Labor Market Deregulation and Industrial Conflict in New Democracies: A Cross-National Analysis

Abstract

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 deregulation 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 relatively modest increases in earnings in a number of 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 incidence of strikes. Finally, wage regulation has the largest effect on aggregate wages and consequently on the incidence of strikes and lockouts.