Unions and Employment in Uruguay

This study examines the impact of unions on wages and employment using data from Uruguay in a period when unions were banned (1973-1984), then legalized with tripartite bargaining (1984-1991) followed by industry-wide or firm-specific bargaining (1992-1997). The relationship between wages and employment shifted significantly across these periods as evidenced by recursive residuals, which show structural shifts in five of six industries, with the shifts coming at the same time as the regime changes. Wages are exogenous to employment before 1985, but not afterwards. Wage elasticity and the employment-output elasticity fell sharply after 1984. Unions significantly raised wages in 1985-1992, but afterwards the change in bargaining structure and increased openness led to concessions. Starting in 1985, workers in unionized industries were less likely to be laid off than workers in nonunion industries