Argentina's Javier Milei Reforms ‘delusional’ Labour Laws In Bid To Spark Economy

BUENOS AIRES, Argentina – Argentina’s President Javier Milei, whose early, attention-grabbing economic victories have cooled, has successfully pushed through a package of transformational labour reforms in a bid to modernize Argentina’s ailing economy.

The radical measures enacted by the self-professed libertarian leader take aim at the country’s stringent employee protections, extending the maximum working day from eight to 12 hours, reducing severance pay, and restricting the right to strike.

The new law represents a major victory for Milei, who for months has been battling fierce opposition by Argentina’s powerful unions as well as leftist parties in both the congress and senate.

“We have passed the Labour Modernization Bill, a bill that sweeps away a delusional measure enacted 50 years ago, inspired by caveman-like ideas from 80 years ago, which left half of all workers in the informal market,” Milei told Congress on Sunday. “This law will allow the labour market to align with an economy undergoing the greatest transformation in history.”

Despite Milei’s early economic successes — achieving Argentina’s first budget surplus in over a decade and bringing monthly inflation down from 25 per cent to a low of 1.5 per cent in May 2025 — his fortunes have turned. More than 290,000 registered jobs were lost in the two years to November 2025, while last year saw Argentina record negative foreign direct investment for the first time in more than two decades.

In a statement this month, he said that “only by modernizing our labour laws will we generate genuine employment, predictability, and greater economic freedom in our country.”

With over 40 per cent of the Argentine workforce in the informal sector – employees who are unregistered and untaxed — one of the bill’s central goals is to increase formal hiring.

Closing the fiscal black hole created by missing contributions from the informal sector would be a massive gain for public finances; Argentine think tank Fundación Éforo estimates that the national social security agency alone loses US$975 million for every 1 per cent increase in informality.

Another cornerstone of the reform is its reduction in the risk of worker litigation against employers.

According to public policy think tank IERAL, labour litigation is one of the main obstacles to job creation and business growth in the country. With employers facing a litigation rate more than 10 times higher than that in Spain or Chile, it argues that the threat of costly lawsuits discourages formal hiring.

Crucially, the reforms also drastically weaken Argentina’s powerful unions, which have fiercely opposed the bill, including staging a 24-hour general strike on Feb. 19.

For nearly 80 years, unions in Argentina have been able to negotiate one nation-wide contract for all workers in a given sector. This has contributed to the country’s poorer northern provinces having informality rates more than twice as high as those in the capital, as businesses cannot tailor contracts for the widely varying conditions in different regions.

Milei’s reforms will make it possible for employees and local unions to negotiate salaries directly with businesses, allowing greater flexibility for both employers and workers.

Unions’ ability to paralyze factories through strikes has also been slashed, with just 25 per cent of essential operations now vulnerable to labour action.

Yet union opposition did have some effect, forcing the government to water down some of its reforms, for example its proposal to reduce workers’ sick pay by up to 50 per cent.

Workers’ organizations opposition continues, with the powerful General Confederation of Labor (CGT) union announcing in a statement on Monday that it would “proceed with legal action” against the government.

Argentine newspaper La Nación reports that unions’ lawsuits will target the bill’s limitations on the right to strike and its reductions to severance pay.

Some industry leaders see the reforms as a vital step in Milei’s quest to shift Argentina onto a path of sustainable growth.

“This labour reform is important and we think that it will, without a doubt, bring benefits to the industrial sector,” Daniel Rosato, president of the Argentine Industrial SMEs association, told National Post. “It creates what we needed in the industry, which is legal certainty,” he added.

Others, however, are not so convinced that the bill will fix Argentina’s informality issues.

“There is a misunderstanding… on behalf of the government with respect to why informality exists in Argentina,” said Hernán Letcher, Director of the Center for Argentine Political Economy (CEPA).

He said small businesses often don’t have the financial means to offer formal employment, while sectors such as construction and textiles require specific approaches to tackle their high rates of informality.

Letcher also expressed skepticism over Milei’s claims that the labour laws will boost job growth: “That the reform will create jobs makes no sense.”

Although economic activity grew by 1.8 per cent from November to December, Letcher stresses that most of this growth was experienced by sectors that generate little demand for employment, such as agriculture and finance. In contrast, the more labor-intensive manufacturing and retail sectors both shrank.

More concerning still is the rate at which businesses have shut down throughout Milei’s presidency.

According to CEPA, more than 20,000 businesses closed between November 2023 and September 2025 – a rate of roughly 30 each day.

While Milei may have successfully changed Argentina’s labour laws, he still faces an uphill battle in reviving the country’s obstinate economy.

“Businesses can’t compete with imported products,” said Rosato. With “the high costs of production that we have in Argentina… we cannot compete and are closing production.”

Latin America Reports

• J.D. Tuccille: The remarkable triumph of Javier Milei
• Michael Taube: Javier Milei's chance to save Argentina from leftist fanatics

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