Trade union’s power and income distribution: Evidence from Chile

Abstract

High income inequality has been a hallmark of Chile’s political economy for decades, even centuries. The purpose of this article is to explore a ‘forgotten’ strand in the Chilean debate, that is to say, the role of the union’s power as a countervailing force against high income inequality. Mainstream interpreters have sidelined this approach. Using the Power Resources Approach, it is argued here that Chilean income inequality can be related to fluctuations in organisational power and the lack of an inclusive wage-setting system (e.g. industry-wide collective bargaining). This analysis is based on a deductive approach using relevant literature and two official datasets. In addition to the original investigation, a Propensity Score Matching model is conducted. It is found that changes to the labour code, in 1979, and the imposition of a radically decentralised industrial relations system adversely affected workers’ ability to achieve a large share of incomes.