"Theoretical and empirical research shows that an individual’s earned income is not only dependent on his/her individual productivity-relevant characteristics. The employer and his pay policy, too, have an independent influence on the pay level, which is reflected by the payment of company wage differentials. The main objective of this report is analysing the relationship between the pay regime - use of an industry-wide wage agreement, use of a company wage agreement or an individual wage agreement - and the level and spread of the relevant company wage differentials. The study is based on the Lower Saxony sample of the wage and salary structure survey for 1995, which contains information on employees and companies as well as on the use of collective agreements. As regards methodology, a multi-level model is estimated which explicitly takes into account the hierarchical nature of the data. The findings indicate that a use of collective agreements is accompanied by higher incomes most of all because the base wage for all employees in a firm is increased. Furthermore, the gender-specific wage gap within a company diminishes when a collective agreement is used. However, no systematic differences between the pay regimes can be proven for the rates of return for schooling or for potential work experience, which comes as a surprise against the backdrop of the trade unions’ wage policy that aims at wage standardisation and compression, at least in programmatic respects." (author's abstract, IAB-Doku) ((en))
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