Argentina’s opposition-dominated Congress on Thursday approved legislation that would double the cost of laying off private and public employees over the next six months, handing President Mauricio Macri his first legislative setback since taking office.
Mr. Macri, who said the law would spook investors and destroy jobs, is expected to veto it on Friday. The setback for Mr. Macri comes as pollsters say Argentines are increasingly worried about the prospect of losing their jobs.
Passage of the jobs bill, dubbed the “anti-layoffs law,” raises questions about Mr. Macri’s ability to pass key economic and political initiatives in a Congress dominated by the opposition Peronist political movement. Mr. Macri’s “Let’s Change” coalition is a minority in both houses of Congress.
“What this shows is that in some ways the government has lost control of the political agenda,” said Nicolás Solari, an analyst at pollster Poliarquía. “Now it’s the opposition that is setting the agenda.”
More than 57% of Argentines supported the legislation while 52% said they fear that a family member’s job was at risk, according to a recent survey by pollster Raúl Aragón.
Mr. Macri took office in December after narrowly defeating his Peronist opponent in last year’s presidential election. He quickly reversed the nationalistic and interventionist policies of his populist predecessor, Cristina Kirchner, who nationalized companies and heavily regulated the economy. Mr. Macri eliminated taxes on most farm exports, ended currency controls and replaced Argentina’s central bank president.
But Mr. Macri did much of that on his own, without need for Congress, and his ability to govern smoothly during the remainder of his term will depend on support from Peronist leaders—particularly governors who heavily influence how Peronist legislators vote.
Until now, Mr. Macri has successfully wooed those governors, winning their backing in exchange for promises to improve the economy and invest billions in infrastructure projects across the country. In return, the governors backed a plan by Mr. Macri to settle Argentina’s long-standing conflict with a group of bondholders in the U.S.
But after settling that dispute in April, Mr. Macri slashed subsidies on utility rates, leading to higher gas, electricity, water and transportation prices for millions of people in and around this capital city.
Economists said the move was necessary to reduce Argentina’s budget deficit, but the price increases were unpopular and made it harder for Peronist politicians to support Mr. Macri in public.
“Sales have fallen 20% since Macri became president and we’re afraid of getting laid off,” said Liliana Bartes, 33 years old, who works at a bakery. “I have two kids and if I get laid off I’d end up in the street. I think it’s a good idea to pass the anti-layoffs law.”
“There is not a wave of layoffs in Argentina,” Argentina’s Labor Minister Jorge Triaca said at a congressional hearing last week, adding that private sector job creation has been stagnant for the past five years. “This is the situation we’re in. It’s worrisome because it’s structural but it’s not different today than it was five years ago.”
Argentina’s Modernization Ministry, which is charged with updating the state bureaucracy, hasn’t renewed the contracts of almost 11,000 temporary state workers. Those job cuts augmented concerns about broader job losses in both the private and public sectors.
Debate over the layoffs bill has raised concerns among some investors about political stability in a country where several non-Peronist presidents have been forced out of office early because of virulent opposition from Peronist politicians and allied unions.