Today’s Labor Updates:
Argentina Introduces New Inflation Index
Why Volkswagen is helping a union organize its own plant
Argentina Introduces New Inflation Index
Economists Had Accused Government of Lying About Data in Previous Index
By Shane Romig
BUENOS AIRES—Argentina released a new measure of inflation on Thursday aimed at assuaging critics who accused the government of President Cristina Kirchner of lying about the data.
Under the new calculation, the January consumer-price index rose 3.7% on the month, according to the national statistics agency Indec, a reading that isn´t far from independent estimates. According to private forecasts compiled by opposition legislators, prices rose 4.61% in January and were up 30.78% on the year.
In December, the old index pointed to a monthly inflation rate of 1.4% and an annual gain of 10.9%. Last year, the International Monetary Fund censured the country for producing questionable data as inflationary pressures increased. “I think this reconfirms that the government is serious about its international agenda and perhaps it even shows that they might be slightly more serious than we had expected,” said Credit Suisse economist Casey Reckman.
The new index measures prices on goods across the country and replaces one that only calculated inflation in the urban sprawl of the country`s capital Buenos Aires. The change was intended to provide a more accurate reading of price increases and restore investor confidence. The IMF reacted cautiously to the new index, saying Thursday that it will review Argentina´s reports on progress in revising its inflation and gross domestic product statistics later this year.
While the new index will win the government some plaudits with economists, it could complicate things politically for Mrs. Kirchner by explicitly recognizing that prices are rising far faster than the government had previously admitted, and raising the bar for wage demands from unions and other workers. Unions have used their own rough estimates of inflation as a floor for annual wage talks overseen by the government and launched frequent strikes that have crippled the country.
The labor groups have been a key constituent of the ruling Peronist party. But relations with labor leaders have soured in recent years as heavy government spending—financed largely by printing money and borrowing foreign reserves—has fueled steep inflation that hit workers’ wallets hard. A nearly 20% devaluation of the peso relative to the dollar in January added fuel to the fire, just as the economy cooled, foreign reserves dwindled and the government´s fiscal deficit widened.
The controversy over inflation calculations began to gain steam in 2007, when then president Nestor Kirchner sacked the head of Indec’s inflation unit, Graciela Bevacqua, along with several statisticians, field workers and clerks. From that point on, official inflation data came in between half and a third of the pace private forecasters reported. For well over a year, statisticians held monthly protests outside Indec headquarters to coincide with the release of inflation data, and lambasted the government’s data.
After Mrs. Kirchner succeeded her husband in 2007, her government lodged fines of $125,000 and criminal charges against a handful of the economists for reporting their forecasts, pushing opposition congressmen to release the figures behind the shield of immunity granted to legislators. Economy Minister Axel Kicillof questioned the methodology and sampling base of those private estimates Thursday. Earlier in the day, Cabinet Chief Jorge Capitanich told reporters that the congressional index was a “true laughingstock.”
The government’s price tsar, Guillermo Moreno, resigned late last year after a federal court began investigating him for abuse of power in pursuing the economists. The cases—against the economists and against Mr. Moreno—are still being argued in court.
–Taos Turner contributed to this article.
Why Volkswagen is helping a union organize its own plant
By Lydia DePillis
February 10 at 8:41 am
This week at Volkswagen’s plant in Chattanooga, Tenn., 1,570 workers will vote on whether to join the United Auto Workers. It’s a big deal: While the big three American carmakers are all unionized, so far the foreign companies have avoided it by locating in Southern states with strong Right to Work laws. From their perspective, unions usually just mean work stoppages, expensive benefit plans, and the inability to fire people at will.
That’s what’s weird about the VW vote: The German company is campaigning for the UAW, not against it, in a kind of employer-union partnership America has seldom seen. What gives?
Well, VW is kind of different, as automakers go. It understands how having a union can boost productivity and allow it greater flexibility in adjusting to downturns. It should know: The rest of its plants are unionized too.
This would also be something new for the United Auto Workers. They wouldn’t have the same relationship with VW as they do with Chrysler, General Motors, and Ford. Rather, the idea is to create something called a “works council,” which are widespread across Europe and enjoy tremendous influence over how plants are run. In America, that kind of body can’t be established without a union vote — but crucially, the works council would be independent of the union, meaning the UAW would give up some control as soon as it gained it.
While the details of the arrangement would be ironed out after the election, works councils — which are elected by all workers in a factory, both blue and white collar, whether or not they belong to the union — usually help decide things like staffing schedules and working conditions, while the union bargains on wages and benefits. They have the right to review certain types of information about how the company is doing financially, which often means that they’re more sympathetic towards management’s desire to make cutbacks when times are tough. During the recession, for example, German works councils helped the company reduce hours across the board rather than laying people off, containing unemployment until the economy recovered.
In the early 1990s, Harvard labor law expert Paul C. Weiler interviewed managers about why they valued works councils. One representative executive told him:
There are three major advantages of councils. You’re forced to consider in your decision making process the effect on the employees in advance…this avoids costly mistakes. Second, works councils will in the final run support the company. They will take into account the pressing needs of the company more than a trade union can, on the outside. And third, works councils explain and defend certain decisions of the company towards the employees. Once decisions are made, they are easier to implement.
In that way, works councils can be an ally of management in keeping the business strong for the sake of keeping workers employed over the long term. Weiler was given this example:
[The parent company made] an agreement with the works council to introduce a flexible work-time system, around-the-clock operation through Saturday, starting again Sunday night. They were under tremendous pressure from the union not to do this, but let us go ahead. We couldn’t have gotten that out of the union.… Our works council people are not hostile to rationalization of automation. On the contrary, they ask us to automate, to modernize our machinery so that our operations can be competitive. They say, ‘We know that we lose jobs by this, but we agree that this is a good thing.’
Works councils are also typically not allowed to call strikes, but they also don’t usually need to, because their authority is baked into their agreements with the company (and, in Europe, usually enforced by law). If the UAW wants to strike over wages and benefits, it’s still able to do so, but the likelihood of arriving at a mutually agreeable solution without one is much higher.
That’s why VW wants its plant to go union. According to VW’s global works council leader, Bernard Osterloh, the company even sees its culture of worker codetermination as a “competitive advantage.” That doesn’t mean, however, that the vote is unopposed. National anti-union groups and the state’s Republican leaders are campaigning against the UAW, saying unionization will spread like a contagion through Tennessee’s other auto plants. “Then it’s BMW, then it’s Mercedes, then it’s Nissan, hurting the entire Southeast if they get the momentum,” said Sen. Bob Corker (R.-Tenn.).
BMW likes its works councils too, though. Apparently, some politicians think they know what’s good for auto makers better than the companies do themselves.