Wages and the bargaining regimes in corporatists countries: a series of empirical essays

In the first chapter,a harmonised linked employer-employee dataset is used to study the impact of firm-level agreements on the wage structure in the manufacturing sector in Belgium, Denmark and Spain. To our knowledge, this is one of the first cross-country studies that examines the impact of firm-level bargaining on the wage structure in European countries. We find that firm-level agreements have a positive effect both on wage levels and on wage dispersion in Belgium and Denmark. In Spain, firm also increase wage levels but reduce wage dispersion. Our interpretation is that in Belgium and Denmark, where firm-level bargaining greatly expanded since the 1980s on the initiative of the employers and the governments, firm-level bargaining is mainly used to adapt pay to the specific needs of the firm. In Spain, the structure of collective bargaining has not changed very much since the Franco period where firm agreements were used as a tool for worker mobilisation and for political struggle. Therefore, firm-level bargaining in Spain is still mainly used by trade unions in order to reduce the wage dispersion. In the second chapter, we analyse the impact of the bargaining level and of the degree of centralisation of wage bargaining on rent-sharing in Belgium. To the best of our knowledge, this is the first study that considers simultaneously both dimensions of collective bargaining. This is also one of the first papers that looks at the impact of wage bargaining institutions on rent-sharing in European countries. This question is important because if wage bargaining decentralisation increases the link between wages and firm specific profits, it may prevent an efficient allocation of labour across firms, increase wage inequality, lead to smaller employment adjustments, and affect the division of surplus between capital and labour (Bryson et al. 2006). Controlling for the endogeneity of profits, for heterogeneity among workers and firms and for differences in characteristics between bargaining regimes, we find that wages depend substantially more on firm specific profits in decentralised than in centralised industries ,irrespective of the presence of a formal firm collective agreement. In addition, the impact of the presence of a formal firm collective agreement on the wage-profit elasticity depends on the degree of centralisation of the industry. In centralised industries, profits influence wages only when a firm collective agreement is present. This result is not surprising since industry agreements do not take into account firm-specific characteristics. Within decentralised industries, firms share their profits with their workers even if they are not covered by a formal firm collective agreement. This is probably because, in those industries, workers only covered by an industry agreement (i.e. not covered by a formal firm agreement) receive wage supplements that are paid unilaterally by their employer. The fact that those workers also benefit from rent-sharing implies that pay-setting does not need to be collective to generate rent-sharing, which is in line with the Anglo-American literature that shows that rent-sharing is not a particularity of the unionised sector. In the first two chapters, we have shown that, in Belgium, firm-level bargaining is used by firms to adapt pay to the specific characteristics of the firm, including firm’s profits. In the third and final chapter, it is shown that firm-level bargaining also allows wages to adapt to the local environment that the company may face. This aspect is of particular importance in the debate about a potential regionalisation of wage bargaining in Belgium. This debate is, however, not specific to Belgium. Indeed, the potential failure of national industry agreements to take into account the productivity levels of the least productive regions has been considered as one of the causes of regional unemployment in European countries (Davies and Hallet, 2001; OECD, 2006). Two kinds of solutions are generally proposed to solve this problem. The first, encouraged by the European Commission and the OECD, consists in decentralising wage bargaining toward the firm level (Davies and Hallet, 2001; OECD, 2006). The second solution, the regionalisation of wage bargaining, is frequently mentioned in Belgium or in Italy where regional unemployment differentials are high. In this chapter we show that, in Belgium, regional wage differentials and regional productivity differentials within joint committees are positively correlated. Moreover, this relation is stronger (i) for joint committees where firm-level bargaining is relatively frequent and (ii) for joint committees already sub-divided along a local line. We conclude that the present Belgian wage bargaining system which combines interprofessional, industry and firm bargaining, already includes the mechanisms that allow regional productivity to be taken into account in wage formation. It is therefore not necessary to further regionalise wage bargaining in Belgium.