Argentina should address family allowances as part of its labor reform to help reduce informality in the labor market. This is the conclusion of a report by the Argentine Institute for Social Development (IDESA). The report states that promoting formalization requires more than changes to labor laws; it is crucial to review the factors that lead micro-enterprises and low-income workers to operate in the informal sector. IDESA points out that family allowances, which "transcend labor legislation," are a key factor that incentivizes informality. In fact, "an informal worker receives much higher family allowances than a formal one." To generate a dynamic process of labor formalization, an integral approach is needed, including improving the design of social benefits. Although it has a "fiscal impact," "it is essential that the benefits for children between informal workers and formal workers with the lowest remuneration be leveled." For example, an informal worker with a child under 3 years old receives a total of 217,000 pesos per month, while a formal worker receives 120,000 pesos. The IDESA analysis indicates that "for a worker to enter the formal sector, they will demand an increase in remuneration that compensates for this almost four-fold difference in the child allowance benefit." In low-wage sectors, this is a powerful factor inducing informality.
