Wages, Employment and Workers' Rights in Latin America, 1970-98

By Weeks, John | International Labour Review, January 1, 1999 | Go to article overview

Wages, Employment and Workers' Rights in Latin America, 1970-98


Weeks, John, International Labour Review


The political economy of Latin America in the 1990s was dramatically different from what it was before. Prior to the debt crisis that began in mid1982 (when Mexico announced the possibility of a moratorium on its debt payments) most governments in the region pursued economic policies that were essentially national, rather than geared to international markets. This was possible because of a range of controls over capital flows and regulations that affected imports and exports.1 Through the 1980s and 1990s, virtually every government (with the exception of Cuba's) reduced both trade regulations and capital controls.2 Closely associated with this process of deregulation has been regional integration, most notably under the North American Free Trade Agreement (NAFTA), which came into effect in 1994. In a parallel development, the Governments of Argentina, Brazil, Paraguay and Uruguay formed the "Common Market of the South" (MERCOSUR), with Chile and Bolivia as associate members. The purpose of this article is to consider what has occurred in the labour markets of Latin America 3 during these processes of economic liberalization and regional integration. The economic and social trends coincident with liberalization and regional integration arise from a range of factors that include: (1) recovery from the debt disaster of the 1980s and its associated policies of demand compression (De Pinies, 1989); (2) a shift in economic ideology from active fiscal policy to the predominance of monetary instruments;4 and (3) a rise in the economic power of capital relative to that of labour, in part the result of changes in national legislation.

The following review of labour market experiences assesses whether workers in wage employment have gained or lost during the major changes in economic policy that have occurred over the past two decades. Neoclassical economic theory predicts that labour should have gained: trade liberalization and labour market flexibility should increase employment; general deregulation should foster growth; and faster growth should lead to higher wages (see Horton, 1994; Horton, Kanbur and Mazumdar, 1994). According to the StolperSamuelson Theorem, to the extent that countries are labour abundant, wages should rise and profits should fall. And if this were the case, it might be used as an argument against legislation to protect workers and their basic right to organize. But outcomes have been contrary to the neoclassical prediction: the outcomes for labour over the past 25 years have been extremely mixed. Furthermore, labour's gains in the 1990s, when economic growth quickened, have been meagre, even negative in some countries.

Labour market conditions, 1970-98

As the twentieth century draws to a close, Latin America's population is overwhelmingly urban. In only three of the 18 countries under consideration does a majority of the population live in rural areas. 5 While rural employment has remained important in most countries,6 close to 80 per cent of the region's total workforce is urban. The majority of workers in a majority of the countries are employees, not self-employed. These characteristics differentiate Latin America from other underdeveloped regions, like Sub-Saharan Africa, South Asia and Southeast Asia, where labour forces are predominantly rural. 7

For basic data on the distribution of the labour force in Latin America, see table 1. It shows the importance of wage employment, both public and private, in seven countries of the region (including the four with the largest populations). In 1992 wage employment accounted for well over 60 per cent of the nonagricultural labour force in each country, and for almost 70 per cent of it in the region as a whole. But compared to 1980, the regional share of wage employment had actually declined by six percentage points. Thomas ( 1996) interprets this as a process of "informalization" associated with the liberalization of labour markets (see also Orellana G.

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