Austerity Measures in Argentina Lead to Massive Public Sector Layoffs and Economic Contraction

While tens of thousands of public employees have been laid off under President Javier Milei's "Chainsaw" plan in Argentina, the country is experiencing deep employment losses, company closures, and a household debt crisis nationwide despite the drop in inflation.

The "Chainsaw" Policy and Layoffs in the Public Sector

In line with the "La Motosierra" (Chainsaw) plan of President Javier Milei, who took office in December 2023 in Argentina, major cuts were made in public employment. According to official data, between December 2023 and December 2025, the number of central government employees decreased by 18.4 percent, falling by 63,234 people. The total reduction in public employment reached 73,000 people.

During this period, the number of ministries was reduced from 18 to 8, while 5,284 people were laid off from the state postal company Correo Argentino and 3,637 from the state railways. In addition, the purchasing power of university faculty members eroded by 33.7 percent, the science and technology budget was cut by 95 percent in real terms, and 14 percent of CONICET researchers were dismissed from their positions.

The Realities Behind the Fall in Inflation

The most highlighted success of the Milei administration was the inflation rate, which fell from a monthly level of 25 percent to double digits by the end of 2025, and the budget surplus achieved for the first time in 16 years. However, economists state that this decline is not due to productivity growth, but rather the complete collapse of domestic demand.

With the collapse of demand, manufacturing industry production fell sharply, while factories in the automotive sector began operating at only 24 percent capacity. During this period, more than 2,000 businesses in the industrial sector closed down, and 73,000 people lost their jobs.

Company Closures at a 20-Year High

According to May 2026 data from the think tank Fundar, 30,633 companies, corresponding to approximately 6 percent of the total companies in the country, have closed since Milei took office. The number of active companies fell to 481,724, reaching its lowest level in the last 20 years and dropping below the lowest point recorded during the pandemic.

In May 2026 alone, 2,371 businesses ceased operations, equivalent to an average of 76 companies per day. On a sectoral basis, the largest losses occurred in trade, transport-storage, real estate, and the manufacturing industry.

Unemployment Rises and the Public Borrows for Basic Needs

The contraction in both the public and private sectors directly hit the employment market. While 241,000 salaried jobs were lost in the private sector, the total official job loss reached 314,000. The unemployment rate rose from 5.7 percent to 7.8 percent, while the informal employment rate reached 44.2 percent, the highest level in the last 20 years.

The economic contraction has also dragged households into a debt trap. According to Central Bank data, the default rate on household loans surged to 12.8 percent, while this rate reached 29.6 percent for digital wallet loans. In August 2026, thousands of people gathered in Buenos Aires to protest the government, stating that they were forced to borrow for basic needs such as food, rent, and medicine.