Economy

Argentine social crisis nearing worst historic levels

1st October 2020

By Ignacio Portes

Argentine social crisis nearing worst historic levels

Argentina’s social crisis is starting to resemble some of the worst in the country’s history. Though the scenes in the streets paint much of the story by themselves, the latest poverty and unemployment reports from the INDEC statistics bureau now support those impressions with data.

</p> <h2><strong>One fifth of jobs lost</strong></h2> <p>Diving into the latest figures reveals that the drama is much deeper than the headlines have so far suggested.</p> <p><a href="https://www.indec.gob.ar/uploads/informesdeprensa/mercado_trabajo_eph_2trim20929E519161.pdf">INDEC’s job report for the second quarter</a> said 1.3 million Argentines were unemployed, out of 11 million that are considered as “economically active” in Argentina’s urban centers, resulting in unemployment figures of 13.1 percent.</p> <p>That number is a big jump from the near <a href="https://gettheessential.com/economy/2019/04/04/unemployment-on-the-way-to-two-digits-as-production-slumps">10 percent</a> that the country had been used to over the last few years, but the losses in the job market have been much worse since the start of the pandemic than that figure suggests. Some alternative measurements place it at <a href="https://www.libertadyprogreso.org/2020/09/29/el-desempleo-en-argentina-seria-del-293-si-se-toma-en-cuenta-la-pea-que-no-pudo-buscar-trabajo-por-la-cuarentena/">up to 29 percent</a>, more than twice what’s being officially reported, and showing that one fifth of Argentines lost their jobs during the first months of the pandemic.</p> <p>So is someone lying? Or how can these massive differences (1.3 million vs. almost 4 million) be reconciled?</p> <h2><strong>Pandemic exceptionalities</strong></h2> <p>The problem is that, according to international unemployment measurement standards (which INDEC follows), people are only considered as part of the “economically active” population if they are working or actively looking for a job. If they are not finding one, then they are counted as unemployed. But if they have not been actively seeking a position, they are merely excluded from the economically active, and excluded as well from the most commonly-used unemployment measurement.</p> <p>Although this methodology has <a href="https://www.bls.gov/lau/stalt.htm">always</a> <a href="http://www.shadowstats.com/alternate_data/unemployment-charts">been</a> <a href="https://labor.ny.gov/stats/PDFs/alternative_measures.pdf">questioned</a> (as it excludes those who have been so discouraged after failing to find jobs for years that they have stopped looking for one, for example), there are also some valid arguments behind its deployment: students, those living from rents, and some other groups are also not holding a job, but it can’t be fairly argued that they are part of the unemployed population.</p> <p>Under the extraordinary circumstances brought on by the pandemic and the lockdown, however, the situation is different. Many are not looking simply because they can&#8217;t, but they have lost their job recently and against their will. INDEC&#8217;s report also shows that, <strong>compared to the same quarter last year, 2.5 million Argentines lost their jobs but didn’t go looking for a new one. This means that they don’t count as “unemployed” according to the narrow definition in use</strong>. But it is clear that the problem is much larger than a mere 3 percent rise in joblessness.</p> <p>Sticking to this methodology blindly does not fully make sense in the current context, as the sudden bankruptcy of firms, plus the fear and prohibitions of even going outside due to COVID-19 and the lockdown, have contributed massively to people not looking, though most would likely desire to still be on someone’s payroll.</p> <h2><strong>Skyrocketing poverty</strong></h2> <p>Poverty figures are also more alarming than they look at first sight.</p> <p>The Argentine statistics bureau <a href="indec.gob.ar/uploads/informesdeprensa/eph_pobreza_01_200703093514.pdf">reported yesterday</a> that those not earning enough to meet a minimum basket of goods jumped from 35.5 percent in the second half of 2019 to <strong>40.9 percent in the first semester of 2020.</strong></p> <blockquote class="twitter-tweet" data-width="550" data-dnt="true"> <p lang="es" dir="ltr">La historia de la medición de la pobreza en Argentina en un gráfico. 1988 &#8211; 2020. <a href="https://t.co/7sR2C48CQN">pic.twitter.com/7sR2C48CQN</a></p> <p>&mdash; Martin Rozada (@MartinGRozada) <a href="https://twitter.com/MartinGRozada/status/1311668409176920064?ref_src=twsrc%5Etfw">October 1, 2020</a></p></blockquote> <p><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></p> <p>But with the pandemic and the lockdown only starting in the second half of the first semester, those figures would look much different for June than what they did in January.</p> <p>According to a breakdown of the official data published by Alberto Fernández’s ally and Banco Nación president Claudio Lozano, <strong>poverty actually <a href="https://www.clarin.com/economia/segundo-trimestre-pobreza-salto-46-21-millones-personas-pais_0_SfabZbsON.html?utm_medium=Social&amp;utm_source=Twitter#Echobox=1600979504">rose to 46 percent</a> between April and June 2020</strong>. Similar figures are being offered by the Argentine Catholic University, who places poverty between 45 and 47 percent as of today. CEDLAS, another institute measuring poverty, also puts it at 47 percent for the second quarter.</p> <p>The consensus is there are 10 percentage points more poor Argentines than a year ago, 4.4 million up compared to the second quarter of 2019.</p> <p>Looking at child poverty paints an even more depressing picture: according to CEDLAS calculations, <strong><a href="https://eleconomista.com.ar/2020-10-abril-junio-pobreza/">6 out of 10 kids below 14 years of age were living in poverty</a> during the second quarter of the year</strong>, a grim sign for Argentina&#8217;s future.</p> <p>As for destitution figures, which measure the share of Argentines not earning enough to afford the minimum required nutrition, it has also soared to 10.5 percent, up from 7.7 percent a year ago, INDEC reported.</p> <h2><strong>Comparisons with 2001</strong></h2> <p>For the first time in two decades, the figures start to look similar to those of Argentina’s 2001-2002 crisis, the worst in the country’s modern history, when unemployment briefly reached <a href="https://www.clarin.com/economia/desocupacion-alta-historia-215_0_H1EQP4gRtx.html#:~:text=En%20un%20a%C3%B1o%20la%20tasa,la%20gesti%C3%B3n%20de%20Carlos%20Menem.">22 percent</a> and poverty neared 60 percent.</p> <p>But although it’s quite likely that Argentina will reach those levels, given that the economic crisis is still ongoing, the social situation is still not as grave as it was at that point yet.</p> <p>One important factor is that the methodology to measure poverty has changed since the start of the century, and if current standards were used, then poverty during that crisis would have been <a href="https://twitter.com/danyscht/status/1311386012694786049">closer to 70 percent</a> for a few months after the late 2001 banking crash and early 2002 devaluation, more than 20 points above the current measurements.</p> <p>There’s also the fact that Argentina’s welfare state is somewhat stronger than it was in 2001, with the Universal Child Benefit (AUH) and the Emergency Family Income (IFE) providing basic sustenance to families in dire need.</p> <p>But with the Argentine currency nearing total collapse and economic authorities <a href="https://gettheessential.com/economy/2020/09/24/new-central-bank-restrictions-wont-halt-economic-crisis">running out of options</a>, a massive devaluation of the peso and inflationary jump seem <a href="https://gettheessential.com/economy/2020/05/07/how-argentina-recovers-from-its-economic-crises">all but inevitable</a> to escape the current crisis and re-start economic production, so those benefits might not be enough to contain further social deterioration down the line.</p> <p>In the short-term, however, there is hope that the re-opening of some economic activities will bring back part of the jobs lost, with industries and services now slowly regaining traction, although several thousands of them have already closed their doors permanently.</p> <p>

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Ignacio Portes

Ignacio Portes is The Essential's General Editor. Former Economy editor at the Buenos Aires Herald, he has also written for publications such as Naked Capitalism, NSFWCorp and Revista Debate.