Over the last decade, as a business leader, I have visited hundreds of SMEs across the country. Large, medium and small factories. Family businesses, workshops, regional industries. Along the way I spoke to thousands of business people and also many workers. I heard different stories, but with one common denominator: current labor laws have become one of the biggest obstacles to job creation, especially in SMEs.
This diagnosis results from accumulated experience. To see how the same situations repeated themselves in different provinces, sectors and company sizes. A widespread and silent malaise that lasted for years and ended up manifesting itself in the worst possible way: companies that stopped growing, others that closed, and a compelling fact that sums up the structural problem: Argentina has not created formal net private employment for more than 15 years. Employment is stagnating while informality continues to increase.
One of the most common problems that arose on each tour was the extreme rigidity in the management of the companies. In SMEs with 10 to 50 employees, I found cases where several people were part of the union representation and often did not perform productive functions. Constant meetings, constant discussions, work interruptions and a dynamic that ultimately led to the paralysis of the plant and the deterioration of productivity.
In SMEs with 10 to 50 employees, I found cases where several people were part of the union representation and often did not perform productive functions.
All of this happened far from the big headlines. It was neither seen in the media nor part of the public debate. Often, only those of us who toured the inside of factories had access to the stories of companies that closed or were seriously weakened by multi-million dollar labor lawsuits, ongoing litigation, or clearly disproportionate penalties that threatened the company’s survival.
In this context, I clearly remember a situation that had an impact on me. I visited a factory that had already closed. There I met the former manager who told me: Some time after closing, the delegate had returned to look for him. I was sorry. He told him: “The truth is that I did not recognize the situation.” The manager had warned him for months that the company was no longer available and that the end would be inevitable if the conditions were not adjusted. The delegate didn’t believe him. He continued to pull on the rope. When the plant closed, it was too late for everyone.
This episode was no exception. It was a reflection of what was happening in countless factories where there were no reasonable limits to the exercise of rights and where constant conflict ultimately destroyed what it claimed to defend.
Another recurring element was the perverse incentive to absenteeism and litigation. Non-existent illnesses, false credentials, improper licenses and employment lawsuits worth millions. In many SMEs, between absenteeism, delegates and licenses, there were between 10 and 15% of people not working directly. The rest watched this situation with resignation, feeling that it was not worth sticking with.
So the system ended up rewarding those who looked for shortcuts and punishing those who did well. Effort, responsibility and commitment were devalued in the face of a scheme that promoted constant conflict.
In some extreme cases, I have visited companies where virtually no one could be laid off, even if the economic situation required it. At others, especially small companies, I saw the opposite effect: companies that needed staff but didn’t dare to hire new employees. And it’s important to say it clearly: No company hires employees just to fire them. A dismissal is always a borderline case, a difficult decision that the employer makes in a critical situation or when he realizes that an employee does not fulfill the function that the company needs.. When this basic management tool disappears, bloated structures emerge with allocations that do not correspond to productive reality and an inevitable decline in productivity. That is the central point of the problem.
I have visited companies where virtually no one could be laid off, even if the economic situation required it. In others, especially small companies, I saw the opposite effect: companies that needed staff but were afraid to hire new employees.
This framework was maintained for years by a combination of outdated legislation and labor law that reinforced and multiplied these distortions. The result was a level of litigation that is unparalleled internationally: today there are around 640,000 labor law cases pending, which corresponds to almost 10% of registered formal employment. In many developed economies, labor disputes are marginal; In Argentina, however, it became a system that grew concurrently with the stagnation of formal employment.
Faced with this scenario, many companies – especially in the service sector – have found a false but understandable way out: informality. Today, almost 45% of workers are outside the formal system. This is neither a virtue nor a solution. It’s a sign of failure. Because informality leaves millions of people without training, without a career, without pension protection and without a future.
All of this reflects a profound contradiction: a discourse that claims to protect work, but a system that ultimately displaces jobs, weakens businesses and creates inequality.
Modernizing the world of work is not a magical solution, nor does it alone solve the systemic competitiveness problem facing the country. But it is one of the central pillars that must be rebuilt if we want an Argentina that produces more and creates jobs again.
We need a 21st century work regime. A framework that fully respects workers’ rights but recognizes a fundamental truth: without companies there are no jobs. A system with appropriate boundaries that does not encourage absenteeism, ongoing conflict or litigation as a model.
It is also important to discuss collective agreements again. Many are over 40 years old. Ultraactivity has frozen rules that no longer reflect productive reality. We must restore the ability to negotiate, the ability to adapt and the ability to reach agreementwith companies and employees sitting at the same table.
As President of the Argentine Industrial Union, I feel obliged to put into words the silent demands of thousands of SMEs over the years.
Excessive rigidity, lack of boundaries and constant distrust have brought us here. This model didn’t work. Recognizing this does not mean targeting workers, but rather starting to build a fairer, more equitable and sustainable system.
My goal is to work for an industry that is growing, creating jobs and being competitive. And one of the cornerstones of this is a modern, balanced work system that meets the challenges of today’s world. A thoughtful, gradual and responsible reform that will enable thousands of SMEs to get back to doing what they do best: producing, growing and providing work.
The author is President of the UIA
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