What Capital Wants: Business and Labor Market Reform in Portugal and Spain

• In Event: Interests Representation and Distribution in Latin America & Non-Western Europe

Abstract

This article investigates the coalitional bases of economic adjustment to explain variation in labor reforms after the Great Recession in Portugal and Spain. Given the existence of a monetary union, countries could not modify the exchange rate and labor costs became the key to regain competitiveness. External institutions demanded the liberalization of labor markets and policymakers in both countries advanced reforms in that direction, yet business differed in its support for these measures. While the industrial export sector was in favor of collective bargaining decentralization and limiting the extension in time of agreements, those in the domestic-market sector preferred sector-level bargaining and longer agreements so as to maintain a level playing field. In addition, while those in the first group favored—or were indifferent to—more expensive and long-term contracts, those in nontradables wanted cheap and short-term contracts. Differences in labor reforms across the two countries reflect differences in their industrial profile and business interests’ configuration. These findings illuminate the complexity of political coalitions during economic crisis and the difficulty of imposing a one-size fits-all policy across countries.  

Author

• Jimena Valdez, Cornell University