Intergenerational spillovers of Collective Bargaining: a case study for Uruguay

In Uruguay, collective bargaining defines the formal income for the largest part of the workforce. The effects of collective bargaining on employment, income inequality and mobility have been for a long time a central topic of study in the economics literature. However, little is known on the spillovers for the next generation. This study aims to shed light on the intergenerational effects of collective bargaining for Uruguay in the last 20 years exploiting variations in wages induced by the second round of the Consejos de Salarios, the country’s institution for centralized three-way wage negotiation. Using a treatment at the sector-level we find descriptive evidence that children with parents who work in sectors with strong collective bargaining units occupy a higher place in the income distribution, are more likely to enroll in university and inherit a parent’s employer and - though with a weaker effect - more likely to anticipate their entry to the labor market. We try to identify the causal impact of collective bargaining on intergenerational mobility using a treatment at the individual level and controlling for parent sector. We find some positive noisy but non-robust results in the same direction for the place children occupy in the income distribution and entry to the labor market, but these shift when observing variables such as educational decisions and inheritance of employers.In Uruguay, collective bargaining defines the formal income for the largest part of the workforce. The effects of collective bargaining on employment, income inequality and mobility have been for a long time a central topic of study in the economics literature. However, little is known on the spillovers for the next generation. This study aims to shed light on the intergenerational effects of collective bargaining for Uruguay in the last 20 years exploiting variations in wages induced by the second round of the Consejos de Salarios, the country’s institution for centralized three-way wage negotiation. Using a treatment at the sector-level we find descriptive evidence that children with parents who work in sectors with strong collective bargaining units occupy a higher place in the income distribution, are more likely to enroll in university and inherit a parent’s employer and - though with a weaker effect - more likely to anticipate their entry to the labor market. We try to identify the causal impact of collective bargaining on intergenerational mobility using a treatment at the individual level and controlling for parent sector. We find some positive noisy but non-robust results in the same direction for the place children occupy in the income distribution and entry to the labor market, but these shift when observing variables such as educational decisions and inheritance of employers.

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