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WEEKLY NEWSLETTER
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Chile
Index
Immediately after the 1973 coup, many labor
institutions, that
is, traditional channels of influence, such as government
offices,
which unions used to get their voices heard, were
disbanded, and
some important unions were dissolved. Thus, wage
adjustments became
mainly a function of indexation, which, given Chile's
history of
inflation, had become an established element of any wage
negotiation. Indexation was kept in place until 1982,
through ten
years of declining inflation.
Starting in October 1973, the government mandated
across- theboard periodic wage adjustments tied to the rate of
inflation.
Lower wages were adjusted proportionally more than higher
ones.
From 1973 to 1979, indexation to past inflation with
varying lags
was the norm throughout the economy. The 1979 Labor Plan
formalized
this practice by requiring that collective bargaining
agreements
allow for wage adjustments at or above the rate of
inflation. In
1982 the indexation clause of the Labor Plan was
eliminated. The
government continued the practice of periodically
announcing wage
readjustments and bonuses, with the wage increases usually
not
keeping pace with inflation and covering the nonunionized
sector
only. The dynamism of the economy in the early 1990s
resulted in
actual wage increases above officially announced
readjustments.
The Employment Security Law established that in the
absence of
"just cause" for dismissal, such as drunkenness,
absenteeism, or
theft, a dismissed employee could be reinstated to the job
by a
labor court. This law was replaced by a less costly system
of
severance payments in 1978. Decree Law 2,200 authorized
employers
to modify individual labor contracts and to dismiss
workers without
"cause." A minimum severance payment was established that
was
equivalent to one month of salary per year of service, up
to a
maximum of five months' pay. This new system applied to
all
contracts signed after August 1981.
The changes introduced by Decree Law 2,200, along with
the 1979
reforms, which established new mechanisms to govern union
activity
(Decree Law 2,756) and collective bargaining (Decree Law
2,758),
became known in Chile as the Labor Plan. Decree Law 2,756
departed
significantly from traditional legislation: union
affiliation
within a company became voluntary, and all negotiations
would now
have to be conducted at the company level; bargaining
among many
companies would be eliminated. According to the previous
law, which
had applied until the 1973 coup, once the majority of the
workers
of an enterprise chose to join an "industrial union" all
workers
became part of that union. That is, one union would have
exclusive
representation of all workers in an enterprise. The right
to
collective bargaining was granted to unions at the
enterprise level
and also to union federations and confederations. This
resulted in
some negotiations at the industry level with the
participation of
the Ministry of Labor and Social Welfare through the Labor
Inspectorate. As in the past, the new law required
participation of
10 percent of the workers or a minimum of twenty-five
workers
(whichever was greater) for creation of a union. Workers
were not
required to be represented by a union in collective
bargaining.
Decree Law 2,758 stipulated that in the event of a
strike, a
firm could impose a lockout and temporarily lay off
workers, which
the previous law had prohibited. At the same time, Decree
Law 2,758
established norms about collective bargaining, and in its
Article
26 the law established that unionized workers' nominal
wages should
be adjusted to at least match the rate of inflation. This
article,
which became a severe constraint to downward real wage
flexibility
during the 1982-83 crisis, can be understood only in the
context of
a previously existing policy of 100 percent indexation
across the
board. In 1982, at the onset of the debt crisis, Article
26 was
amended, eliminating the downward inflexibility of real
wages. This
reformed law was in effect until April 1991, when some
important
changes proposed by the Aylwin administration were
approved by the
National Congress (hereafter, Congress).
Data as of March 1994
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