Macroeconomic Stabilization and

Socio-Economic Transformation
Through Public Employment:
The Case of Argentina
Pavlina R. Tcherneva, Ph.D.
Assistant Professor, Bard College
Research Scholar, Levy Economics Institute
tchernev@bard.edu
http://pavlina-tcherneva.net
Twitter: @ptcherneva
Outline

• Hyman Minsky’s approach to macroeconomic

stabilization
• Targeted Demand vs. Aggregate Demand Management
• Direct job creation as a tool for macroeconomic
stabilization
• Direct job creation an institutional vehicle for socio-
economic change and transformation
• Argentina’s experience with large scale public
employment
 Hyman Minsky’s approach to
macroeconomic stabilization
• Minsky – Financial Keynesian/Analytic Institutionalist
• Financial theory of investment
• Institutions matter; 57 varieties of capitalism
• Normal functioning of the economy leads to financial crises, inflation,
unemployment and poverty in the midst of plenty
• Unemployment is a pervasive feature of monetary production
economies (K. Polanyi: the uncertainty of labor conditions was the
most vicious result of the new economic system)

• Full employment at the center of policy

• No ‘one-glove-fits-all’ policies
• High-investment path is rejected in favor of high/full employment
path via direct job creation
Targeted demand management: high
employment path

• Minsky’s “Road to participation” through Public Service

Employment (PSE); chock-full employment (Vickrey)

• Full employment through direct job creation (Keynes)

Public Service Employment (PSE)
• A “bubble up” policy, not trickle down economics

• Counter-cyclical stabilizer

• Pays a fixed (living) wage and sets the standard for all
industry

• Maintains and enhances human capital

• Addresses cyclical and structural unemployment

• Does not have the inflationary bias of pump priming

• Is a better anti-poverty strategy

When are Public Service Employment
Proposals favored?
• Economic Stabilization or Crisis Resolution (Great Depression,
Argentina)

• Also proposed as a tool for industrial development (Korea) or urban

development (M. L. King)

• A Tool for Poverty Reduction (India, South Africa)

• Corporatist model (Sweden)

More than policy for full
employment
• PSE --Institutional Vehicle for achieving a wide range of desirable
social goals—a tool for organized and structured response to:

• Gender Issues

• Race issues

• Universal health/education

• The Meaning of Work

• Living wage issues

• Environmental rehabilitation

• Etc.
Public Service Employment (PSE)
• The merits of direct job creation extend beyond its macroeconomic
benefits
• J.R. Commons: policy makers must “pursue appropriate
institutional design to allow collective action by the working
class and to use government to raise the standards of working
conditions toward best practices in industry.”

• Public Employment Programs can set the standard and serve as

an “institutional pre-requisite for successful capitalism.”
 Targeted demand management:
Lessons from Argentina
• Macroeconomic aspects and institutional characteristics; response to
critics

• Argentina: Minskian Financial Fragility helped by Washington

Consensus policies (currency board, market liberalization, downsizing
government, massive privatization and freeing financial capital)

• The depression of 2001/2002 – unprecedented levels of

unemployment and poverty

• Argentina implemented a direct job creation program (Plan Jefes y

Jefas de Hogar) to provide jobs to unemployed male and female
heads of households
 The standard objections to
PSE programs
• Unmanageable, administrative nightmare
• Big and inefficient government, corruption
• Unskilled and lazy people with no culture of work
• Disincentives to people to get real jobs
• This is not work, it’s ‘make work’, or simply unemployment by
another name
• Programs are inflationary, they destabilize currency, crowd-out
private investment (and actually hurt the economy)
• Forcing people to work in government projects under very poor
employment conditions is akin to slavery (coercion)
• Artificially increasing the labor force by ‘activating’ many women
who were otherwise perfectly happy to stay at home
• There isn’t sufficient infrastructure and institutional support for
large-scale public service programs
 How did Argentina answer
these objections
• What is the Argentinean Program?
• In 2001 Argentina: over 30% unemployment, 80% child
poverty, 25% of the population lived in extreme poverty.
Factories were shutting down for over a decade.
• People took to the streets demanding from the government to
provide jobs
• (Jefes y Jefas) which paid 150 pesos/mo (US$50) for 4 hrs of
daily work in a community project.
 Who are the beneficiaries
• Most people who showed up for work were from the bottom
20% of the income distribution, with no education and with
many unsatisfied basic needs (like poor housing, sanitary
conditions, overcrowded rooms, etc). 70% were women.

• Beneficiaries:
• immigrants with little formal labor market experience
• skilled workers who had lost jobs as a result of the economic
crisis
• young and educated women from a “downwardly mobile”
neighborhood that had aspired to middle class status before
the crisis
Beneficiaries: Educational Level

45
40
35
30
25
20
15
10
5
0
ed
ar
y
ar
y
ool ool it y ity
n d
im im h h rs r s
tte pr pr sc sc iv
e
iv
e
a < = gh gh u n u n
v er h i h i < =
ne < =
Beneficiaries: Unmet Basic Needs
• More than 3 members per room 21.8%
• Inadequate housing 8.6%
• Poor sanitation 44.9%
• Kids that do not go to school 0.9%
• Dependency rate (members per
employed person in the household) 3.9
• Household with at least with one
unmet basic need 56.8%
Did you receive other social assistance ?

• Food assistance 47.2%

• School Lunchroom 38.7%
• Medicines 21.2%
• Clothing 14.0%
• Community Lunchroom 12.8%
• Cash subsidies 12.8
• Free crèche 2.9%
• School fellowships 1.6%
Why you do not work in the program?

Pregnacy

Waiting to start

Handicaped

Have no information

I have family to take care

Nobody called me

0 10 20 30 40 50 60
Some averages

• Average size of the household 4.5

• Average number of youngsters 2.4
• Average number of older than 60years 0.2
• Households with at least one unemployed 65.6%
• Dependency rate (members per occupied person in
the household) 3.9
Distribution of Jefes workers
by type of employment

work in firms
1% other
3%
school attendance
2%

training
7%

community projects
87%
 Projects: Financing
Maximum
Project Types financing
1. Water Supply 80%
1. Sanitary 2. Sewer System, Water-Drainages 80%
Infrastructure 3. Pluvial Networks 60%
1. Health Infrastructure 80%
2. Education Infrastructure 80%
3. Welfare Infrastructure 60%
4. Communitarian Cultural
2. Social Infrastructure 60%
Infrastructure 5. Sport Infrastructure 60%
1. Municipal infrastructure for trade
fairs & markets 60%
2. Municipal Slaughter Houses 60%
3. Recreational and/or Tourist Areas 60%
3. Productive
Infrastructure 4. Hydraulic Defenses 60%
4. Improvement of
the Habitat 1. Improvement of claypits 60%
5. Communitarian
Orchards 1. Communitarian Orchards 60%
 Decentralized administration
• Institutions:
Project-
Executing • National: Ministry of Labor, GECAL
Organizations
• Local: Municipalities, Municipal
Municipality Consultative Councils (MCC)

• Project Executing Organizations:

Beneficiaries • NGOs, Governmental
Municipal
Consultative organizations, Non-profits
Council (CCM)

• Beneficiaries
• Heads of Household
Types of community projects

Micro enterprises 26 %
Social and community services 17
Maintenance and cleaning of public spaces 14
Public lunchrooms 11
Educational activities 10
Construction and repair of homes and social infrastructure 8
Healthcare and sanitation 5
Administrative support 4
Child care 2
Elderly care 1
Other 2 .
Total 100 %
 What types of work do the
beneficiaries do?
• Activities
• Many of the projects sell output in markets
• Some distribute their output or services free of charge to their communities

• SOME SPECIFIC EXAMPLES

• Cleaning and environmental support in the agricultural sector
• Improving the sewer systems and water-drainage
• Renovation of existing community centers or building new ones
• Food kitchens
• Family attention centers which address domestic violence issues or provide temporary shelter
and other services to abused women or children
• Health promotion programs, which offer basic education on sanitary issues, for example, how
to boil water, how to handle food and avoid dysentery and other infections;
• Mending old clothes that have been donated to poor communities
• Repairing donated books for public libraries in poorer communities
• Reforestation
• Survey of malnourishment
 Do people get stuck in the
public sector?
• Jefes increases employability
Steady Decline in Jefes Beneficiaries
2,500,000

2,000,000

1,500,000

1,000,000

500,000

0
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07
 Macroeconomic conditions
GDP

• Unemployment 31%  8%, government surplus 2% of GDP

• The multiplier effect of this program on the economy is 2.57
• Indigence (extreme poverty) fell by 25% in the first 4 months after the
implementation of the program
Unemployment began falling before GDP started growing

Unemployment rate

GDP growth
Government budget

Government budget
The exchange rate
Prices
 Impacts: Poverty and
Indigence
Households
Households Without the With the plan % point
plan difference
Indigent 86.4 61.8 -24.6

Poor 98.3 95.4 -2.9

Individuals
Households Without the With the plan % point
plan difference
Indigent 87 68.6 -18.4

Poor 98.6 96.7 -1.8

Microeconomic conditions
• Jefes formalizes the gray economy
• Social security and retirement: employment cards and benefits
• Employment contracts
• Effective minimum wage policy

The Jefes Wage is the Effective Minimum Wage

Distribution of Jefes beneficiaries who have found private sector jobs

according to salary received
Salary received Percent of beneficiaries

Less than 150 pesos 6.8%

150 -- 349 pesos 30.4%
350 -- 549 pesos 34.8%
550 -- 749 pesos 17.7%
750 pesos and above 10.3%
TOTAL 100.0%
 Is Jefes a Minskian program?
Institutional Characteristics Minskian direct Argentina’s Jefes Plan
job creation
1. Infinitely Elastic Demand Yes. No means No. It is means-tested and
for Labor? tests, no term limited to heads of household;
limits it does not have term limits
but other policy initiatives aim
to eliminate the program.
2. Hires Off the Bottom? Yes Yes

3. Loose Labor Markets? Yes Likely. People moving into the

private sector but program
discontinuation prevents
evaluation of any long term
counter-cyclical mechanism.
4. Fixed Wage? Yes Yes, but below poverty
wage.
5. Enhances Human Yes Maybe. The training and
Capital? education component is too
small relative to needs.

6. Useful Activities? Yes Yes

 ARGENTINA SECTOR BALANCES
8

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

-2

-4

-6

-8
source: World Bank Government sector balance (%GDP) Private sector balance (%GDP)
Jefes and women
• August 2005 cite visits and interviews with policy makers and
workers

• A large majority of interviewed participants were female, as were

many of the supervisors, managers, political activists

• Gender matters in Jefes program evaluation

• All women said they preferred work over welfare

• They benefit from a range of social services

• Most of the women – especially those who had not previously

participated in formal labor markets – believe they are learning
useful skills; many think they are improving their chances of
obtaining other (non-Jefes) paid work, which some women desire
Discussions with ministry
of labor officials
• Committed to the issues but insisted on reform
• Types of reform
• Plan Familias: child allowance
• Seguro de Capacitacion y Empleo: unemployment insurance with
training component
• Main objections to the Program
• Corruption and clientelism
• Training and education is too low
• Poorly designed and mismanaged projects
• Deficient institutions, resources and infrastructure
• ‘Make work’
• Artificial increase in the labor force by ‘activating’ women
Financing constraints and
community initiative
Does the program generate
disincentives to work?
• Everyone wants to work, some want private
sector jobs, others prefer public sector jobs
because they are ‘mother-ready’ (but they want
to work and not to sit at home)

• Many worked long hours (beyond the 4 hours for

which they are paid); many were getting literacy
training and education alongside their
employment
Why people wanted jobs
• Reasons for preference to work:

• they felt (or would feel) useless sitting at home

• they felt like they were helping the community when they
were working

• there is dignity in working

• they were meeting their neighbors and

• they were learning new skills

Why people wanted jobs
• Little money but
want to work
Why satisfied with program
Why people wanted jobs
• Pastry shop long
Women (& men) wanted jobs
Is this make work?
• Most cases products were sold on the market
(carpentry, knitted products, baby clothes)

• Food kitchens work overtime or until they run out of

supplies

• In some cases you could think it’s make work (e.g. agro
plot, where people do not sell the vegetables in the
market but growth them just feed themselves and
their families, but this is not like digging a hole and
filling it back up)

• The debate with politicians and the meaning of work

Is this slavery, do people work
in poor conditions?
• In some cases new community centers were built. In many
neighborhoods, however, the infrastructure is so poor that
there is simply no good place to do the jobs. Families
‘donated’ rooms in their homes and their garages to these
projects; so long as there are jobs, people will find the place to
do them
Types of projects: butcher
shop, sewing coop, bakery
Agro-coop, Micro enterprise, Multi-
project house
Literacy training, education, family
planning, low cost/high quality
products
Problems with the Argentinean
program
• MUCH WORK NEEDS TO BE DONE
• Below poverty wage
• Not enough training
• Not enough projects
• Not enough funding
• Some corruption and inefficiencies

• THINGS JEFES MAY NOT BE ABLE TO ADDRESS

• Stigmatization of workers by private sector employers
• Discrimination of immigrant workers in the market place

• CURRENT REFORM
• From Jobs to Child allowance and Unemployment Insurance – a step
back for women
A note on the present reform

• Familias
• Child allowance

• Seguro de Capacitacion y Empleo

• Unemployment insurance with training component

• All women report that they wanted to work

• Jefes: a policy with the people in mind
How has Jefes helped micro-
conditions
• Formalizing the gray economy: When people leave Jefes they enter the formal sector and
they get paid a premium above the Jefes wage

• Social security and retirement: employment card and benefits

• Stable employment contracts

• Reduced precarious work

• Women are given both income and an opportunity to work (unlike US welfare where they
need to find jobs to prove that they are deserving of the welfare benefit). Jobs in the public
sector are mother-ready: public sector has increased the provision of day care services and
public sector jobs specifically are close to the children.

• PSE jobs provide after-school activities, help with homework assignments and have
increased school enrollment and performance and have reduced drop out rates.

• Enhanced health services (nutrition, prenatal, reproductive services)

• Enhanced (relatively) training and education, although much is needed still.

• Alleviation of skill mismatch problems: Database of skill, training and experience of Jefes
workers is accessible to private employers who can hire depending on their specific skills.
Formal program for inserting public sector workers into the private sector.
Do the Beneficiaries Benefit?
• It is important how the people who participate in the program
view it and how it has affected their lives
 Satisfaction with the program
Degree of Satisfaction with the Program

80

70

60

50
percent

40

30

20

10

0
Very satisfied Satisfied Not Satisfied
SOURCE: Ministry of Labor, Employment and Social Security, Argentina
 Reasons why you are satisfied
with the program Reasons Why You Are Satisfied With the Program

I have an income

I do what is required

I can do something

I help the community

I work in a good environment

I learn

0 5 10 15 20 25 30 35 40 45
pe rce nt
SOURCE: Ministry of Labor, Employment and Social Security, Argentina
What would you like to do
as part of the program? What Would You Like to Do as Part of the Program?

Go to school

Training

Community project

productive project

work in firms

other

0 5 10 15 20 25 30 35
percent
SOURCE: Ministry of Labor, Employment and Social Security, Argentina
Why they liked their public
sector jobs
• Proximity to jobs and childcare

• Long commute from jobs was among the major disadvantages to their
private sector jobs before they were laid off.

• Kids attended daycare, enrolled in school, or accompanied mothers to

the workplace for after-school activities.

• Participants have access to various social services—often in a room

attached to the workplace.

• tutoring and literacy programs for children and adults

• reproductive health services
• information about intervention services for drug abuse and violence
within the family
PSE Empowers
• Acquire skill and experience
• Dignity in work
• Direct representation in government
• Decentralized model that enhances participatory democracy
• The Take by Naomi Klein and Avi Lewis (Brukman factory)
Infrastructure constraints?

 Eva Peron foundation

Literacy training, education,
family planning, low cost-high
quality products
Desire to work
• Women wanted work (many worked long hours, beyond the 4 hours
for which they were being paid)
• Some had specific skills, some were getting literacy training and
education
• Some were starting their own business
• Reasons for preference to work
• they felt (or would feel) useless sitting at home
• they felt like they were helping the community when they were
working
• there is dignity in working
• they were meeting their neighbors
• they were learning new skills
• PSE Empowers
• Women supervisors, managers, community leaders
• Direct representation in government
• Cuidad Oculta (now Villa 15)
• Decentralized model that enhances participatory democracy
Preference for public sector jobs
• Proximity to jobs and childcare
• Long commute – a major disadvantage to their private sector jobs before they
were laid off
• Kids attended daycare, enrolled in school, got needed vaccinations
• Public sector jobs involved students in after-school activities and offered help
with homework assignments; some indication of reduced dropout rates

• Participants often have access to various social services – often in a room

attached to the workplace
• Tutoring and literacy programs for children and adults
• Reproductive health services
• Information about intervention services for drug abuse and violence within the
family
• Homeless shelters

• Public employment commands more respect than informal work

Jefes vs. Plan Familias
• Welfare reform
• Women kept going to Jefes jobs
• Did not want to transition to welfare
• No longer benefited from or participate in the provision of
the much needed community services supplied through
Jefes
• Forced back into the household (their needs for paid work
become invisible)
• Reform reinforced old stereotypes about women’s roles in
the household/market
Jefes vs. Familias and Women

• Expand, enhance female agency: patients of development,

agents of development
• Erode paternalistic views of women’s place in society and
women’s jobs, meaning of work
• Dignity, Empowerment, Respect
• Escape from domesticity, forced inactivity
• Double shift?
Problematic reform
• Santa Fe test run study by World Bank poor results
• Stepped up PR efforts to convince people to transition
• Reinforces paternalistic views
• Jefes provides control over income, output and assets (micro-
coops). Familias does not.
• Makes them dependent on social services
• Removes tangible opportunities that empower

• Keynesian warning of the fate of programs that are

implemented as emergency measures and temporary fixes to
short term cyclical instability.
• Unemployment is a long term problem
The meaning of work:
two views
• Public discussion about the meaning of work
• productive vs. unproductive
• profit generating vs. socially useful activities
• women’s work as a public good?

• A major obstacle and reason for reform: politician’s attitudes toward

women’s work

• Welfare or Work?
• The point is not to require women to work as is done in modern
workfare programs with punitive means-tested measures, but to give
them the opportunity to be employed in decent jobs if they want to
work
• Policy must consider what women want
Public service employment as an
institutional vehicle for addressing
gender disparities
• The gender dimension of public service employment (PSE)
• PSE offers parent-ready jobs
• Reduces time-use associated with unpaid work
• Reduces unpaid work itself by recognizing care as socially useful
• Reduces gender biases in work (e.g. feminization of certain low skill jobs
due to inadequate access to training and education)
• Provides income and assets to women
• Empowers women by involving them in the community at every level
• Broadens the meaning of productive work
Bottom-up approach
Concluding observations
• There is not one type of market economy and that as a society
we are free to chose the market economy we want.

• The outcomes of economic policy are never narrowly economic.

• Government must assume responsibility for macroeconomic

coordination such that the economy functions for all members
of society.

• Full Employment must be at the center of policy. Direct job

creation can deliver full employment while serving as an
institutional vehicle for socio-economic change, but it must be
periodically re-evaluated and re-adjusted to fit the needs of an
evolving economy.