Wage Floors Set in Collective Bargaining: Evidence on Wages and Employment in Argentina

In Argentina, the national minimum wage (NMW) coexists with sectoral wage floors (WF) established through collective bargaining agreements (CBA). These WFs exceed the NMW for most registered workers, rendering the minimum wage largely ineffective. Using novel data on union-negotiated wages combined with administrative records, this paper analyzes the impact of WFs set in CBAs on employment, wages, and wage inequality among formal workers. The analysis is conducted at both the industry and individual levels, utilizing a fixed-effects model by year and sector and a linear probability model based on individual worker trajectories. Results indicate that CBAs reduce overall wage inequality by decreasing inequality at the upper end of the distribution without affecting the lower end. No significant employment effects are found, except for a negative impact in sectors with a higher proportion of small firms (MSMEs). However, at the worker level, CBAs reduce the probability of remaining employed for work- ers near the wage floors, with more negative effects observed in MSMEs. Finally, CBAs’ positive effect on wage increases and negative effects on employment are more pronounced in unfavorable macroeconomic conditions.