On February 19, 2026, two governments on different continents made diametrically opposed decisions regarding the fate of their workers. Argentina is deregulating its labor market after losing 280,000 jobs. Montenegro is strengthening protections, following the European path. In ten years, one country will be wealthier. But which one? And why are representatives of the ultra-rich Germany fleeing their own rules en masse—to places where these protections are fewer?
On February 19, 2026, the Government of Montenegro approved another package of labor law reforms—a logical step on the path to European Union integration. Companies with more than one hundred employees are now required to conduct gender audits and "correct" pay gaps. The minimum wage has risen to €600-700, depending on education levels. Dismissal procedures have become even more formalized. Although the Constitutional Court overturned the ban on Sunday trading in January, labor legislation itself continues to move toward greater "protection" for workers. This seems reasonable—after all, that's what the wealthy countries of Europe do, right?
On the same day, thousands of miles away, the Argentine Chamber of Deputies, after twelve hours of continuous debate, approved a reform moving in the exact opposite direction. Deregulation of the labor market. Simplification of dismissals. Elimination of the mandatory inclusion of bonuses in compensation calculations. Creation of the Labor Assistance Fund (FAL) instead of direct payments from employers. The philosophy of the reform is simple: the easier it is to hire and fire a worker, the more employers will dare to do so—meaning more jobs.
Two continents. Two approaches. Two philosophies of worker protection. One path leads through increased state control and mandatory standards. The other leads through reducing risks for the employer and freedom of contract. Who is right? And more importantly—should Montenegro follow the example of the European Union if Europe itself is losing its competitiveness and its citizens are fleeing to where these protections are fewer?
The Paradox of Prosperity: Why are residents of wealthy Germany fleeing their own rules for other countries?
A thoughtful reader will immediately object: "But Germany is rich! Isn't that proof that worker protections work? Look at their auto industry, their standard of living, their social guarantees!"
This is an absolutely reasonable point. Germany is indeed one of the wealthiest countries in the world. Its labor legislation is considered a model of social responsibility: at least 24 days of vacation, 100% sick pay for the first six weeks, extremely strict protection against dismissal, and mandatory works councils in companies with more than five employees. On paper, it looks like a workers' paradise.
However, let's look not at today, but at the dynamics—the trend. And here, the picture becomes alarming.
In 2025, four hundred millionaires left Germany—a net outflow of capital. Inquiries from wealthy German citizens for alternative residency grew by 114% in two years. Where are they going? To the United Arab Emirates, Malta, Poland. And to Montenegro—where, ironically, Germans have become the largest foreign investors in real estate. Over the last decade, the influx of millionaires to Montenegro has grown by 124%, with another 150 arriving in 2025.
But this is only the tip of the iceberg. 42% of German companies plan to invest in Central and Eastern Europe. 22% are considering moving production out of Germany itself. Volkswagen has invested more than ten billion euros in plants in Poland, the Czech Republic, Slovakia, and Hungary. BMW is expanding production in Debrecen. Daimler is building a transmission plant in Romania.
An uncomfortable question arises: if German labor law protects workers so well and promotes prosperity, why is German capital fleeing en masse to countries where these protections are fewer? Could it be that Germany is rich not because of strict labor regulation, but in spite of it? And that this wealth is an echo of the past, not a foundation for the future?
Recall history. In 1948, Ludwig Erhard implemented radical deregulation in occupied Germany—overnight, he abolished controls on prices, wages, and resource allocation. Unions protested. The Allies were in shock. Critics predicted disaster. But a week later, goods appeared on the shelves. In twelve years, production grew by 400%. Wages tripled in real terms. Unemployment fell from 10% to 1%. It was called the Wirtschaftswunder—the Economic Miracle.
Today, that same Germany exports strict labor regulation to Montenegro through European Union mechanisms. It has forgotten the recipe for its own success. And the result is evident—stagnating growth, capital emigration, loss of competitiveness. German business is becoming less competitive on the global market not because of a lack of technology or skill, but because of excessive regulation that makes doing business increasingly expensive and risky.
The Esnafs of Bar and Ulcinj: History that rhymes
For residents of Montenegro and the Balkans, this situation should trigger déjà vu. In Ottoman Bar, Ulcinj, and Budva, there were once esnafs—professional associations of craftsmen and merchants. In the 15th and 16th centuries, they were voluntary. Bakers joined with bakers, shoemakers with shoemakers, blacksmiths with blacksmiths—for mutual aid, training apprentices, and maintaining quality standards.
It worked perfectly. The guild's reputation depended on the quality of each master's work, so everyone ensured that unscrupulous craftsmen didn't tarnish the common name. Apprentices received years of training. Widows and orphans of masters received support. Innovation spread within the profession. Membership was prestigious but voluntary.
Then the Sultan decided that esnafs were a convenient tool for control and taxation. By the 17th century, membership became mandatory. Esnafs received a monopoly on their profession in exchange for performing state duties—collecting taxes, controlling prices, and ensuring supplies for the army. New masters could only join the guild with the permission of old ones, often through family connections. Prices were dictated not by the market, but by the Padishah's decree through the esnafbashi (head of the guild).
What happened next is easy to predict. Stagnation. The esnafs began to hinder new production methods—they threatened the established order and monopoly. Barriers to entry into the profession became insurmountable for talented but non-noble young people. Product quality began to fall—why try if there's no competition and customers are forced to buy from esnaf members anyway? The Ottoman economy gradually fell behind Europe, where guilds either remained voluntary or disappeared altogether, giving way to free competition.
After the liberation of Montenegro in 1878, mandatory esnafs were abolished. Trade and crafts flourished.
Why is it that today, a century and a half later, Montenegro is voluntarily moving toward new esnafs? The European Union demands "harmonization"—uniform labor standards mandatory for all. These are the mandatory esnafs of the Ottoman Empire in their late phase, just on a supranational level. History doesn't repeat itself, but it certainly rhymes.
The Law on Foreigners and Gender Audits: How protection becomes a curse
Specific examples help to better understand abstract logic. In December 2025, the Government of Montenegro proposed amendments to the Law on Foreigners: residence permits for foreign company owners would be conditional on hiring at least three workers, two of whom must be Montenegrin citizens.
It seems like a reasonable requirement—to stimulate local employment. But the reaction from the business community was sharply critical. Why? Why are successful entrepreneurs so afraid to hire employees?
The answer lies in the details of the Montenegrin labor code. When you hire a worker, you take on enormous obligations and risks:
- Minimum thirty days' notice before dismissal (Article 177, Zakon o radu)
- Severance pay of at least one-third of a month's salary for each year of service, but no less than three average salaries (Article 169)
- A written decision with detailed justification and the right to appeal in court (Articles 174-175)
- For mass dismissals (twenty or more people in ninety days)—mandatory consultations with unions for at least thirty days (Article 167)
Hiring is easy. Firing is almost impossible. And you must pay regardless of actual productivity or results. Furthermore, you cannot simply pay a market rate—the state dictates a minimum of €600 for workers with a secondary education and €700 for those with a higher education.
Imagine you own a small cafe in Old Bar. The season lasts five months. You need waiters. If you hire them officially, then after the season ends, you will be forced either to pay them all winter for doing nothing or to go through an incredibly complex dismissal procedure with the risk of lawsuits. What rational entrepreneur would do this? It's much easier to work with family, use self-service, or pay "under the table"—despite all the risks.
Here is the paradox: the state tries to protect workers through strict regulation, but the result is that they become so "protected" that employers prefer not to hire anyone at all. Unemployment in Montenegro stood at 10.5% as of June 2025. If the worker is so well protected by law, why can't every tenth person find a job? Perhaps it is this very "protection" that makes them... unemployable?
Now add the gender audit. Recently, companies with more than one hundred employees have been required to report on the "gender pay gap" and "correct" it. The idea is noble—to eliminate discrimination. But let's think about the consequences.
There are objective, biologically based differences between men and women that influence career choice, work schedules, willingness to work overtime, and risky tasks. Differences in average salaries often reflect voluntary choices, not discrimination. A woman might consciously prefer a lower-paid but more flexible job that allows her to spend more time with her family. This is her free decision, and it is worthy of respect.
Mandatory "correction" means the state does not recognize people's right to make their own choices. Equality is about equal rights and opportunities, not equality of outcomes. If free people make different choices and get different results, there is no injustice.
Moreover, what are the practical consequences? It will be much easier for companies to keep their staff at ninety-nine people than to face the absurd bureaucracy of a gender audit. Small firms won't grow. Large ones will split up. Who does this help—women, or bureaucrats from the Ministry of Labor?
Argentina: An experiment at the other pole
Now let's look at the opposite approach. Until recently, Argentina had some of the strictest labor laws in the world—a legacy of Peronism and the influence of powerful unions. The result? From November 2023 to September 2025, the country lost 280,000 jobs. Twenty thousand businesses closed—about thirty a day. Forty percent of workers were in the informal sector, with no protections at all, precisely because formal hiring was too risky for the employer.
The reform approved in February 2026 radically changes the situation. The Labor Assistance Fund (FAL) is created—employers contribute 1% for large companies and 2.5% for small and medium-sized businesses. Upon dismissal, the worker receives payment not directly from the employer (which created a bankruptcy risk during mass layoffs) but from the fund. The compensation calculation base no longer includes bonuses, tips, or vacation pay—only the base salary. Large companies can pay compensation in installments over six months; small and medium-sized ones over twelve.
The workday can be extended to twelve hours by mutual agreement (with a mandatory twelve-hour rest period). A "time bank" has been introduced—overtime is compensated with additional rest instead of monetary payment. Salaries can be paid in foreign currency or partially in kind by agreement. During strikes in critical sectors (transport, healthcare), 50-75% of services must be ensured, compared to the previous 25%.
The philosophy is simple: reduce the risk and cost of hiring so that employers want to create jobs. Instead of protecting those who ALREADY work, make it so that those who DON'T have a job can find one.
These are not theoretical fantasies. There is a precedent—New Zealand in 1991. Before the reform, the country had centralized wage fixing, mandatory union membership, and strict protection against dismissal. Unemployment reached 10.3%. In 1991, the Employment Contracts Act was passed—radical deregulation. A shift to individual contracts, the abolition of mandatory union membership, and simplification of dismissals.
Critics predicted a social catastrophe. What actually happened? By 1999, unemployment had fallen to 6.3%. Economic growth accelerated from 1% to 3-4% per year. And—contrary to all fears—wages grew by 15-20% over a decade. Why? Because when more people are working, competition for workers intensifies, and employers are forced to offer better conditions.
Argentina lost 280,000 jobs under strict regulation that "protected" workers. Isn't that the main threat—the absence of work itself, rather than a lack of state guarantees?
Protection without the State: How the market does it better
Here, the thoughtful reader will again rightly ask: "Fine, state regulation doesn't help and often hurts. But HOW then do we protect workers from real exploitation and abuse? Without the state, won't there be chaos?"
The Austrian School of Economics and libertarian philosophy do not argue that there should be no worker protection. They argue that state coercion is the worst way to provide it. There are market mechanisms that work more effectively because they are based on voluntarism and personal interest, not bureaucratic coercion.
First—Reputation. In the digital age, an employer's reputation spreads instantly. Platforms like Glassdoor and Indeed allow workers to publicly rate companies. Social networks make it impossible to hide systematic abuse. And in a small society like Montenegro, reputation is even more important. In fact, everyone knows which cafes pay "under the table," which ones delay salaries, and which ones treat employees well. Losing reputation is more expensive than any savings on wages—good workers simply won't go to you, and customers may turn away.
Second—Private Certification. Companies can voluntarily obtain "Best Employer," B-Corp, Fair Trade, and other quality marks that increase their attractiveness to both workers and customers. This is a market tool—no one is forced, but those who receive certification win a competitive advantage. Montenegro is actively developing its Digital Nomad program—and companies wanting to attract highly skilled remote workers are forced to offer excellent conditions. Not because the state forces them, but because otherwise, talent will go to competitors.
Third—Competition for Workers. When unemployment is low, it's not the employer choosing the worker, but the worker choosing the employer. And here's the paradox: strict state regulation creates high unemployment, making workers weak and vulnerable. Deregulation creates many jobs, giving workers bargaining power. Who protects workers better—the state, creating rules that make one in ten unable to find a job, or the market, where companies fight for every skilled employee?
Fourth—Voluntary Unions. Unions can and should exist—but as private organizations, not as state appendages with mandatory membership. Workers have the right to unite, bargain collectively, and boycott an unscrupulous employer. But they should not have the right to force others to join or force an employer to accept their terms through state violence.
Fifth—Contract Law and Courts. The state should protect the fulfillment of voluntarily entered contracts. If an employer violates a contract, fails to pay the agreed wage, or engages in fraud or coercion—that is a matter for the courts. But the role of courts is to ensure the execution of voluntary agreements, not to dictate their content.
Key distinction: protection from fraud, coercion, and breach of contract is certainly the task of the legal system. But mandatory minimum wages, mandatory vacations, bans on firing, and gender quotas are not protections of freedom, but restrictions of it.
The state, by trying to "protect" workers, actually hinders them. Like a doctor who, wanting to heal a fracture, applies a band-aid—the remedy might be right, but the place of application is wrong. A fracture requires a cast, and the state offers a band-aid. And it wonders why the bone doesn't heal.
Venice and the Socialist Federal Republic of Yugoslavia: A history lesson
For a broader perspective, it's useful to look at historical examples of two systems that took similar paths—and reached similar results.
The Republic of Venice in the 12th-14th centuries was the greatest trading power in the Mediterranean. Its merchant guilds competed with each other for the right to trade, built the best ships, hired the best captains, and invented new routes. Competition bred innovation. Venice flourished.
By the 15th century, the situation had changed. Guilds received monopolies from the state—the exclusive right to trade in silk, spices, and grain. Entry into a guild became possible only for the children of existing members or by buying a spot for a huge sum. Innovation stopped—why take risks if profit is guaranteed by monopoly? By the 17th century, Venice lost the competition to Holland and England, where guilds either remained open or disappeared altogether, giving way to free trade. The Republic turned into a museum of former greatness.
Even closer to home is the example of the Socialist Federal Republic of Yugoslavia (SFRY). From the 1950s to the 1980s, the SFRY pursued a policy of "market socialism" and worker self-management. Everyone had a guaranteed right to a job. Dismissal was practically impossible. Worker councils could block any management decisions. The social package was generous. On paper—a workers' paradise.
The result? The debt crisis of the 1980s. Hyperinflation. Enterprises operated at a loss but continued to function because the state wouldn't let them go bankrupt—that would have meant layoffs, which were politically unacceptable. The economy stagnated. By 1991, the federation collapsed.
Residents of Montenegro remember the "guarantees" of the SFRY well. But do they remember the result? Do they remember that the Soviet Union also guaranteed everyone a job—in fact, unemployment was considered a crime, "parasitism." "Full employment" was achieved. And then what? Empty store shelves, shortages of everything, economic degradation, system collapse.
A provocative question arises: if socialist Yugoslavia and the USSR provided maximum "protection" for workers—a guaranteed spot, impossibility of firing, a social package—why did everyone dream of leaving for the West, where "capitalist exploitation" reigned? Perhaps "protection" detached from economic reality and freedom is not security, but a prison?
History warns: the path of mandatory "protections" leads to stagnation and decline. Montenegro faces a choice—to repeat the mistakes of 17th-century Venice and 20th-century Yugoslavia, or to remember the Venice of the 14th century, when free competition created prosperity.
AI, Robots, and Unintended Consequences
It is impossible to discuss the future of the labor market without mentioning the development of artificial intelligence and robotics. This is an unavoidable reality. Machines are becoming more sophisticated, cheaper, and more accessible. Many professions—cashiers, call center operators, drivers, even to some extent lawyers and accountants—are under threat of automation.
But here's a question that is rarely asked: what forces employers to accelerate the replacement of humans with machines? Only technology? Or state policy?
Imagine a cafe owner in Old Bar. He needs a cashier. There are two options:
Option One—A Human. Minimum €700 salary. Thirty days of paid vacation. Sick leave. Social contributions. The risk that in six months he'll want to fire them (low qualification, conflict, simply didn't fit)—and then at least thirty days' notice plus severance pay plus the risk of a lawsuit. If the cafe grows to 101 employees, he'll have to conduct a gender audit.
Option Two—A Self-Service Terminal. A one-time purchase of €300-500. No monthly costs except electricity. No sick leave, vacations, or lawsuits. Turn it on—it works. It breaks—turn it off and fix or replace it.
All else being equal, a human might be preferable—they interact with customers, solve unusual situations, and create an atmosphere. But the state makes the choice unequal. It artificially inflates the cost and risk of hiring a human, making the robot more competitive.
It's not technical progress that's to blame for unemployment, but policy that makes hiring a human so burdensome that the employer is forced to seek any alternative. In a flexible labor market, an employer chooses between a human and a machine based on efficiency. In a strictly regulated one, the machine wins automatically, even when a human could have been more effective.
Montenegro introduces a €700 minimum wage, strengthens protections against dismissal, and introduces gender audits. Simultaneously, technology advances. How many cafes in Old Bar will replace waiters with QR codes for ordering from a smartphone in the coming years? How many supermarkets will install self-service terminals instead of cashiers? Who is to blame for the loss of jobs—artificial intelligence or an artificial regulation system?
A flexible labor market means that the worker and the employer have the opportunity to agree on terms that suit both parties. Maybe a young person agrees to work for €400 for the first three months while learning and gaining experience, and then receives €800. Maybe a retiree agrees to a part-time job for €300 because they don't need the salary as much as they need the social interaction and a sense of usefulness. Strict regulation says: no, minimum €700, otherwise nothing.
And as a result, the young person doesn't get a chance to gain experience, the retiree stays home in front of the TV, and the cafe installs a terminal. Everyone loses. Only the state wins—it "protected" workers, creating beautiful statistics on minimum wages. Except that there are fewer workers.
Two Paths: The world watches an experiment in real-time
So, before us are two approaches, two philosophies, two experiments, the results of which we will learn in the next decade.
Montenegro and the European Union: Protect workers by strengthening state guarantees, minimum standards, and mandatory inspections. Minimum wage of €600-700. Incredibly complex dismissal procedures. Gender audits for companies over one hundred people. Philosophy: "We know better what working conditions should be, and we will force employers to comply with them."
Argentina and the Libertarian Approach: Protect workers by creating the maximum number of jobs. Simplify hiring and firing, reduce risks for the employer, allow free agreement on wages and conditions. An assistance fund instead of direct payments. Philosophy: "The best protection for a worker is the ability to choose between several employers competing for them."
Interestingly, even "socialist" Sweden understands the importance of flexibility. In Sweden, there is no legally mandated minimum wage—it is determined by collective bargaining. Dismissal procedures are simpler than in Germany or France. Swedes take high taxes to fund social programs, but they don't stifle the labor market with strict regulation. The result is unemployment around 7-8% and a dynamic economy. France does the opposite—strict labor laws plus high taxes. The result is chronic unemployment above 10% and stagnation.
In ten years, we will know if the Argentine experiment worked. Will the country repeat the success of New Zealand in 1991—creating hundreds of thousands of new jobs, reducing the informal sector, and increasing wages through competition for workers? Or will critics be right, and deregulation lead to exploitation and growing inequality?
Montenegro is also conducting an experiment—just in the opposite direction. Will it flourish by following European standards? Or will it repeat the fate of Europe itself—stagnation, capital emigration, growing youth unemployment, and the replacement of people by robots?
But there is one fact that already makes one think. If the European way is so good, why did four hundred German millionaires leave the country in 2025? Why is Volkswagen building plants in Poland instead of Bavaria? Why are Germans becoming the largest buyers of real estate in Montenegro—a country with less strict regulation than Germany? Why is every cafe in Europe gradually replacing waiters with tablets for self-ordering?
The market is already voting. Capital and people move to where there is more freedom and less bureaucratic burden. Perhaps it's worth listening to this signal?
Conclusion: A question without an answer
There are no simple answers. Protecting workers from real exploitation, fraud, and breach of contract is certainly a noble and necessary goal. No one wants a return to the conditions of the early Industrial Revolution with child labor and sixteen-hour workdays.
But the question is not about the goal, but the means. We see two approaches. One says: "The state must dictate labor conditions because employers by nature seek to exploit, and workers are weak." The other answers: "The free market, reputation, competition, and voluntary agreements protect better than bureaucratic coercion, which creates unintended consequences."
Montenegro is a small country. It doesn't have vast resources for experimentation. A mistake will be costly. Argentina has natural wealth, agriculture, and room for maneuver. Montenegro has mostly tourism and services, very sensitive to labor costs and bureaucracy.
Maybe it's worth waiting for the results of the Argentine experiment before finally binding oneself to European standards? Or is it better to learn only from one's own mistakes?
History offers many lessons. The esnafs of Bar and Ulcinj flourished when they were voluntary and stagnated when they became mandatory. Venetian guilds made the Republic great through competition and destroyed it through monopolies. Ludwig Erhard's Germany created an economic miracle with radical deregulation—and has forgotten that lesson today. Socialist Yugoslavia guaranteed everyone a job—and collapsed under the weight of inefficiency.
History doesn't repeat itself, but it rhymes. The esnafs, Venice, the SFRY—all started with good intentions to protect people. All ended in stagnation and decline. The rhyme is known. Is it worth stepping on this rake again?
Two paths lie before Montenegro, before all of us. One leads through state control, mandatory standards, and protection through bans and minimums. The other leads through freedom of choice, competition, voluntary agreements, and protection through the market and reputation. One path seems safe because the rich countries are taking it. The other seems risky because it requires trust in freedom.
But if you look closer, it turns out that the rich countries are rich not because they take this path, but in spite of it. And the further they go down it, the more they lose their prosperity, until their citizens start looking for freer places to live and do business.
In ten years, we will know the answer. The only question is whose example we will learn it from—our own or someone else's?