Trust, Labor Market Centralization, and Wage Moderation in Puerto Rico’s Experience with Export-led Development

César F. Rosado Marzán (Princeton University)

This article details how minimum wage policies in Puerto Rico facilitated labor market centralization to establish a system of labor relations where labor, capital, and the government trusted each other. That trust, in turn, helped Puerto Rican policy makers to curb wage demands from labor unions so that the island was able to maintain competitive wage levels and attract external investment for economic growth. The case of Puerto Rico is contrasted with other successful cases where labor and minimum wage laws helped create comparable labor market centralization and tripartite trust schemes: Sweden and the Indian State of Kerala. In all three cases, unions trusted government and capital claims that wage restraint was in the interest of workers. Wage laws in all three cases gave unions access to reliable economic information and participation in the enforcement of wage policies. As such, the article concludes that neoliberal recipes for economic growth based on busting labor unions and shrinking state involvement in the economy are wrongheaded when put in absolute terms. Wage restraint to maintain competitive labor markets and spur economic growth may be required in many countries, but such policy objectives can be attained with well-crafted labor and minimum wage laws and policies that give workers, their unions, capital, and the government an equal footing in the national negotiating tables.

Cite as: César F. Rosado Marzán, Successful Wage Moderation: Trust, Labor Market Centralization, and Wage Moderation in Puerto Rico's Experience with Export-led Development, vol 9.2 ELECTRONIC JOURNAL OF COMPARATIVE LAW, (July 2005), <>.

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1. Introduction
2. Building trust and labor market centralization
3. Sweden
3.1 The Rehn–Meidner model of wages solidarity
3.2 The politics of Rehn–Meidner's implementation
4. Kerala
4.1 Unions in Kerala
4.2 Minimum wage policy in Kerala
4.3 The 'minimum wage crisis' of the 1990s
5. Puerto Rico
5.1 Unions in Puerto Rico
5.2 Wage policy in Puerto Rico: The Minimum Wage Board
5.3 The IGLWU
6. Conclusion

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