Bargained Wages, Wage Drift and the Design of the Wage Setting System

Arbeitspapier

This paper aims at answering the question: How does a typically 'European' bargaining system - with collective bargaining, extension mechanisms and national minimum wage - coexist with low unemployment rate and high wage flexibility? A unique data set on workers, firms and collective bargaining contracts in the Portuguese economy is used to analyze the determinants of both the bargained wage and the wage drift. Results indicate that wage drift stretches the returns to every worker and firm attribute, whereas it shrinks the returns to union bargaining power. Therefore, firm-specific arrangements, in the form of wage drift, partly offset collective bargaining, granting firms a high degree of freedom when setting wages. Union bargaining power raises the overall wage level, but lowers the returns on worker attributes, an outcome of the egalitarian policy pursued.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 914

Classification and Topics

• Classification: Wirtschaft ; Trade Unions: Objectives, Structure, and Effects ; Wage Level and Structure; Wage Differentials ; Firm Behavior: Theory
• Subject: wage distribution ; wage drift ; union bargaining power ; employer coordination ; Tarifpolitik ; Lohnverhandlungen ; Lohndrift ; Arbeitsmarktflexibilisierung ; Schätzung ; Portugal

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cardoso, Ana Rute ; Portugal, Pedro
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/20150
• Last update: 10.03.2025, 11:45 AM CET