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Argentina: A case study on the Plan Jefes de Hogar

Desempleados or the employment road to economic recovery

Daniel Kostzer
UNDP Argentina Secretara o direccin
May 2008 Rio de Janeiro
Economic volatilityexpressed in GDP
growth rate

15,0%

10,0%

5,0%

0,0%

-5,0%

-10,0%

-15,0%
The relationship between employment
and GDP

2 00 ,0

GDP $93
180 ,0

Employed

160 ,0

140 ,0

120 ,0

100 ,0

80 ,0
The relationship between employment
and the economy in the 90s

The target were the macroeconomic fundamentals,


leaving the labor market to automatically adjust.
Labor market should adjust freely in terms of prices and
quantities.
Every rigidity should be removed to let markets work..
Labor costs should be reduced in order to maintain
competitiveness.
Almost religious believe that productivity increases
would impact on wages.
The unfulfilled promise ...

Notwithstanding labor market flexibilization,


unemployment, precariousness and informality grew.
Even with very high GDP growth poverty increased.
Productivity increases were not transferred to salaries
and wages.
Labor costs reduction were not translated into increases
in employment.
Perverse results of labor market
policies

Tasa de empleo no registrado y alcuota promedio


de contribuciones patronales
38 35
32,9
37
37,3 33

36
31

Alcuota de contribuciones patronales


35 Alcuota de Tasa de
Contribuciones Empleo no 29
34 Patronales registrado
27
33
Tasa de ENR

32 25

31
23

30
21
29
29,3 19
17,7
28

17
27

26 15
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Fuente: SPTyEL - DGEyEL


A simple diagnosis ...

Economic growth was disarticulated


Socially, since wages were a mere cost of production.
Deficit in terms of quantity and quality of employment.
Sectorally since imposed international integration,
reducing the level of domestic linkages and networks,
destroying firms and sectors.
Regionally due to the fact that many regions lost their
economic viability and reduced levels of domestic
demand.
N
ov
-

80
85
90
95
100
105
M 95
ar
-
Ju 96
l-
N 96
ov
-
M 96
ar
-
Ju 97
l
N - 97
ov
-
M 97
ar
-9
Ju 8
l
N - 98
ov
-
M 98
ar
-
Ju 99
l-
N 99
ov
-
M 99
Formal employment declined by 25%

ar
-
Ju 00
l
N - 00
ov
-
M 00
ar
-0
Ju 1
l
N - 01
ov
-
M 01
ar
-
Ju 02
l-
02
1000
1500
2000
2500

0
500
abr-80

abr-81

abr-82

abr-83

abr-84

abr-85
GBA

abr-86
Ag.Interior

abr-87
more than three times

abr-88

abr-89

abr-90

abr-91

abr-92
The number of unemployed increased

abr-93

abr-94

abr-95

abr-96

abr-97

abr-98

abr-99

abr-00

abr-01

abr-02
Evolution of poverty and indigence

7.500

7.000 6.672

6.500

6.000 6.047

5.500
Lnea de pobreza
5.000

4.500
4.295
4.000

3.500 3.226
3.052 3.463 3.035
3.000 3.176
3.039 2.762
2.500 2.180 2.836
1.966
2.000 2.347 Lnea de indigencia
1.877
1.500 1.480
867 813
1.000 720
923
492 402
327 353
500 748 797

-
Oct-91

Oct-92

Oct-93

Oct-94

Oct-95

Oct-96

Oct-97

Oct-98

Oct-99

Oct-00

Oct-01

May-02

Oct-02
The new pattern of growth...

New relative prices ...


De facto protection of domestic production by the
new exchange rate
Technologically there is no bias to imported
technologies with low labor content
New fiscal instruments (export taxes).
Fiscal surplus
A buffer stock that allowed policies of income
redistribution.
The new political context

Redefinition of the role of the state


Re-programming of the foreign debt
Recovery of monetary sovereignty
Capital flows control
Universal social policies
Tools

Income policies tools


Head of household program (Plan Jefes)
Fixed amount increases
Minimum wage
Increases of family allowance
Rise in pensions and retirements
Promotion of collective bargaining
Plan jefes y jefas de hogar
desempleados

Job guarantee or the State as


Employer of Last Resort
Political advantages

Constitutes a global strategy against


exclusion and poverty
It is a clear schema of social protection,
not charity
Reduces unemployment
Integrates excluded groups
Permits the identification of problems for
further interventions
Social advantages of employment
programs

It is basically a counter-cyclical strategy


Solves basic needs problems of households
Improves human capital at individual and global
level
Involves beneficiaries in collective plans and
projects
Reduces pressure on informal labor markets
fixing a minimum wage for the sector
Improves income distribution
Regional advantages of
employment programs

Improves or maintain domestic demand


Improves infrastructure and services at
local level
Generate multiplying and accelerating
effects
Can articulate with productive sectors in
order to create stable, good quality jobs
Does not distort negatively local markets
Plan Jefes de Hogar
Desempleados

Provides an income to those head of


households with dependants
There is a work commitment of 20
hours per week
Managed by the Ministry of Labor
Decentralized at local level
Projects by Municipalities and NGOs
Total amount: 0.92% of GDP
4.9% of Federal Budget
Some characteristics

Covers 16% of the overall households


of the country
In some provinces it reaches 40% of
households
Very young population: 47% are below
35 years old
71% are female
60% of the female are head of
household (single parent)
Number of kids

more than 4
25%

1-2 kids
59%
3 kids
16%
Educational level of beneficiaries
University
finished 2 7%
11%
unfinished 1
20%

unfinished 2
25%
finished 1
37%
81% engage in work commitment

School Training Other


attendance 4% 2%
6%

Local Adminst.
20%

Community
Project
60%

Microenterprise
8%
The community projects

Production of goods
Bakery
Clothing
Bricks
Community farms
Production of services
Childcare
Elderly care
Teaching assistance
Community and school kitchens
Health programs support
The micro-enterprises

Individual
Small scale production
Self employment in services
Joint projects
Cooperatives
Joint ventures with private firms
Education

Back to school
Vocational Training
Skills of beneficiaries according to
gender

100%
90%
80%
70%
60% Technical Skills
50% Operational Skills
40% Unskilled
30%
20%
10%
0%
Male Female
Evolution of beneficiaries as % of total
employment
Skills and experience

Previous experience
98% of male had previous experience
82% of female had previous experience
Male workers were formerly in industries and
construction
Female workers were in manufactures and
house care and administration
The program, poverty and
indigence

90% of the households are under the poverty line


53% are under the indigence line
The benefit represents an increase of 63% of the
household income
With the program indigence has reduced by 25
percentage point among beneficiaries
Poverty only by 8%
20% of the households have the benefit as sole
source of income
Impact of the program

The multiplying effect of the program is 2.57


700 thousands beneficiaries found a job in
the formal sector of the economy
Almost half of them have a part-time job
informally
20% engaged in temporary jobs (in and out
the program)
The impact on the overall economy

Economic growth in every region of the


country
Recovery of the employment
Before in the provinces than in Buenos
Aires
Reduction of unemployment
Recovery of purchasing power of wages,
including the informal sector.
Ag

85,0
90,0
95,0
100,0
105,0
110,0
115,0
120,0
125,0
o-
0
O 1
ct
-0
Di 1
c-
0
Fe 1
b-
0

96,7
Ab 2
r- 0
Ju 2
n-
0
Ag 2
o-
0
O 2
ct

90,2
-0
Di 2
c-
0
employment

90,4
Fe 2
b-
0
Ab 3
r- 0
Ju 3
n-
0
Ag 3
o-
0
O 3
ct
-0
Di 3
c-
0
Fe 3
96,0
b-
0
Ab 4
r- 0
Ju 4
Important recovery of formal

n-
0
Ag 4
o-
0
O 4
ct
-0
Di 4
c-
0
Fe 4
b-
0
102,5

Ab 5
r- 0
Ju 5
n-
0
Ag 5
16 5%

o-
0
O 5
ct
-0
Growth rate 2004-2006:

Di 5
c-
0
Fe 5
b-
0
112,6

Ab 6
r- 0
Ju 6
n-
0
Ag 6
o-
0
O 6
ct
-0
Di 6
c-
06
119,2
0,0
5,0
10,0
15,0
20,0
25,0
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
Reduction of unemployment

96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
II -
03
II -
04
II -
05
II -
06
Some indicators

1993 1998 2003 2006*


Average income of households $
$ 1.137.90 $ 1.183.60 $ 1.842,65
(current $) 892,00
Variation of average incomes - 4% -25% 107%
Median of the income $ 800 $ 800 $ 600 $ 1.450
Poverty line value in current $ $ 424,70 $ 495,30 $ 720,10 $ 930,00
PL variation - 17% 45% 29%

Ratio average income and PL 2,68 2,39 1,24


1,98
Variation if Ratio average
- -11% -48% 60%
income and PL
Gini coefficient (G) 0,455 0,472 0,482 0,4495
Households under the poverty
13,6% 17,7% 42,6% 19,2%
line (H)
Income elasticity of poverty -2,23 -2,13 -1,42 -2,16
Distribution elasticity of poverty 3,74 2,96 0,34 2,11
Silver Bullet?
One size fits all?

There is a need to complement with other


measures
Universal child allowances (0-13 years old)
Scholarships for high school.
Especial pensions for the elderly
What to do with small scale producers?
Access to land, water
Access to credit
Some considerations

Silver bullet? One size fits all?


Take into account the structure of the country
food importer or food exporter
Oligopolistic domestic structures
Open financial markets
Keynesian or Marxian type of unemployment
There is no better social and economic policy than
full employment

Nor better work than decent work

That is why there is a need to place


employment in the center of economic
policies.