Argentina IT Battles Inflation, Talent Shortage, & Millennial Culture in Attrition War

The IT sector in Argentina is dealing with severe attrition rates, caused by economic challenges, talent deficit, and demanding millennials.

Argentina inflation

Argentina’s booming IT industry is currently dealing with severe attrition rates, caused by a number of damaging factors, such as ongoing economic challenges, a deficit in talent, and the demanding nature of the millennial workforce.

Reportedly sitting around 25% in January 2018, the country’s inflation rate is currently one of the highest in Latin America, overshadowed only by Venezuela.

Over the last five years, the industry has dealt with this economic black cloud by adjusting wages at periodic moments in the year, which is not just confusing for engineers and programmers, but an administrative burden for their employers.

“It feels like we have been dealing with inflation since forever,” said Ignacio de Marco, CEO of BairesDev, a Nearshore IT services company. “One of the ways we dealt with the problem was by expanding into different countries, so we were not tied exclusively to one economy. In reality, although the current government has done better job than the previous one, there is still a real issue with internal administration, as companies are constantly changing things to offset the economic hurdles.”

Salary Adjustments

Most companies are increasing salaries for all employees every six months, which often causes employees to be unsure whether they are getting a salary raise or just receiving an adjustment for inflation. These types of salary adjustments are reportedly creating an administrative labor cost and overhead in themselves.

These “pay rises” generally maintain an acceptable level of purchasing power for those getting paid. In the case of promotions, people will receive higher pay bumps, including an offset for inflation.

Over the last few years, this practice has resulted in salaries in the country seeing a significant bump, despite their comparable value remaining pretty stable in the US.

Currently, the average monthly salary for junior engineers in Argentina is between ARS$43,000 (US$2,126) and ARS$49,000 (US$2,423). For senior level roles, we found it was between ARS$53,000 (US$2,620) and ARS$60,000 (US$2,966).

Based on 2016 Nearshore Americas research, “IT Wages in South America”, these figures are pretty comparable with today’s price on the dollar side, with front-end developers in Buenos Aires taking home US$2,125 per month. However, in Argentina this was worth a lot less in 2016, around ARS$33,790.

“Inflation moves the salaries every year, which is a problem when you work with countries that are more stable,” said Gustavo Commisso, Founding Partner and Chief Executive Officer at Huenei IT Services, a regional IT services provider. “In this situation, a lot of people prefer to change their jobs and obtain better salaries – you can have different salaries for the same position, because in an inflation context this can happen. The attrition rate is high as a result of this.”

Links to Attrition

While attrition is a well-known challenge for technology companies around the world, companies in Argentina’s inflation-heavy environment have managed to reduce it by providing transparency and visibility into what will happen in the near future, such as a salary raise in six months, for example — this approach reduces the anxiety that comes with the fear of no salary bumps, which can be a real concern for everyone in the sector, especially when there aren’t enough people to fill the roles.

“We are in an industry that grows constantly, so human resources is the main challenge — there are never enough resources to develop software, maintain infrastructure, or produce services,” said Commisso. “There are many initiatives by the government to improve this, but companies demand more than the universities can produce. It will take many years to balance the HR requirements with demand.”

Companies in Argentina have to push a little harder than in other countries to reduce attrition, a fact that they learned the hard way when inflation first hit.

“Not many companies adapted to the scenario fast enough, so many engineers just started switching jobs,” said de Marco. “Once a tendency like that starts, then it becomes a rule of thumb for the industry and not an exception. In this case, everyone had to work much harder to keep attrition low.”

While there’s definitely a question of economy to consider, the biggest impact on attrition is supposedly the culture of the millennial generation.

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“Due to millennials, the attrition rate is on average 20% in IT services in Argentina, which is a huge figure and a big problem,” said Alejandro Jaceniuk, Partner at Deloitte Strategy & Operations Leader. “They are not looking for a long-term career, and have a short-term view – for them, it’s the same working for a huge multinational as it is a small company. Young people will not stay for many years in the same place – they are more proactive and they move more frequently.”

Success in a Difficult Marketplace

Although inflation has been an issue for some time, the IT industry has been able to keep things consistent, growing noticeably in software services.

This is partly because currency devaluation has occasionally been occurring alongside inflation, creating a cheaper market for foreigners, in particular. When the new government took office, there was an immediate currency devaluation of 30%, making prices 30% cheaper for anyone buying goods and services from the country.

Even so, inflation generally has been greater than the rate of currency devaluation, making the country more expensive for the most part, so what else has allowed the country to succeed in IT?

“Within the country’s largest cites, the pool of talent is among one of the best in the region,” said de Marco. “The level of English is substantially better than the Latin America average – it may not be perfect, but it creates a clear advantage. Also, education and literacy is a little higher than average, and there have been some good examples of successful companies that have encouraged more people to take degrees related to technology, as well as creating a startup and tech culture in the country.”

Companies like MercadoLibre, when they first started out, helped young people transition into IT-related studies, and further back, 30-40 years ago, the country had a stronger economy, which helped to develop the nation at a faster rate than many other nations back then.

Despite the clear challenges it faces, that historic backbone is keeping the sector and the country standing up very straight, and if the new government is able to deliver on its promises, Argentina could be one of the first Nearshore locations to make a significant dent in the shared talent crisis.