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Industrial Relations and the Wage Differentials between Skilled and Unskilled Blue-Collar Workers within Establishments: An Empirical Analysis with Data of Manufacturing Firms

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Author Info

  • Hübler, Olaf

    ()
    (Leibniz University of Hannover)

  • Meyer, Wolfgang

    ()
    (Leibniz University of Hannover)

Abstract

Increased wage inequality between skilled and unskilled workers is a stylized fact, which can be observed in many developed countries. Among the explanations advanced for this phenomenon is the increasing globalization, a skill-biased technical progress, restructuring of the firms, and last but not least, a decreasing importance of industrial relations institutions. In the paper, we investigate in a three-step procedure with firms’ data whether the latter determinant is influential. We control for the other relevant explanations and split industrial relations into three components - coverage of collective bargaining, existence of a works council, and union density - within a four-equation model. We find an insignificant influence of the union density. A Works council compresses the wage differentials between skilled and unskilled blue-collar workers while coverage is effective in the opposite direction. The latter two effects nearly offset each other.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 176.

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Length: 31 pages
Date of creation: Jul 2000
Date of revision:
Publication status: published in: Schmollers Jahrbuch: Zeitschrift für Wirtschafts- und Sozialwissenschaften /Journal of Applied Social Science Studies, 2001, 121(3), 285-312
Handle: RePEc:iza:izadps:dp176

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Keywords: union density; skilled and unskilled labour; Wage differentials; coverage of collective bargaining; works councils;

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References

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  1. Claudio Lucifora, 1999. "Wage Inequalities and Low Pay: The Role of Labour Market Institutions," Working Papers, Fondazione Eni Enrico Mattei 1999.13, Fondazione Eni Enrico Mattei.
  2. Freeman, Richard & Schettkat, Ronald, 2001. "Skill Compression, Wage Differentials, and Employment: Germany vs the US," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 582-603, July.
  3. Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52 National Bureau of Economic Research, Inc.
  4. Heywood, John S & Hubler, Olaf & Jirjahn, Uwe, 1998. "Variable Payment Schemes and Industrial Relations: Evidence from Germany," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 51(2), pages 237-57.
  5. Kornelius Kraft, 1994. "Wage differentials between skilled and unskilled workers," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 130(2), pages 329-349, June.
  6. Snower, Dennis J., 1999. "Causes of Changing Earnings Inequality," IZA Discussion Papers 29, Institute for the Study of Labor (IZA).
  7. David Card, 1996. "Deregulation and Labor Earnings in the Airline Industry," NBER Working Papers 5687, National Bureau of Economic Research, Inc.
  8. Fitzenberger, Bernd & Franz, Wolfgang, 1999. "Industry-Level Wage Bargaining: A Partial Rehabilitation--The German Experience," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(4), pages 437-57, September.
  9. Haskel, Jonathan, 1999. "Small Firms, Contracting-Out, Computers and Wage Inequality: Evidence from UK Manufacturing," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 66(261), pages 1-21, February.
  10. Richard B. Freeman, 1991. "How Much Has De-Unionisation Contributed to the Rise in Male Earnings Inequality?," NBER Working Papers 3826, National Bureau of Economic Research, Inc.
  11. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(2), pages 75-96, Spring.
  12. David Card, 1992. "The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?," NBER Working Papers 4195, National Bureau of Economic Research, Inc.
  13. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 302-08, May.
  14. Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 309-14, May.
  15. FitzRoy, Felix R & Kraft, Kornelius, 1985. "Unionization, Wages and Efficiency: Theories and Evidence from the U.S. and West Germany," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 38(4), pages 537-54.
  16. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(3), pages 37-54, Summer.
  17. Blau, Francine D. & Kahn, Lawrence M., 1999. "Institutions and laws in the labor market," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 25, pages 1399-1461 Elsevier.
  18. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
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Cited by:
  1. Uwe Jirjahn, 2011. "Gender, Worker Representation and the Profitability of Firms in Germany," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 8(2), pages 281-298, December.
  2. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, Elsevier, vol. 28(3), pages 175-193, September.

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