The Sanguinetti administration attempted to balance the clear need to increase wages with the equally pressing requirement to control inflation. Thus, the government immediately declared a wage increase in March 1985 but took action designed to control future wage increases. The tripartite wage councils were reestablished to negotiate wages every four months for nonagricultural private-sector employees. The councils at first adopted wage increases that were slightly higher than inflation, so that real wages at the end of 1985 were an average of 15 percent higher than the year before. Nevertheless, there was a great deal of labor unrest: over 900 strikes occurred between March 1985 and September 1986. Workers were apparently frustrated by the slow increases in real wages and anxious to express their displeasure after a decade of repression.

After 1986 the number of labor disputes decreased, partly because of the government's bargaining strategy. The government tried to control wage increases by persuading all private-sector unions to sign twenty- to twenty-four-month contracts under which wages would be adjusted according to conditions within individual companies. This action helped lower the level of conflict between labor and government, but it may have made the task of restraining wage increases more difficult. In exchange for accepting longer wage contracts, unions demanded that workers be protected against inflation through "indexation," or automatic wage increases, to compensate for inflation. In 1986 about onethird of all workers were covered by indexed contracts by the end of 1988, over half were. When Sanguinetti proposed in mid1988 that wage increases be held to 90 percent of inflation, instead of the 100 percent or greater that unions had become accustomed to, most of the nation's work force joined a one-day work stoppage in protest. The position of workers was understandable: their average real wage (purchasing power) remained below its 1968 level (see Blue-Collar Workers , ch. 2). The wage issue, particularly the question of whether indexation was compatible with an anti-inflationary policy, was still unresolved when Lacalle took office in 1990.

Data as of December 1990