Labor Market Deregulation and Industrial Conflict in New Democracies: A Cross-National Analysis
| Author | José Alemán |
| Published date | 01 December 2008 |
| DOI | 10.1111/j.1467-9248.2007.00707.x |
| Date | 01 December 2008 |
| Subject Matter | Article |
Labor Market Deregulation and Industrial
Conflict in New Democracies: A
Cross-National Analysis
José Alemán
Fordham University
This article studies the effect of recent labor market reforms on industrial relations in new democracies
(1994–2003). The literature on labor politics posits two channels through which labor market deregu-
lation may relate to industrial conflict. Wage deregulation may lower wage costs, increasing industrial
conflict. Employment deregulation, however,can reduce the ability of workers to act collectively. Using
methods uniquely suited for panel data analysis, the study reveals a number of important findings. First,
whereas labor quiescence went hand in hand with relativelymodest increases in ear nings in a numberof
established democracies, modest wage increases are generally linked with more labor militancy in new
democracies. Higher wage and employment regulation minimize wage reductions, lowering the inci-
dence of strikes. Finally, wage regulation has the largest effect on aggregate wages and consequently on
the incidence of strikes and lockouts.
While democratization expands popular participation, it also increases pressures
for redistribution, particularly from the working class (Nelson, 1991; Rodr ik,
1999). One way governments in new democracies1have addressed this challenge
is through the creation of institutions of national social dialogue.Over the last two
decades, participation by representatives of trade union and employer associations
in economic and social policy-making (Ishikawa, 2003, p. 3) has featured promi-
nently in processes of democratic transition and consolidation.
In many new democracies, social dialogue has assumed special importance, both
in terms of its ability to maintain social cohesion and of the economic reforms
which it has made possible (ILO, 1997). Tripartite institutions have been instru-
mental in the reform of labor market policies and institutions in Latin America
and Souther n Europe (Cook, 2007, p. 11).2In all Central and Eastern European
democracies, tripartite committees have become the mechanism through which
wage increases are regulated and minimum wages set (Bor isov and Clarke,2006;
ILO, 1997, pp. 151–3). Examples of African and Asian countries where social
dialogue has played a prominent role include South Africa,the Republic of Korea
and the Philippines (Ishikawa, 2003).
The literature on the prerequisites of successful national dialogue,however,raises
two important questions regarding the ability of these institutions to establish
deep roots in new democracies. Corporatist institutions work well when the
doi: 10.1111/j.1467-9248.2007.00707.x
POLITICAL STUDIES: 2008 VOL 56, 830–856
© 2008The Author.Jour nal compilation © 2008 Political StudiesAssociation
national/sectoral level prevails over plant or firm-level bargaining. This,however,
is far from the reality in many new democracies, where decentralized bargaining
is commonplace.
A second question has to do with the labor market regulations that are sup-
posed to complement tripartite institutional arrangements. Democratization has
increased the regulatory profile of governments in some countries and in some
areas of labor market and social policy reform (ILO, 2004; Murillo, 2005).
Nevertheless, many countries with previously high levels of labor market regu-
lation have witnessed reduced state involvement (Deyo and Agartan, 2003),
greater pluralism in labor relations (Buchanan and Nicholls, 2003) and reduced
employer obligations towards unions (Cook, 1998; 2007; ILO, 2004).
This study thus endeavors to establish an association between labor market
deregulation and industrial relations in new democracies. Labor market deregu-
lation refers to processes that scale down the role of some instruments of
economic regulation such as the law or state arbitration in favor of more flexible
employment and collective bargaining relations (Cook, 2007, pp. 41–2; Esping-
Andersen and Regini, 2000, p. 21). These reforms can simultaneously increase
workers’g rievances and decrease the ability of unions to work cooperatively with
governments and employers to respond effectively to these demands.
Since labor market deregulation operates on multiple dimensions, its effects on
industrial relations systems are likely to be complicated. Much depends on
whether these reforms change the bargaining power of employers and workers
and how labor market institutions mediate these changes (Traxler,1995). Even if
strike activity rose as a result of more wage deregulation, this does not automati-
cally imply concomitant rises in other forms of labor militancy. Prevalent
accounts of labor collective action,however,claim that Easter n Europe and Latin
America witnessed net declines in labor protest following the transition to
democracy (Greskovits, 1998; Kurtz, 2004, pp. 287–99). This study demonstrates,
on the contrary, that labor market institutions have increased strike activity and
the number of workers involved in strikes in a representative sample of new
democracies.
The contributions of this article are then threefold. First, existing studies are not
representative of a large number of countries – those where reforms have been
introduced by conservative or center-right cabinets. Conversely, this article rep-
resents the first large-N study of the relationship between labor market institu-
tions and industrial relations conducted on a representative sample of new
democracies. Secondly, the majority of studies neglect political institutions and
institutional explanations of labor collective action (Etchemendy, 2004). This
raises questions of selection and omitted variable bias in the literature that have
not been satisfactorily addressed. Finally, the findings presented here reveal a
picture of labor politics in new democracies profoundly at odds with the expe-
rience of many established democracies. Using methods uniquely suited for panel
INDUSTRIAL CONFLICT IN NEW DEMOCRACIES 831
© 2008The Author.Jour nal compilation © 2008 Political StudiesAssociation
POLITICAL STUDIES: 2008, 56(4)
To continue reading
Request your trial