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The place of labor in market reform coalitions, ranging from democratic inclusion to labor repression, triggers a trade-off between the degree of deregulation in the formal sector and the amount of compensations targeted to the unemployed and poor workers in the informal sector. Comparative analysis of Chile (1973-1989), Argentina (1989-99), and Spain (1982-96) reveals that, the more organized labor is included in the policymaking process, the less extensive reform of the system of industrial relations will be. Conversely, the more organized labor is repressed or excluded, the more labor law will be deregulated. In addition, when labor is excluded or repressed, the relative importance of compensatory policies in the form of subsidies to unemployed and unorganized workers in the informal sector is greater. [ABSTRACT FROM AUTHOR]