PUBLIC EMPLOYMENT PROGRAMS CASE STUDY: ARGENTINA'S TRABAJAR PROGRAM Presented at the Transfers & Social Assistance for the Poor in the LAC Regional Workshop

Argentina's urban poverty declined between 1990 and 1994 together with the achievement of economic stability and growth. This was a dramatic reversal of the trend during the latter part of the 1980's. While Argentina has been quite successful with its recent stabilization and reform efforts, outcomes in the area of employment have been disappointing and some of the previous gains in poverty reduction were reversed during the economic recession of 1995-1996. A highly centralized and rigid labor market has hindered mobility, reabsorption of displaced labor, and wage flexibility, and has resulted in a more costly and longer macroeconomic adjustment. In addition, the new exchange rate parity, decreases in the relative price of capital, low inflation, and nominal wage and labor market rigidities favored quantitative adjustments (reduction of labor force) over price adjustments. Wage and non-wage labor costs have remained high in spite of high levels of unemployment (nationally at 17 percent). Greater employment creation is expected to come about from increased economic activity, which will particularly be stimulated by lower labor costs and increased flexibility in contracting and collective bargaining.