How Can Employers Help Workers Affected by Argentina’s High Inflation?

Liliana Makovsky is a neonatologist nurse in a private hospital in Buenos Aires, Argentina. Living through many years of increasing inflation in Argentina means her salary covers much less than it used to. Even when her salary is raised, it barely keeps up with the inflation.

"Inflation practically erased our ability to save money," Makovsky said. "We had to work more overtime and spend less, not going on vacation, making arrangements at home ourselves without hiring other people, not going out for coffee or restaurants, etc., and yet we couldn't save for six months. The increase in prices happens faster than the increase in salary. By the time you get your pay raise, inflation is higher again, so you never recover your purchasing power."

Decades of Inflation

Argentina's inflation has been ongoing for nearly two decades, and some employers are trying to find ways to dull the impact of the constant crisis. The country is at a record level of inflation, with the current annual inflation topping 120 percent per year, or an increase in the price of goods and services averaging around 10 percent each month. 

Salaries are worth less every month, so employers need to update workers' salaries, said Guillermo Matias Osorio, an attorney with Marval O'Farrell Mairal in Buenos Aires. Otherwise, workers "simply cannot pay the bills at the end of the month." But "even though you update the salaries, at the end of the day, people earn less money," he added. "This happens with all Argentinians. It has been happening for many years now and keeps happening, and that process has accelerated."

Companies understand this problem, and executives of the companies have the same problem themselves, he said.

Unions help to resolve the ongoing problem through regular collective bargaining pushes for salary updates, usually three or four times a year. For employers with nonunionized employees, there are other solutions.

Options for Employers 

One option for companies is to set salaries in a foreign currency, usually the U.S. dollar, but to pay the salary in pesos. This tends to be more common for executives, directors, top-level employees and the highly competitive IT industry. A contract will state the salary in the foreign currency, but it will be paid the equivalent amount in pesos according to the exchange rate in the days leading up to the day of payment. 

"This mechanism is very efficient because the financial statements of multinational companies are usually set in U.S. dollars," Osorio said. "They can foresee the cost, and the salary is updated accordingly."

The problem with this system is that, even for multinational companies, the funding for local salaries doesn't usually come from goods and services that are priced in U.S. dollars or a foreign currency; they are priced in local pesos. 

Another option is to both set the salary in a foreign currency like U.S. dollars and pay the salary in that foreign currency. The problem with this method is that there are often restrictions on accessing foreign currency, so many companies won't be able to access the currency needed to pay salaries in this way. 

Change is likely coming to Argentina with the presidential election of Javier Milei. His top campaign proposal aimed at eradicating inflation has been to ditch his nation's peso and adopt the U.S. dollar as the national currency, according to The Wall Street Journal. However, some economists question whether the country has the funds to carry out his dollarization proposal.

Companies can also choose to make advance payments of salaries to get ahead of inflation. "When you have 10 percent inflation in one month, if you pay the employee on the 15th of the month instead of day 30, the employee is saving the same 5 percent," Osorio said. Sometimes this means simply that companies pay the annual Christmas bonus in advance, even as early as November, while other companies are paying regular salaries in advance, so employees can get more value for the salary they are owed.

Benefits for Employers and Employees

Attempting any of these options can alleviate some of the financial stress on regular employees.

"It's creating a huge discomfort, and huge levels of frustration, because people have been in the same work for years and years and years. ... It's not logical that you have the same job for 20 years, and you earn less money as time goes by," Osorio said. "And all of a sudden, you see yourself struggling to pay the bills at the end of the month, for services and goods that you used to be able to pay five to 10 years ago."

For Makovsky, the little that is done is not enough. "There are salary increases, but they arrive late," she said. Many of her co-workers are taking on overtime hours to earn a little bit more money. 

"The biggest challenge is to maintain the same lifestyle despite inflation. Slowly, your purchasing power decreases and you start giving up small things," Makovsky said. "We still believe the situation can change and the country has great potential, but we need a different economic plan."

Katie Nadworny is a freelance writer in Istanbul.