Argentina etched out a job market program aimed at addressing informal labor as it seeks to lower government spending.
A government decree Tuesday created the “puente” or bridge program by which social welfare recipients can continue to receive their handouts for a year after starting a formal, payroll job. The government will also cover all employer contributions during that period. The policy aims to target welfare recipients who opt for informal, all-cash jobs to avoid losing government benefits and persuade them to stay in the system.
The measure comes as Argentina’s labor market diverges from its social outlook, indicating deepening inequality. While the unemployment rate in the formal job market is down to its lowest level since 2015, poverty is expected to rise this year as low-wage, informal workers outside the traditional labor market have their incomes wiped out by inflation galloping above 70%.
It also comes at a time in which the country is looking to cut overall government spending to comply with a $44 billion program with the International Monetary Fund that calls for a primary fiscal deficit of 2.5%. Social assistance programs are expected to top 2.6 trillion pesos ($18.8 billion) this year, according to Argentina’s most recent IMF review.
Over 80% of the new jobs created post-pandemic in Argentina have been informal, according to the most recent report on the subject from the UN-backed International Labor Organization.
Countries like Argentina across Latin America have dealt for decades with high levels of all-cash jobs where workers don’t pay income taxes, don’t have health care and are more likely to receive social welfare payments. The pandemic exacerbated that trend as companies closed and others opted for freelancers amid high volatility.
Argentina banned companies from firing workers for about two years, a measure that shielded some jobs but also helped lead to a surge of informal work. The country now has roughly the same amount of salaried payroll jobs—between the private and public sectors combined—as informal, all-cash gigs.
—With assistance from Scott Squires.
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