Illustration by Mark Beauchamp
Here’s a loaded question: If you are going to intervene in a labor market to help workers whose jobs are in jeopardy, should you intervene before or after they are laid off?
Argentina’s unemployment peaked at 21.5% in 2002 — so officials there have had recent experience with debilitated employment markets. In the global recession that began in 2008, Argentina reintroduced a program developed in the last recession. It is called REPRO (Programa de Recuperacion Productiva) and its main goal is to intervene before workers are laid off:
In order to qualify for support, businesses need to provide past evidence of profitability and solid prospects over the hump. They must submit a list of the workers they want to retain and who will eventually obtain benefits paid directly. The grants goes to each worker as a monthly stipend of up to US$150 (AR$ 600) for a period of up to 12 months. Although the direct beneficiaries are the workers, the firms also come out better-off since they can deduct the amount paid in by the government from each worker´s salary and still comply with the collective bargaining agreement reached with unions. In addition, firms enjoy a cut on their social security burden since the contribution they owe is calculated on the reduced share of the salary. In return, the firm makes a commitment to refrain from layoffs. The federal government monitors the agreements with onsite visits as well as by checking with the tax revenue service and the social security agency whether firms have in fact retained employees. If they are found to be in breach of commitments, the benefits expire immediately and a suit for fraud is filed.
There are some very interesting breakdowns of participating companies by industry sector, firm size, and region in the full paper, which can be found here (PDF).