WAGE DETERMINATION IN BRAZIL - THE GROWTH OF UNION BARGAINING POWER AND INFORMAL EMPLOYMENT

This article examines wage determination in Brazilian manufacturing du ring the 1980s and early 1990s. It presents evidence to show that the reduction in state regulation of collective bargaining has led to the development of a system of wage determination which is increasingly ch aracterised by rent shaving and insider trade union bargaining power: Real wages appear increasingly inflexible with respect to movements in open unemployment, with a large informal sector disciplining formal s ector wage bargaining and cushioning the impact of broader labour mark et conditions. An important consequence of this is that the employment costs of a successful counter-inflationary strategy may be very sever e.