and lack of human capital afflicting developing countries. In
contrast, the measures introduced in the field of labor market social
expenditure, and conditional transfers, discussed hereafter, were
more far reaching.
Income and labor market policies
The LOC policy model differs from the liberal one regarding the
extent to which labor policies explicitly addressed the problems
inherited from the 1990s, i.e. rising unemployment, job
informalization and instability, falling unskilled wages, diminishing
coverage of social security, and the weakening of institutions for
wage negotiations and dispute settlements.
Argentina enacted income policies to strengthen the purchasing
power of poor and middle-income earners, including a rise in
minimum wages, a large-scale public works program, a deliberate
attempt to extend the coverage of formal employment, and the re-
birth of trade-unions. In Uruguay the Frente Amplio administration
reinstated the ‘wage councils’, i.e. tripartite collective bargaining
bodies composed of representatives from the business sector,
unions and government that negotiate wage settlements for major
industries. In Brazil the government set up an Economic and Social
Development Council composed of representatives of business,
labor and a wide variety of civil society organizations as an advisory
body on economic and social issues. Most LOC governments
decreed hikes of the minimum wage, which were far from
excessive when considering their very low initial levels. This led to
important increases in the minimum wage index in LOC countries
and to a moderate increase in NO-LOC countries (Table 2 above).
A recent empirical assessment of 19 Latin American countries for
the years 1997-2001 (Kristensen and Cunningham, 2006 ) suggests
that the increases of minimum wage introduced during the
2000s in the region likely produced an equalizing effect.
Indeed, the study shows that the minimum wage^51 raised the pay
at the bottom of the distribution and was generally associated
(^51) Minimum wage varied between 20% and 143% of low-skilled wages, with the
number of beneficiaries varying between 1% and 20% of the labor force.