July 24, 2014
The wages of devaluation
While the government expresses most frequent concern with unscrupulous businessmen, perhaps the labour front could prove to be the key arena in the post-devaluation scenario. The last thing the government wants is a wage-price race which workers already seem to be losing and they are dragging their feet on trade union demands for prompt collective bargaining to update wages or in its stead, a lump sum of up to 3,000 pesos. Yet even in the unlikely event of organized labour patiently agreeing to wage restraint, the economy stands to suffer because the eroded purchasing-power of most incomes would find it impossible to keep up the level of sales in a model where over two-thirds of Gross Domestic Product depends on consumer spending, thus dealing a further blow to ebbing confidence — think tanks which had predicted two percent growth at the start of the year have already rolled back their forecasts to negative growth of one percent for 2014. Yet even if consumer-led growth is doomed by prices overtaking wages, the government seems in no mood to make any concessions to the trade unions or even to recruit them as allies in monitoring prices — the alienation from the Kirchnerite bid of recent years to refound Peronism away from its organized labour “spine” seems to run too deep.
Thus far Cabinet Chief Jorge Capitanich is standing firm against more than one round of collective bargaining negotiations this year (which he is in no hurry to start) while dodging the issue of any transitional lump sum bonus but it remains to be seen how strike action will be resisted in such a turbulent socio-economic scenario — perhaps the one aspect of a long, hot summer we have so far been spared. The public sector looks especially vulnerable to the worst unrest in a decade — years of fiscal surpluses followed by a determination to sustain runaway increases in government spending despite mounting red ink have enabled the Kirchnerite presidencies to keep state employees more or less happy until now but that strategy is starting to run out of rope. The main inhibition against industrial action would be an anxiety to protect employment because job creation (long a strong point of Kirchnerite rule) has virtually trickled to a halt.
Another factor keeping the government on top of the trade unions during the past decade is that organized labour has been as fragmented as the political opposition with at least five main umbrella groupings, thus making “divide and rule” tactics child’s play, but in the looming crisis common problems might well prompt rival labour bosses to make common cause.