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Pay clauses in public procurement: The wage impact of collective bargaining compliance laws in Germany

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  • Pyka, Vinzenz

Abstract

Using administrative data from Germany, this study provides first evidence on the wage effects of collective bargaining compliance laws. These laws require establishments receiving public contracts to pay wages set by a representative collective agreement, even if they are not formally bound by one. Leveraging variation in the timing of law implementation across federal states, and focusing on the public transport sector - where regulation is uniform and demand is driven solely by state-level needs - I estimate dynamic treatment effects using event-study designs. The results indicate that within five years of the law's implementation, wage increases were on average 2.9 to 4.6 per cent higher in federal states with such a law compared to those without one - but only in East Germany. These findings highlight the potential for securing collectively agreed wages in times of declining collective bargaining coverage.

Suggested Citation

  • Pyka, Vinzenz, 2025. "Pay clauses in public procurement: The wage impact of collective bargaining compliance laws in Germany," Discussion Papers 132, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    • Handle: RePEc:zbw:faulre:321882
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy

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