining agreements approved by the Ministry of Labor in the first semester of 2014 reflect a 28 percent increase if compared to the same period during the previous year. 

Collective bargaining agreements increased the most over the first semester of 2013. The number of collective agreements was 67 percent higher than the number of activity agreements and 50 percent higher than the number of enterprise agreements during this period.

The data obtained during the first semester of this running year seems to suggest that collective bargaining has recovered after the 2012 and 2013 slope. Indeed, the Ministry of Labor approved as many collective agreements as during 2010 and 2011, the two years with the highest number of approvals in the last decade.

Wage negotiations during the first semester of 2014

Salary adjustment agreements (at least for the country's main activities) were entered into and reached with the unions in the first months of 2014.  The agreements were reached because the unions found it necessary to agree to the salary demands and needs of their workers early on to help offset the effects of depreciation of wages due to a general and increasing rate of inflation, and employers were somewhat forced to reach such agreements to avoid a potential radicalization of tangible conflicts.

During the first stage of the negotiations, the national government had intended to impose a around 20 percent nominal increase. Inflation in the first quarter of 2014  continued to rise and the government's intended nominal increase pattern was rapidly  eclipsed.

As a result, the national government proposed yet a new pattern with the purpose of limiting all salary agreements below a imaginary maximum of  a 30 percent nominal increase. In this sense, many of the first collective agreements that were publicly disclosed theoretically reflected increases below the 30 percent level to discourage agreements up and above said limits. However, a more detailed study of the pay scales would then reveal that the real increase was not the one originally disclosed by the government or government aligned unions. For instance, the agreement entered into by the union of metallurgical workers was reported as a 26,5 percent salary increase, but a closer look at the new salary scale would show a 29 percent increase.

Although generally speaking, increases are close to or around 30 percent, only a few of them actually surpass this year's inflation rate.

Workers who benefited the most during the recent years by collectively bargained salary increases are those rendering services in companies with activities such as oil, food or sugar industry.

Conclusion

As occurred in previous years, the economic environment in Argentina poses significant challenges to companies that are facing increased  demands from unions.  Challenges faced by companies are also due to the strategic operational decisions that are made.  The persistent and increasing rate of inflation and the low but consistent devaluation of the Argentinean Peso are very significant ingredients to be considered in the current situation.

Efforts by the National Government to keep salary negotiations and agreements (at an activity level, and at a company level) within the level of increases that they informally proposed were not successful, and it seems that in the future this trend will continue.

In addition to the foregoing, during the upcoming months companies will be under continued pressure to ensure that  salary increases remain in line with inflation and the reduction of the power of purchase of the salary, retention of talents and the spread that customarily exist between unionized and non-unionized compensation.

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Conclusion

As occurred in previous years, the economic environment in Argentina poses significant challenges to companies that are facing increased  demands from unions.  Challenges faced by companies are also due to the strategic operational decisions that are made.  The persistent and increasing rate of inflation and the low but consistent devaluation of the Argentinean Peso are very significant ingredients to be considered in the current situation.

Efforts by the National Government to keep salary negotiations and agreements (at an activity level, and at a company level) within the level of increases that they informally proposed were not successful, and it seems that in the future this trend will continue.

In addition to the foregoing, during the upcoming months companies will be under continued pressure to ensure that  salary increases remain in line with inflation and the reduction of the power of purchase of the salary, retention of talents and the spread that customarily exist between unionized and non-unionized compensation.