What Capital Wants: Business Interests and Labor Market Reform in Portugal and Spain

Abstract

Under what conditions are governments able to liberalize labor markets? I leverage the cases of Portugal and Spain, two countries hit by the Eurozone crisis and constrained in their policy options, that diverge in the key measure mandated by international creditors to recover – the decentralization of collective bargaining. Against the common assumption that the liberalization of labor is widely embraced by capital, I show that governments are only able to advance labor reforms when there is a leading industrial export sector that benefits from it and provides a powerful domestic social partner. I test this argument with in-depth qualitative data collected during twelve months of fieldwork in both countries, including 129 interviews with politicians, policy-makers, and members of business associations and labor confederations, among others.