Enrique M Stile
Marval, O’Farrell & Mairal, Buenos Aires
ems@marval.com

Javiera Martinez Correa
Marval, O’Farrell & Mairal, Buenos Aires
jamc@marval.com

Introduction

We are undoubtedly facing a challenging era: a global pandemic, a war with international scope, and unprecedented technological progress have all had their inevitable impact on the worldwide economy, society, and politics. Of course, the labour market has not been immune to this.

In this environment, employees’ priorities have shifted and this, together with the restructuring of the labour matrix, has forced companies to adapt – in the most Darwinian sense – to be able to recruit and retain qualified personnel while remaining competitive.

This article will analyse how companies are adapting in an adverse economic and social environment.

Pandemic, technological revolution, and economic crisis

When talking about the events that have recently affected the labour market, the first which comes to mind is clearly the Covid-19 pandemic. Few other events have generated so many changes in society as Covid-19, which in 2020, brought unexpected change worldwide. People were forced to stay at home and remove any social or cultural activities from their lives. Digitisation grew exponentially as work in most non-essential areas began to be carried out remotely.

But the Covid-19 pandemic arrived in an environment already favourable to digital communications. There was already a global technological revolution taking place, and globalisation had brought an intensification of all kinds of transnational business schemes.

In that sense, the pandemic and technological advances have led to the blurring of physical and geographical borders. They have made it possible for work to be carried out from anywhere in the world where there is the infrastructure and employees with the necessary skills.

But the technological progress and globalisation have not only produced the digitisation of services. There is also a gradual replacement of human work by artificial work. This implies a higher valuation for specialised and qualified jobs. While mass or manual jobs are more likely to be absorbed by technology, the most sought after are the more sophisticated jobs, especially those involving the ability to work together with technological systems.

Another factor affecting the labour market is the adverse economic situation. Inflation has been a key issue in Argentina for decades, but now, with an ongoing international war, it is becoming a problem worldwide. We are now facing an inflationary environment not seen in decades.

The human factor

Inevitably, these circumstances have had an impact on the human factor, which is clearly the main factor in businesses. Technologies, production and services are all managed by people who are also part of society.

First, the pandemic introduced the idea of a ​​crisis very close to people’s everyday lives. The idea of ​​getting infected, suffering the disease severely or even dying has led to a shift in priorities.

Many researchers are studying what has been called ‘the great resignation’. This is the process in which employees around the world left their jobs in search of short-term goals and gave priority to their personal lives. It can be said that people in general – and employees in particular – began to prioritise quality of life over professional development, and to rethink whether their work truly satisfied them.

On the other hand, the current inflationary context also influences employees to prioritise short-term economic incentives over a gradual long-term career. This leads to continuous staff rotation. Companies invest more in recruiting new talent than in retaining their own, and employees are easily persuaded to look for instant financial satisfaction rather than waiting for the long run. And economic wellbeing is undoubtedly part of individual wellbeing.

There is also a generational aspect to it, as it is more typical of Generation Z and millennials to aim to work for employers which are consistent with their values ​​and principles. The term ‘green economy’ has been used for such sectors relating to the production, distribution and consumption of goods and services consistent with human wellbeing. This includes companies that demonstrate a commitment to the environment, corporate social responsibility, as well as diversity and inclusion.

Challenges for companies

As described, we are facing the replacement of manual human labour with more technological and qualified jobs, while simultaneously seeing a lack of enthusiasm for traditional work and a prioritisation of short-term incentives against a background of inflation and social uncertainty. All these factors make it increasingly difficult for companies to stay competitive and retain talent.

Companies face difficult internal competition. The development of start-ups with attractive incentives for young talent are common. Moreover, the pandemic and the subsequent telecommuting has resulted in local companies competing with multinational companies. In Argentina, an increasing number of employees are being recruited by foreign companies to provide services from home. These companies are inevitably in a better economic position to offer young people what they are looking for.

In other words, international mobility stimulated by digitalisation resulting from technological development, communications, and the pandemic triggered unforeseen national and international competition for local companies.

Recruitment and retention

This whole situation puts human resources in a strategic position. Managing human resources is no longer just about recruiting and organising personnel. A survey carried out by the international consulting firm PAE involving 121 leading companies in Argentina showed that companies’ current main priorities are the creation of salary incentives, retention of talent, and creation of competitive compensation schemes that protect employees’ emotional wellbeing.

Accordingly, in an inflationary context such as Argentina’s, with exchange restrictions in force, many companies have begun to pay salaries partially or totally in US dollars, constituting a great incentive by ensuring the value of wages in the face of devaluation.

Other companies have even gone a step further and adopted payment mechanisms that involve technology not yet regulated (at least in Argentina), such as cryptocurrencies. Clearly, blockchain technology has appeared as a typical phenomenon of this new virtual economic reality product of globalisation and technological progress, and everything seems to show that employment law cannot remain oblivious to these changes for long.

Nevertheless, monetary incentive is not the exclusive mechanism for attracting today’s employees. In addition to strategies to keep salaries intact in an era of economic instability and uncertainty, companies must create indirect compensations or non-salary incentives – the so-called ‘emotional salary’.

Indirect compensation includes lunch allowances, housing, items for children of school age, etc, all of which – without being monetary – imply an indirect compensation that reduces the cost of living, in addition to demonstrating empathy towards employees’ personal situations.

Other non-salary strategies aim to make employees comfortable at work, in a scenario in which going to the offices in person is no longer a prevailing need. These include flexible working policies in which performance matters more than strict compliance with the working hours. The truth is that the pandemic and the new technologies gave rise to a new mechanism for measuring working hours, which focuses on meeting objectives and results rather than on a time schedule. This, in turn, is compatible with more comfortable and flexible schedules, demanded by employees after the pandemic.

To encourage employees to go to the office in person, it has become common to create space where employees can feel comfortable, such as co-working areas, after office events, breakfasts, or even entertainment areas with table tennis tables, among others.

These strategies not only have the objective of recruiting and retaining employees, but also improving productivity and employee commitment rates. This is eventually reflected in business results by reducing staff rotation and the associated costs of recruiting.

Final thoughts

Argentina and the world face an era marked by the effects of the pandemic on the economy, society, and human psychology. Companies are struggling to remain competitive in the face of employees’ priorities, which have drastically changed from long- to short-term objectives.

It has become apparent that employers in Argentina and elsewhere must make their businesses develop in a way which does not provide any certainty about the future. The strategies vary from those designed to protect salaries against a background of inflation, to those aimed at improving employees’ emotional wellbeing. This implies playing within certain limits of employment law, such as working hours and salaries. We are clearly facing a labour market that does nothing but change and adapt to the times. The same should apply to companies and the law.