Of
Vincenzo Donato
Executive Director of the PMI Observatory Foundation. Professor at the Department of Business Administration, University of Bologna. Italy.
If we pierce the monetary veil of inflation, we will find it the hidden origin of the growing social exclusion and poverty in Argentina is the sharp decline in labor productivity in small businesses and its growing divergence from medium and large companies. This note tries to explain the connection between labor productivity and poverty and its corresponding statistical corroboration.
The productivity difference between large companies and SMEs is normal, here and around the world, but the growing divergence is a serious anomaly. This situation goes unnoticed in the statistical measurements that are usually spoken of today in our country, because labor productivity is seen as a single aggregate. This approach is normal, but insufficient. The added aspect does not make us see the growing dualization of the economy we are witnessing. If, on the other hand, we look at the evolution of labor productivity disaggregated by company size, we can see that the country has a small group of industrial, commercial, agricultural and technological “champions” unicorns, of which we are proud, who march fast with considerable gains. of labor productivity and, on the other hand, a huge business segment of micro and small businesses with productivity in free fall for yearsthat when they manage not to close their doors, they defend themselves by expelling the job and immersing themselves more and more in informality.
The decline in labor productivity in small businesses is a long-standing problem, but it has worsened over the past decade, and even more so during the pandemic. Despite paying lower wages than their larger counterparts, the decline in productivity in micro and small businesses is so great that has seriously affected the profitability of this business segmentcreator par excellence of low-medium wage labor, the only type of work capable of absorbing the millions of people today structured in social plans.
The growing dualization of labor productivity is common to all productive sectors in Argentina, but to better understand the functioning of the transmission mechanism from decline in productivity to poverty and informality, we can observe in detail the evolution of this phenomenon. in the manufacturing industry. It is also worth focusing on the productivity differences between medium-sized (between 51 and 249 employees) and small (between 10 and 50 employees) companies, knowing that the differences between large companies (over 249 employees) and micro- enterprises (fewer than 10 employees) will be even larger. To accurately visualize the phenomenon, let’s look at the situation from the beginning of the pandemic until today, a period during which the INDEC informs us of the great increase in self-employment and informality at work.
According to our measurements, since the last quarter of 2019 (i.e. shortly before the start of the pandemic) the already significant divergence in labor productivity among small and medium-sized enterprises in the manufacturing sector increased by 64%, while the difference in wages paid only increased by 8%.
What does this mean? That the relative profitability of the smallest companies in the sector, from the beginning of the pandemic to today, has drastically decreased, aggravating a trend already observed in the last decade, as described in subsequent reports by the Foundation’s SME Observatory.
To defend themselves against the decline in profitability, companies that have not closed, it stopped generating employment and plunged into informality, in variable proportions depending on each specific situation. This is precisely the mechanism through which the decrease in labor productivity in small businesses is linked to the structure of poverty and the growing informality of our country.
Official data confirm this key reading. According to the Ministry of Labor, micro and small industrial enterprises generate less and less registered employment. In 2011, they represented 27% of total formal wage work, while a decade later, in 2021, this participation dropped to 23%. On the other hand, according to INDEC, informal employees (without pension discount) in the manufacturing industry reached 600,000 workers in 2022. This is more than a third of manufacturing workers today work in the informal sector80% is concentrated in companies with fewer than 20 employees.
Beyond the industrial sector, the same trend was observed in the economy as a whole: according to the Ministry of Economy, between 2011 and 2021 registered (formal) employment in large companies grew by 8.7 % and in medium-sized enterprises 3.8%, while in small enterprises it fell by 6.7% and in micro-enterprises it fell by 11.9%. Consequently, while in 2011 micro and small enterprises in all sectors generated 34% of the total number of registered employees, in 2021 this share fell to 29%. Furthermore, according to INDEC, the share of total informal employees in the economy in the last year reached 37.8% of total employees against 31.5% in the previous year.
In short, the decline in recorded employment (with pension discounts) and the increase in informality in the micro and small business segment, the only sector capable of generating work for those categories of low and medium-trained workers, is a tragedy. . Without increasing labor productivity in small businesses, it will never be possible to sustainably increase their demand for employment or transform social plans into private work and this social cohesion will continue to decline we were proud of in the past.
The title dilemma does not exist, it is a false dilemma.
To do?
In 2024 an immediate tax reform, which avoiding the mistakes of the past, resolve the contradiction between low labor productivity and high social security contributions. At the same time, the launch of an effective, long-term and rigorously planned production policy, aimed at containing the growing divergence in labor productivity between large and small businesses. It is not easy, but it can be done with a political vocation.
Source: Clarin
