Employers and the Persistence of Centralized Wage Setting

Abstract

Recent research indicates that centralized collective bargaining institutions are more resilient than predicted by the conventional wisdom, which viewed them as incompatible with new competitive conditions and newproduction strategies. Drawing on a case study of Norway, the author argues that one reason for this resilience is that centralized wage setting may be actively supported by employers because it serves important employer interests. It has helped moderate wage growth, reduced transaction costs, contributed to stable industrial relations, and provided political leverage for employer organizations. The author also argues that institutional change must be viewed in terms of its economic and institutional context. There has been some formal devolution of bargaining capacity to the level of the individual firm in Norway, Sweden, and Denmark. However, these changes have been accompanied by institutional changes, instigated by employers, that have increased the coordinating capacity of labor market actors. Labor markets in all three countries remain highly institutionalized.