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Anti-Layoffs Bill in Argentina Spells Disaster for Workers

By: Antonella Marty - @AntonellaMarty - May 1, 2016, 9:37 pm
layoffs in Argentina
The initiative has passed the Senate and must now go to the House of Representatives. (Abelfer)

EspañolIn Argentina, the populist ideology known as Peronism is so paradoxical and inconsistent that its latest support of the so-called “anti-layoffs law” is no longer surprising.

The bill spearheaded by the Peronist opposition, which has already passed the Argentinean Senate, seeks to suspend layoffs in the public and private sectors for 180 days and force employers to give a double severance pay.

Peronists call themselves the upholders of progress and work, but all they do is create barriers for economic growth and productive jobs. The founder of the movement, former President Juan Domingo Perón, famously said that “to govern is to give jobs” — but at whose expense? At what cost?

One must be somewhat thick not to realize, after abundant examples in Latin America and across the world, that prohibitionist policies just lead to undesired consequences, often achieving the exact opposite of the intended goal.

If all it takes to solve a problem is legislation, why not promote a bill against hunger, cold, poverty, heat, accumulation or scarcity? Prohibition is a self-destructive path has never achieved its purpose.

By prohibiting layoffs, companies will be destroyed. The employer will be restricted, unemployment will increase, and at some point accumulated layoffs will come. The result? The law will not benefit those who are already employed, let alone those who are unemployed.

Moreover, companies will avoid risk and think twice before hiring someone. When the burden becomes too large, they will stop hiring and overall unemployment will increase.

The anti-layoffs bill may be one more botched magical solutions peddled by the Peronists over the last decade under the Kirchner administration, disguising a problem they created and that they now want the current administration to bear the burden for.

It is worth recalling one of Perón’s first economic measures in 1945, when he got a law passed freezing rents and banning evictions. This caused a fall in the construction of rental housing. The owners and potential lessees went bankrupt. Those who had savings invested in real estate were impoverished, future investment in rental housing disappeared, and nobody wanted to accept a new tenant for fear of not being able to evict them.

Everyone in the business was harmed, as you can always expect to happen with this kind of prohibitionist approach.

In Venezuela’s Chavista model, anti-layoffs rules produce the same effect. The law establishes that “work stability is guaranteed and all forms of unjustified dismissal are restricted.” Today you have the Venezuelan government reducing working hours because they have destroyed the country’s economy with similar interventionism.

Shortages, insecurity, expropriations, prohibitions, price controls and thousands of arbitrary policies have destroyed private inventiveness, and have filled the country with inefficient public employees.

In the meanwhile, ordinary citizens focus all their waking time on how to survive, where to find food or medicine, and how to dry out their hair without a hairdryer, a suggestion of President Nicolás Maduro on how to save energy.

In Argentina, the hypocrisy about this measure is so blatant that it is baffling.

Héctor Recalde, a congressman for the Peronist Front for Victory movement, expressed in 2014 — when Peronist Cristina Kirchner was in power — that “we must be careful” about any anti-layoffs legislation “because these issues may hinder job hiring”.

Fast-forward to 2016 and a new administration. Recalde now states that “all blocks of the opposition signed this project. It has the intention to help SMEs and workers” and “we must not continue with policies for the rich. ”

Recalde’s overflowing inconsistency is just another example of Peronism’s modus operandi. It suggests that what the opposition is after is not helping workers but to sabotage the economic recovery.

The worst part is that this measure will directly harm common Argentineans and not only the business-friendly environment that the Mauricio Macri administration is trying to show the world.

For SMEs, which make up more than 90 percent of private firms in Argentina, it will be really difficult to afford the double severance pay mandated by this bill. They may well end up in bankruptcy, generating more and more unemployment.

No one will invest in a country where rules change overnight, and without investment there is no way out of the problems inherited by the long and terrible Peronist era.

Antonella Marty Antonella Marty

Antonella is founder and project coordinator of the Youth Foundation for Liberty in Argentina. She has worked as an intern at the Atlas Economic Research Foundation, Cato Institute, The IFEF, and Cedice Libertad. Follow her @AntonellaMarty.

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