COVID-19, recession and fall in real wages in Argentina. Who will be most affected?

This paper explores the aggregate and systematic income risk of formal workers in Argentina, using an extensive longitudinal database that contains information on approximately half a million formal employees in the private sector throughout the country for a span of twenty years (1996-2015). We estimate pooled quantile regression models to measure the sensitivity of remunerations to the economic cycle along the conditional distribution of salaries, which allow us to capture the heterogeneity of Gross Domestic Product (GDP) impacts on different conditional quantiles. The main result is that estimated income risk decreases monotonically along the conditional distribution of salaries, showing that individuals located at the lower part of the distribution are more exposed to the fortunes of the aggregate economy. One important factor that probably explains this difference in salary elasticity is given by the role of the unions. Although this decreasing pattern on elasticity remains when we separate estimates by economic sector and firm size, we found some specificities, since males that work in Construction sector and small firms are those with higher income risk. These estimates allow us to approximate the magnitude of the impact of the current recession in Argentina, which is deepening due to the COVID-19 pandemic.