© 1991 International Bank for Reconstruction and Development / The World Bank
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ORGANIZED LABOR, POLITICS, AND LABOR MARKET FLEXIBILITY IN DEVELOPING COUNTRIES
Organized labor is usually viewed as an obstacle to labor market adjustment. But unions' responses to adjustment programs in fact range from militant opposition to acquiescence or even explicit cooperation. Three sets of variables shape these responses: the strength and characteristics of the union movement itself; economic cycles; and political institutions and their ties to unions.
•Strength of the labor movement: In industrial democracies, an aggressive stance on wages tends to be associated with moderately strong unions. Small or weak unions are less militant, as might be expected; more surprisingly, large and powerful unions also tend to be more moderate, primarily because of their greater participation in consultation and decisionmaking at the national level. The experience in developing countries is somewhat different: only a few of these have strong labor movements, and among these, militancy is common. The large share of wage labor in the public sector complicates comparisons with industrial nations, since governments as employers clearly behave differently from private employers, particularly in hard times.
•Economic cycles: Depression almost invariably reduces militancy in developing as well as industrial nations.
•Political institutions: The nature of the political regime—democratic or authoritarian—is only roughly associated with how governments handle labor relations, and correspondingly with the options available to unions. More important in shaping unions' behavior are the nature of the political party system and how unions are connected with parties. The conditions needed to gain workers' cooperation are analogous to those which encourage business to invest: political stability, a voice in policy that affects their interests, and arising from these, the confidence that current sacrifices will ultimately yield a fair share of future benefits.
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