Collective Bargaining and Within-firm Wage Dispersion in Spain

This paper analyses the effect of collective bargaining on within‐firm wage dispersion for the case of Spain. What is relevant in the Spanish case is to compare the effect of the two basic levels of bargaining (firm and sector) on wage dispersion. By using the Oaxaca–Blinder decomposition, this paper concludes that collective agreements at firm level have a negative effect on wage dispersion. At the same time, firms that have signed these types of agreements show greater wage dispersion than those covered by agreements at the sector level, owing to the positive and compensating effect of firms’ and workers’ features.     

Collective Bargaining and Wage Dispersion in Europe

The level at which collective bargaining takes place is usually considered important in determining wage levels and wage inequalities. Two different situations are considered: a first in which bargaining is only ‘multi‐employer’, and a second in which it is ‘multi‐level’, in the sense that workers can be covered by both a ‘multi‐employer’ and a ‘single‐employer’ contract at the same time. The purpose of this paper is to analyse the impact of these different institutional settings on pay dispersion. The study is carried out using the European Structure of Earnings Survey, which is a large dataset containing detailed matched employer–employee information for the year 1995. The countries analysed are Italy, Belgium and Spain. The empirical results generally show that wages of workers covered by only a ‘multi‐employer’ contract are no more compressed than those of workers covered by both ‘multi‐employer’ and ‘single‐employer’ contracts. This implies that where workers are not covered by single‐employer bargaining, they receive wage supplements paid unilaterally by their employers.     

We Want Them All Covered! Collective Bargaining and Firm Heterogeneity: Theory and Evidence from Germany

This article establishes a link between the degree of productivity dispersion within an industry and collective bargaining coverage of the firms in the industry. In a stylized unionized oligopoly model, we show that differences in productivity levels can affect the design of collective wage contracts a sector‐union offers to heterogeneous firms. Using German linked employer–employee data, we test a range of our theoretical hypotheses and find empirical support for them. The dispersion of sector‐level labour productivity decreases the likelihood of firms being covered by a collective bargaining agreement on the industry level, but increases the likelihood of firms being covered by firm‐level agreements. The results hold for different subsamples and (panel) estimation techniques.     

Pay Policies of Firms and Collective Wage Contracts—An Uneasy Partnership?

Theoretical considerations suggest that firms establish consistent internal wage structures and pay wage premiums of similar size across occupational groups. Strong evidence for the existence of coherent employer pay policies across occupations is found using a German employer–employee data set. However, firm‐specific elements of wage policies are less prevalent in firms applying industry‐level collective contracts than in firms with individual‐level wage contracts.     

The Impact of Wage Bargaining Regime on Firm‐Level Competitiveness and Wage Inequality: The Case of Ireland

This paper uses a linked employer‐employee dataset to analyze the impact of institutional wage bargaining regimes on average labor costs and within‐firm wage dispersion in private sector companies in Ireland. The results show that while centralized bargaining reduced labor costs within both the indigenous and foreign‐owned sectors, the relative advantage was greater among foreign‐owned firms. The analysis suggests that there are potentially large competitiveness gains to multinational companies that locate in countries implementing a centralized bargaining system. Furthermore, the results provide additional support to the view that collective bargaining reduces within‐firm wage inequality.     

Labor Contract Duration,Indexation, and Wage Adjustment: Interdependence and Inflation Propagation Mechanisms

We study simultaneously the three main outcomes of collective bargaining negotiations, namely indexation, non‐indexed wage adjustment, and contract duration. The wage adjustment equation accommodates varying degrees of wage indexation in the current and previous contracts. The elasticity of indexation, a latent variable, deals with both the incidence and intensity of wage indexation and links consistently with the wage equation. Duration, which may change between contracts, is shown to depend on indexed and non‐indexed wage adjustment, obviating the need for expected inflation in the empirical duration equations of earlier work. Complex intra‐ and inter‐contract inflation propagation mechanisms involve expected inflation and inflation uncertainty in an essential way. The model accounts for the secular doubling of contract duration and dramatic decrease in indexation and non‐contingent wage adjustment.     

The Institutional Context of an ‘Empirical Law’: The Wage Curve under Different Regimes of Collective Bargaining

The wage curve postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most studies have not taken into account that differences in the institutional framework may have an impact on the existence (or the slope) of a wage curve. Using a large‐scale linked employer–employee dataset for Western Germany, this article provides a first direct test of the relevance of different bargaining regimes (and of works councils) for the existence of a wage curve. In pooled regressions for the period 1998 to 2006, as well as in worker‐level or plant‐level fixed‐effects estimations, we obtain evidence for a wage curve for plants with a collective bargaining agreement at firm level. The point estimates for this group of plants are close to the ?0.1 elasticity of wages with respect to unemployment postulated by Blanchflower and Oswald. In this regime, we also find that works councils dampen the adjustment of wages to the regional unemployment situation. In the other regimes of plants that either do not make use of collective contracts or apply sectoral agreements, we do not find a wage curve.     

Dissecting Between-Plant and Within-Plant Wage Dispersion: Evidence from Germany

Using rich linked employer–employee data for (West) Germany between 1996 and 2014, we conduct a decomposition analysis based on recentered influence function (RIF) regressions to analyze the relative contributions of various plant and worker characteristics to the rise in German wage dispersion. Moreover, we separately investigate the sources of between-plant and within-plant wage dispersion. We find that industry effects and the collective bargaining regime contribute the most to rising wage inequality. In the case of collective bargaining, both the decline in collective bargaining coverage and the increase in wage dispersion among the group of covered plants have played important roles.     

Sharp Teeth or Empty Mouths? European Institutional Diversity and the Sector‐Level Minimum Wage Bite

The article explores the link between different institutional features of minimum wage systems and the minimum wage bite. We notably address the striking absence of studies on sectoral‐level minima and exploit unique data covering 17 European countries and information from more than 1,100 collective bargaining agreements. Results provide evidence for a neglected trade‐off: systems with bargained sectoral‐level minima are associated with higher Kaitz indices than systems with statutory floors, but also with more individuals actually paid below prevailing minima. Higher collective bargaining coverage can, to some extent, reduce this trade‐off between sharp teeth (high wage floors) and empty mouths (non‐compliance/non‐coverage).     

The Union Wage Effect in Japan

Previous studies point to Japanese labor unions’ lack of bargaining power that results from their organization at an enterprise level. However, a detailed examination of the institutional setting backed by the Labor Standard Law and Trade Union Law reveals that unions have strong bargaining power against deteriorating work conditions. This paper examines the effect of unions on wages using the Japanese General Social Surveys 2000–2003, which cover a period of economic stagnation. We find a robust union wage premium for both males and females. A Cotton–Neumark decomposition reveals that about one‐fifth of union workers’ higher wage is explained by the difference in the union and nonunion wage structures. We also can confirm the union wage compression effect using the DiNardo, Fortin, and Lemieux (1996 ) method. Union workers are likely to think that they will not find jobs with similar compensation packages if they leave their current jobs. In summary, unions in Japan contribute to an increase in the average wage and compress the wage distribution among their workers. This result is reconciled with previous findings by considering the uniqueness of the macroeconomic conditions of the sample period.     

Rent‐Sharing under Different Bargaining Regimes: Evidence from Linked Employer–Employee Data

Using Belgian linked employer–employee data, we examine how collective bargaining arrangements affect the relationship between firms' profitability and individual wages via rent‐sharing. In industries where agreements are usually renegotiated at firm‐level (‘decentralized industries’) wages and firm‐level profits are positively correlated regardless of the type of collective wage agreement by which the workers are covered (industry or firm). On the other hand, where firm‐level wage renegotiation is less common (‘centralized industries’), wages are only significantly related to firms' profitability for workers covered by a firm‐level collective agreement. Thus, industry‐wide contracts that are not complemented by a firm‐level collective agreement suppress the impact of firm profits on workers' wages in centralized industries.     

The Economic Impact of the Boston Living Wage Ordinance*

This paper presents one of the first quantitative assessments of the effect living wage laws have had on firms covered by their mandate. Applying difference‐in‐difference estimation methods to survey data from Boston, Massachusetts, I find little evidence of reduced employment or hours worked, following living wage implementation. Instead, there is strong evidence that firms actually shifted from part‐time towards full‐time staffing as a result of Boston's living wage law. Estimates also reveal a substantial degree of wage compression within firms who raised wages. Finding no evidence of reduced employment or hours, this paper uses qualitative survey data to examine other ways in which firms may have adjusted to higher wages. I find some evidence that covered firms have taken lower profits as a way to adjust to the Boston law.     

Wage Cyclicality Under Different Regimes of Industrial Relations

We analyze the effect of collective wage agreements and of works councils on the cyclicality of real wages. Using employer–employee data for western Germany (1995–2004), we find that wage adjustments to positive and negative shocks are generally not symmetric. Wage growth increases in all industrial relations regimes when unemployment is falling, but this inverse relationship is weaker when unemployment is rising. Moreover, in plants with individual‐level bargaining, wages do not adjust at all to rising unemployment. Works councils increase wage growth only in firms covered by sectoral agreements, but they do not affect the cyclicality of wages.     

The Extent of Rent Sharing along the Wage Distribution

The relation between rent sharing and wages has generally been evaluated on average wages. This article uses a unique employer–employee panel database to investigate the extent of rent sharing along the wage distribution in Italy. We apply quantile regression techniques and control for national level bargaining, unobserved worker and firm heterogeneity and endogeneity. Our findings show that the extent of rent sharing decreases along the wage distribution, suggesting that unskilled workers benefit most from firms’ rents. By applying quantile regressions by occupational categories, we show that the decreasing pattern is mainly driven by blue collar workers, while estimates for white collars are higher and basically constant along the wage distribution. We also provide evidence that unions might represent one of the drivers of our findings.     

The Coverage of Collective Pay-setting Institutions in Britain, 1895–1990

Fewer than 50% of British employees now have their pay and conditions affected by collective pay-setting institutions — collective bargaining or wages councils. This paper charts the historical context for the current picture of a decollectivized Britain, constructing a time series on coverage from 1895 to 1990. Extant estimates and sources of coverage data are presented and discussed alongside estimates drawn from a source used only sparingly before now — the number of workers affected by changes in wage rates of national agreements or wage orders. The recent decline in collective bargaining coverage is the most prolonged ever recorded and has been noticeably steeper than the fall in union density, such that the proportion of British workers covered is lower now than in the 1940s. With the abolition of wages councils in 1993, collective pay-setting machinery now affects the pay and conditions of fewer workers than it did in the 1930s.     

The Impact of Union Wage Concessions on Union Premiums

Previous research showing that union wage premiums actually rose from the late 1970s to the mid-1980s suggests that concession bargaining was more media hype than the result of a fundamental change in collective bargaining. Our study found that nonrandom attrition of workers from the union sector does lead to an upward bias in the measured growth of union premiums, but concession bargaining was not a sufficiently widespread occurrence to reduce the size of union premiums during the sample period.     

The Impact of Collective Bargaining Legislation on Strike Activity and Wage Settlements

We examine the effects of collective bargaining legislation, such as (among others) bans on replacement workers and reinstatement rights, on private sector strike activity and wage settlements using Canadian data from 1978 to 2008. Our estimates indicate that this legislation does not have a statistically significant effect on the incidence of strikes. However, we do find that some of the policy variables have a statistically significant effect on strike duration and wage settlements.     

Decentralized Wage Formation in Sweden

Recent Swedish collective bargaining agreements have incorporated provisions for local pay review talks and opportunities for individuals to negotiate their own wages. Using trade union data, we show that members who participate in local pay review talks and members who negotiate their own wages have significantly higher monthly wages than those who do not. Pay decentralization either improves an individual's bargaining position or attracts more productive trade union members. Either way, trade union wage policies to increase individual‐level wage variance are achieving their intended effects.     

Collective Wage Contracts,Opt‐Out Clauses,and Firm Wage Differentials: Evidence from Linked Employer–Employee Data

Using a large linked employer–employee data set, this article studies whether the existence and use of flexibility provisions within centralized collective wage agreements alter the structure of pay across employers. Using level regressions and first‐difference methods, we find that—compared with contracts without any flexibility—wages under opt‐out clauses are more responsive to local profitability conditions in below‐average‐performing establishments. In contrast, the sensitivity of wages to local profitability is smaller in high‐performance establishments. Our results provide further evidence for a threat potential of the existence of opt‐out clauses whose impact on flexibility is larger than the real application.     

Flexible Wage Contracts,Temporary Jobs,and Firm Performance: Evidence From Italian Firms

This study focuses on the effects of decentralized wage schemes and temporary forms of employment on firm performance. The effect of monetary incentives on workers' effort and firm performance is a central topic in economics. According to the principal‐agent paradigm, firms (the principal) have to link employees' remuneration schemes to any verifiable indicator of performance to avoid opportunistic behavior. The empirical evidence shows that financial incentives have the potential to exert strong effects on indicators of firm performance, such as productivity and worker absenteeism, although the degree of effectiveness of such schemes varies significantly according to the institutional/economic context in which firms operate. From both a theoretical and empirical point of view, the prediction on the effects of temporary types of employment on effort and productivity is less neat. In light of these considerations, this study uses a sample of Italian firms to provide further empirical evidence on whether and to what extent performance‐related pay schemes and contract flexibility affect workers' effort (in terms of absenteeism) and, in turn, firm productivity. These effects are analyzed for different types of workers (white collar vs. blue collar), working in workplaces characterized by a different degree of uncertainty and risk and in firms operating in different economic and institutional settings. Our results show that wage flexibility has a significant effect on effort and then on firm's productivity and that white‐collar workers are more responsive to monetary incentives than blue‐collar workers. Moreover, the presence of a large share of temporary contracts, implying a lower dismissal probability for permanent workers and a deterioration of the working environment, appears to reduce workers' motivation and effort.