The labor reform of the Bases law attacks the fiscal surplus

Since time immemorial, human societies have been organized based on systems of rewards and punishments, that is, when a behavior is desired by society, this behavior is rewarded, and when behavior not desired by society is punished.

After this very brief introduction, we inform the reader that we intend to carry out a different analysis of what has happened so far on the effects that the intended labor reform would have on our society and on public accounts. So – about the call Base Law -We are wondering:What is a behavior sought by this Government? the evasion of social charges? Judging by the legislation introduced in the labor reform of the Basic Law, it would seem so.

The basic law establishes the repeal of the aggravated compensation contained in the Laws No. 24,013 and No. 25,323as well as the repeal of the law 25,345 which gives workers the possibility of demanding work certificates from their employers that prove their professional training and verification of the contributions made to social security by their employers.

Then there will no longer be a penalty for lack of contributions. It is logical to think that employers, as businessmen – rational beings – who seek to maximize their profits, will stop doing so to a greater or lesser extent. And we say to a greater or lesser extent, because perhaps they prefer to have their employees with a certain level of coverage against occupational risks. In which case they will register the relationship for a lower amount so that they can enjoy insurance (against accidents or illnesses) but making a reduced contribution to the social security system.

What is the priority for our president Javier Milei? It is the fiscal surplus, the so-called “zero deficit.” Which is nothing other than the balance of public accounts and the “zero issuance” of currency. Recently, our President, on national television on April 22, 2024, announced with great fanfare that the fiscal surplus had been reached.

The question we must ask ourselves is: how was said fiscal surplus achieved? And this is where the crudeness of the numbers comes, since the fiscal surplus was largely achieved liquefying retirements. That is, raising them below inflation, taking away purchasing power from retirees and pensioners. To the passive sector of our society. One of every three pesos saved from that boastful fiscal surplus was from taking money out of the pockets of retirees. That is to say that today in Argentina we have a fiscal surplus at the cost of a serious social deficit..

So that we all understand it. With what money are retirees paid? The money to pay retirees comes precisely from the collection of social security contributions carried out by the active sector. To put it more clearly, they are the contributions made by registered workers. Or as they are known in the jargon, the “blank” workers.

So if the libertarian government repeals the sanctions for non-payment of contributions, it is most likely that in the medium and long term collection drops for this item, and therefore, if collection falls due to non-payment of pension contributions, there will be no money to pay retirees.

This will undoubtedly affect the national accounts, that is, it will affect the zero deficit that keeps our president so awake.

Why do we say that it will affect it in the medium or long term? Because surely the defenders of this bad legislative technique called Basic law They will show that – if sanctioned – tax revenue from pension contributions will increase. But it will only be for all those cases of debtors who access “laundering” and we mostly estimate that it will be all those who are currently on trial. The law contemplates this benefit in its articles 75 to 80 of the bill approved in Deputies. Article that we consider illegal because it has retroactive effects, where recalcitrant delinquent debtors are allowed to avoid the aggravated sanctions of the Laws No. 24,013 and No. 25,323 still in court through access to a moratorium. So, any rational, well-advised employer will access this benefit. paying a maximum of 30% of what you owe (art. 76 in fine) probably with much less interest. And, in this way, you will avoid a sentence for a much larger amount. And here we will also see how the national accounts are affected and therefore, the famous “surplus” because The State will miss out on collecting much more money than it is actually owed.

Another point of analysis, from the Chicago and Harvard schools (e.g. Church, Jeffrey and Ware, Roger, 2000, Industrial Organization, Boston, McGraw-Hill), that is, an absolutely liberal analysis – like the ones the President likes – is the terrible system of incentives that this basic law brings us. Where Those who evade are rewarded and those who paid their pension contributions correctly during all this time are punished. That is, the one who evaded contributions had a higher profit rate, or a greater profit margin compared to the one who paid everything in order and ended up assuming a greater effort to maintain his business, company or trade.

The President of the Nation sends contradictory messages all the time. On the one hand he wants to have a fiscal surplus but on the other, he publicly declares that he who flees dollars is a hero and then promotes laws such as the Bases Law where it rewards (or at least forgives) those who evade social security contributions.

We hope that this brief reflection contributes to the public debate in an era where values ​​are subverted, where those who comply are belittled and those who do not comply are rewarded with lax regulations that discourage those who comply to continue complying. We long to live in a society where the fiscal surplus and the balance of public accounts is a consequence of an increase in revenue from productive activities and not by taking money for subsistence from the most vulnerable in the system.

Nahuel Altieri is a lawyer, President of Abogados del Fuero and professor of Labor Law at the Faculty of Law of the University of Buenos Aires.