The Policymaking of Wage Policies: The Political Economy Patterns in Democracy and the Challenges from Different Minimum Wage and Collective Bargaining Models in Chile and Uruguay

The nature of the policymaking process (PMP) in Latin American countries changed during the 2000s, especially in the Southern Cone. This new PMP approach had different impacts on the relationship between minimum wages and collective bargaining in Uruguay and Chile. What happened in these countries is linked to the pattern of the democratic transition each country faced and the timing that democratic and economic reforms occurred. Whilst in Uruguay the economic reforms (late 1980s) arrived after the democratic transition, in Chile, the economic reforms implemented during the military regime, were part of the negotiations during the democratic transition. As a result, MW and CB policies have experienced different emphases in Uruguay, with active or passive uses of such policies, but in Chile, CB have remained untouched and MW has been an important wage policy. This study seeks to contribute to the discussion of democratic transition PMP, analysing how wage policies are part of a bounded negotiation (as in the case of Chile) based on the Constitutional and political restrictions and how in Uruguay, without these restrictions, MW and CB policies have fluctuated according to Governments’ decisions. To analyse these differences, this study argues that wage policies have elements in common with other policies, such as social policies and tax policies. Compared to the former, this study claims that wage policies in Latin American countries that have had leftist governments during the democratic transition are affected by the same variables that shape social policies universalism: characteristics of political parties, level of electoral competition and policy legacies. This study also argues that wage policies function similarly to tax policies in two aspects. Wage policies could be seen as a choice between a flat tax (minimum wage) and an income tax (collective bargaining). Therefore, wage policy outcomes could be seem as a consequence of how structural and instrumental power are exerted by actors involved in the policymaking: trade unions and business elites. Considering all elements described, this study’s contribution is twofold. For the policymaking discussion, this research agenda looks for testing political variables used for social policies and tax policies in other policy realm, such as wage policies. From the perspective of labour policies, and especially wage policies debates, this research agenda includes actor’s policy preferences and the political setting during the democratic transition. In that sense, the added value for studying wage policies is the interception of two complementary realms and an innovative regard for examining wage policies in Latin America.