The ILO urges the modification of the Wage Councils
It understands that two of its powers are contrary to international labor conventions ratified by law by Uruguay.
This year, Uruguay is included in the "blacklist" of the Committee on the Application of Standards of the International Labour Organization (ILO). The body issued recommendations to countries that fail to comply with international labor conventions, and Uruguay is one of them.
The reason has old roots: the complaint that the business sector presented to the ILO in 2009, questioning that the then-proposed collective bargaining law—which later became Law No. 18,566—was not compatible with international labor conventions. To date, a series of powers held by the Wage Councils (Consejos de Salarios) that undermine free and voluntary collective bargaining—a pillar of ILO Convention No. 98—remains pending modification.
Below, we review these powers and the ILO's stance, and assess the opportunity that the world's highest international labor body offers to Uruguay.
1. The Wage Councils
The Wage Councils are tripartite bodies composed of representatives from the Executive Branch and the most representative organizations of workers and employers. They were created by Law No. 10,449 in 1943. They operate at the industry branch level or by activity groups, within mandatory frameworks that run parallel to or cumulatively with bipartite collective bargaining at the branch level.
They possess a series of exclusive powers. The three most important are: classifying workers in each activity group by profession and category; setting the minimum wage for each of those categories; and acting as conciliation bodies in collective disputes. These three were provided for in the 1943 law.
In 2009, Law No. 18,566 modified Article 12 of the 1943 law and incorporated two additional powers. Although these were sometimes voluntarily included by social partners in each Council, the law made them mandatory: wage adjustments and the regulation of "other working conditions."
2. Why the ILO Urges the Government to Modify These Powers
Article 4 of ILO Convention No. 98 provides that "measures appropriate to national conditions shall be taken, where necessary, to encourage and promote the full development and utilisation of machinery for voluntary negotiation between employers or employers' organisations and workers' organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements."
The contradiction with Article 12 of Law 18,566 is evident: because the Wage Councils force the negotiation of wage adjustments and working conditions at specific times and under certain rules, with the intervention of the Executive Branch (the fact that voting on working conditions requires the concurrent vote of employers and workers does not eliminate the obligation to negotiate them).
In this context, the Committee urged "the Government, in consultation with the most representative organizations of employers and workers, to take the necessary legislative measures, in particular the modification of Article 12 of Law No. 18,566, to ensure full compliance of legislation and practice with the principles of collective bargaining and with the Convention" (No. 98). The resolution also encourages Uruguay to seek technical assistance from the organization and requests that it submit a report on the progress made before September.
3. Why the Questioned Powers Disrupt the Labor Market
To the regulatory argument, we add one related to labor market efficiency. This efficiency must be measured not only by improvements in working conditions (which the Wage Councils do indeed generate) but also by the employment rate. The problem is that the conditions agreed upon in the Councils do not always safeguard the maintenance of employment rates. Partly because the Councils rarely allow for opt-outs (descuelgues)—the possibility of reducing the minimums approved at the branch level—except in cases of obvious business crises. Partly because the interests of the strongest companies within an activity group do not always take into account the situation of others that may be facing difficulties.
But above all, because agreeing on uniform working conditions from the branch level—from "above"—without considering the uniqueness of each company, prevents wages from being set according to the productivity of each position. This is the central point: the cost of a job should be related to its productivity. And that is better measured from within each company, freely and voluntarily, taking into account the particularities of each worker, production process, and sectorial context.
4. Assessment
Questioning the Wage Councils is controversial because they are the "sacred cow" of our labor relations.
However, modifying their powers in the sense analyzed does not mean emptying them of content, but simply allowing these bodies to return to functioning as they did—uninterruptedly—from 1943 to 2009: addressing the negotiation of wage adjustments and working conditions in a genuinely free and voluntary manner.
This normative adaptation would align national legislation with ILO standards. Furthermore, if legislation were enacted to incentivize free and voluntary collective bargaining—especially at the company level, with agreements that seek a relationship with productivity—it would be more feasible to achieve efficient employment protection.
A crisis that is an opportunity. Because the ILO resolution is not a condemnation; it is a roadmap. Capitalizing on it—through dialogue with social partners and a reform that preserves what is valuable about the Councils while correcting what causes distortion—would also be a sign of institutional maturity and seriousness regarding international commitments.