Traditional models assume that economic agents make some economic calculations regarding the benefits and costs of labor regulations to decide whether to support them or not: those who may be positively affected are more likely to show support than those who may be hurt.  However, some people may endorse regulations even if the comparison of (narrowly defined) benefits and costs would deem it unwise.  Some of the reasons why these people may support regulations are: they don’t know the cost of regulations (rational ignorance), they don’t believe in the costs of regulations (irrational beliefs), or even if aware of the costs they prefer the distributive outcome that results from having higher labor regulations.

In this paper we explore the factors that have an influence on the support of labor regulation at the individual level.  We are especially interested in studying the effect of preferences and perceptions on the likelihood of favoring labor regulations, which are not attributable to the direct impact of regulations on individuals’ wellbeing.  One group of people that may show higher support of labor regulations, even after controlling for the impact of labor regulations on income and job security, is union members.

We test the hypotheses using multinomial and IV probit models on individual level data from the Latin American Public Opinion Project for Argentina, Chile, and Venezuela, which are the only countries with questions on individual support for minimum wage increases and firing restrictions.  To preview the findings, our results indicate that support for labor regulations is higher for those who may be positively affected (such as unskilled employees) and lower for those who may be negatively affected or may be better able to quantify the benefits and costs of regulations (e.g., higher income and more years of education).  Interestingly, union members present a higher support for labor regulations even after controlling for the positive effects of regulations on their wellbeing.  This evidence seems to suggest that their support for labor regulations may not be explained only by the narrow comparison of benefits and costs but also by other determinants such as information gaps, irrational beliefs or particular preferences about how the labor market should reward different people.  Determining exactly which channel explains this finding is still an open question for further research.