12 will be important to ensure that the informal jobs keeping many residents out of extreme poverty are not destroyed but either moved to the formal economy or kept in the informal economy with increased wage and labor regulations. While expanding regulation within the informal sector, policies could at the same time encourage informal workers to slowly transition to the formal sector through education and training. Protecting the earnings and livelihood of informal workers directly addresses Argentina’s commitment to three of the United Nations Sustainable Development Goals: no poverty, decent work, and reducing inequalities (Medina & Cario, 2017). History of the Informal Sector in Argentina The history of the informal sector in Argentina is long and complex. The sector has expanded and diminished, sometimes dramatically, driven by several key factors. According to the ILO, variables that have increased the size of the informal sector in Argentina include a complex tax system, high tax rate, strong formal employee benefits, lack of access to education, solid social programs for informal workers, and recessions. Considerable debate exists regarding whether Argentina’s large informal sector results mainly from (1) an excess supply of workers, (2) mismatches between worker skills and formal firms’ needs, or (3) a lack of demand for formal workers due to excessive labor supply. Labor experts argue that “informal jobs may often be the only opportunity available to unskilled workers” (Albertini et al., 2019). This duality—lack of alternatives and lack of skills— in turn suggests that transitioning informal workers to the formal sector not only depends on the quantity of jobs but also on what types of jobs are created. Globally, informality and per capita income are inversely related (International Labour Office, 2013). In Argentina, this pattern has repeatedly emerged during recessions: the informal sector grows as poverty and formal unemployment rise. Due to political instability in the 1960s and 1970s, Argentina saw its first significant emigration of highly skilled, native-born citizens. This outflow was coupled with a large inflow of less-skilled, less-educated immigrants from other Latin American countries between 1960 and 1989. Presumably, these migrants left their countries looking for new opportunities in Argentina; however, due to a limited supply of formal jobs and the migrants’ education levels, many joined the informal sector upon arrival. During the early 1990s, Argentina economically outperformed many countries across Latin America; however, later in the decade, a currency, debt, and banking crisis catapulted Argentina into one of the worst recessions in its history. This downturn caused millions of people to fall into unemployment, poverty, and the informal sector. The recession in Argentina and increasing wages in the EU prompted the number of Argentine emigrants to Spain and Italy to double from 1999 to 2004. Many of these emigrants were classified as skilled and educated workers. The brain drain of highly skilled, intelligent workers leaving for other countries is a large problem not only in Argentina but also throughout Latin America (Jachimowicz, 2006). Many social programs were instilled to support Argentina’s poor; for example, in 2002, the government launched a massive social transfer program called the Head of Households Plan to help cushion crisis effects and combat the massive poverty. Informality hit an all-time high of 60% during the 2001 recession; however, by 2004, informality started to decline (Porembka, 2013). Argentina’s economy grew significantly during the period 2004–2019, which drove down both unemployment and the size of the informal sector (Figure 1). However, this downward trend in the informal sector recently has reversed, due to the current recession that started in 2018. Exacerbated by the COVID-19 pandemic, Argentina’s real unemployment rate approached 28% as of December 2020. Furthermore, the rate of Argentines entering the workforce fell to its lowest level on record (Gillespie, 2020). Similarly troubling, Argentina’s poverty rate increased from 20% in 2018 to 47% as of late 2020 (Misculin et al., 2020). Demographics of Informal Workers in Argentina In order to fully understand the informal sector in Argentina, it is important to know who is involved. There are at least two types
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