Bargaining Institutions Research Articles

Complex cooptation: How regime complexity affects the stability of cooptation bargains—the case of China and the World Bank

ABSTRACT How do variations in regime complexity affect the overall stability of cooptation bargains amidst shifting great power rivalries? Increased complexity creates opportunities for institutional bargaining during cooptation deal negotiations, enabling cooptees to explore outside-options, engage in regime-shifting and countervailing institutional creation. While great power dynamics influence actors’ decisions regarding cooptation deals, regime complexity shapes their ability to employ cross-institutional strategies, affecting deal stability. Focusing on China's cooptation deal with the World Bank since 1980, we find that during the Cold War, the deal remained stable due to China's limited outside-options and significant power asymmetry with the US. Post-Cold War, increased complexity offered China with only limited outside-options, while it couldn't effectively engage in regime-shifting. The establishment of the AIIB, however, threatens the stability of the cooptation deal made in World Bank by providing China with genuine orum-shopping and regime-shifting opportunities. This analysis highlights how regime complexity and power dynamics interact to affect cooptation bargain stability amid evolving global rivalries.

Beggaring Thy Co-Worker: Labor Market Dualization and the Wage Growth Slowdown in Europe

As temporary employment has become a pervasive feature of modern labor markets, reasons for wage growth have become less well understood. To determine whether these two phenomena are related, the authors investigate whether the dualized structure of labor markets affects macroeconomic developments. Specifically, they incorporate involuntary temporary workers into the standard wage Phillips curve to examine wage growth in 30 European countries for the period 2004–2017. Relying on individual-level data to adjust for a changing employment composition, their findings show, for the first time, that the incidence of involuntary temporary workers has strong negative effects on permanent workers’ wage growth, thereby dampening aggregate wage growth. This effect, which the authors name the competition effect, is particularly pronounced in countries where wage bargaining institutions are weak. The findings shed further light on the reasons for the secular slowdown of wage growth after the global financial crisis.

Politicizing the minimum wage: A multilingual text analysis of minimum wages in European electoral manifestos

This article examines the determinants of the growing political salience of minimum wages in European party manifestos. By using multilingual quantitative text analysis, I show that the electoral salience of minimum wages has increased in the past decades. Although left-wing parties emphasize minimum wages more than right-wing parties, I find that the electoral salience of this policy follows a U-shaped relationship: right-wing populist parties dedicate greater attention to minimum wages than centre-right parties do. A sentiment analysis finds that compared to other policies designed to supplement the income of low-wage workers, such as strengthening collective bargaining institutions and in-work benefits/wage subsidies, there do not seem to be specific party-political characteristics, which determine the sentiment with which discussions on minimum wages are framed.

The Politics of the European Minimum Wage: Overcoming Ideological, Territorial and Institutional Conflicts in the EU Multi‐level Arena

AbstractUntil recently, the idea of a European minimum wage (EMW) policy had never taken concrete shape, due to the heterogeneity of national wage‐setting and collective bargaining institutions, uncertain EU competence on the matter, and widespread scepticism amongst political actors. In 2022, however, the EU adopted a directive on adequate minimum wages. How did this make it to the EU agenda, despite the many political, territorial and institutional tensions? What coalitions supported and opposed it? Based on a reconstruction of the policy process substantiated by an analysis of news media data and 14 interviews, this article investigates the multi‐level politics of the EMW. It shows that, despite enduring ‘euro‐social scepticism’ in northern Europe, the emergence of pro‐minimum wage coalitions in key member states and the increase of party‐competition dynamics at the EU level were crucial in overcoming the lines of conflict that had long hindered EU initiatives on minimum wage co‐ordination.

Inflation and real wages

Within the Italian industrial relations system, the relationship between inflation and collective bargaining has historically been a crucial one. The capacity of collectively agreed wages to protect workers’ purchasing power has been the object of negotiations, fights, and divisions not only between governments, employer associations and trade unions, but also within each of the parts involved. The return to high inflation rates since 2022 has highlighted the inadequacy of Italian collective bargaining institutions in defending real wages.

Does collective bargaining reduce health inequalities between labour market insiders and outsiders?

AbstractCollective bargaining institutions are correlated with better population health. However, there are still major gaps in our understanding regarding the impact of collective bargaining on health inequalities, particularly between labour market ‘insiders’ and ‘outsiders’. In this study, we investigate the effect of collective bargaining coverage on individuals’ self-rated health, and whether the impact varies according to labour market status. We use four waves of the European Values Survey (1981–2018) and three-level nested random intercept models across 33 OECD and European countries (N = 66 301). We find that stronger and more inclusive collective bargaining institutions reduce health inequalities between the unemployed and the employed by disproportionately improving the health of the unemployed. This study implies that targeting the political institutions that shape the distribution of power and resources is important for reducing health inequalities.

How collective bargaining shapes poverty: New evidence for developed countries

AbstractAlthough many studies point to the significant influence of collective bargaining (CB) institutions on earnings inequalities, evidence on how these institutions shape poverty rates across developed economies remains surprisingly scarce. This paper explicitly addresses the relationship between CB systems and working‐age poverty ratesbeforeandaftertaxes and transfers in 24 developed countries over the period 1990–2015. Our results show that countries with a more centralized CB system, a more extended bargaining coverage rate and/or a higher trade union density display significantly lower poverty rates. However, these results only hold in a post‐tax benefit scenario. Controlling for country and time fixed effects and a wide range of covariates, our estimates indeed suggest that the poverty‐reducing effect of CB institutions stems from the political strength of trade unions in promoting public social spending rather than from any direct effect on earnings inequalities. Sensitivity tests for endogeneity and overlapping samples support this conclusion.

The Origins of the Swedish Wage Bargaining Model

AbstractThis paper revisits the development of the canonical Swedish wage bargaining model, from the 1930s to the 1950s. The question at the core of the debate is: how did Sweden achieve “good” wage bargaining institutions -- good, in the sense of facilitating investment, employment, and controlled inflation? The conventional account focuses on the actions of employers and trade unions in export industry, and a cross-class alliance between the two. This paper questions this account. The paper builds on archival sources in the Swedish Labour Movement's Archives and Library in Stockholm: the minutes from the main trade union confederation's yearly wage policy discussions, in preparation for bargaining rounds. In total, some 1,500 pages of wage policy discussion. I find that the export sector cross-class alliance played a very small role, and that macro-corporatist concerns, that the labour movement had to take responsibility of all of society and pursue a planned wage policy, was much more important. This has theoretical implications for the analysis of wage bargaining institutions in general and the Swedish model in particular.

Reconsidering the drivers of country-specific recommendations: The Commission's ideological preferences on wage policies

As part of the European Semester, the European Commission issues country-specific recommendations for all member states. I contribute to the literature on this political instrument, by considering the determinants of recommendations calling for greater wage moderation and enhanced cost competitiveness. For the most part, research on European economic governance has either understood the European Commission as a politicized and ‘ideological’ institution or as a de-politicized, technocratic actor. My analysis shows that the European Commission's ideological preferences on labour markets and wage bargaining institutions are more convincing predictors than explanations based on economic indicators. By testing a series of multilevel models, I find that irrespective of developments in competitiveness, countries with stronger social actors are more likely to be recipients of country-specific recommendations calling for wage restraint.

Varieties of organised decentralisation across sectors in Denmark: A company perspective

The decentralisation of European collective bargaining has been subject to much research and IR modelling. However, these studies mainly focus on the implications for national and sectoral bargaining institutions and rarely include a company perspective. Based on cross-sectional representative survey data among managers and shop stewards in Denmark, this paper offers a fresh perspective on the recent decentralisation process. We explore if company-based bargaining structures are in place and whether local social partners have utilised these bargaining opportunities across distinct sectors after decades of decentralisation. Analytically, we seek inspiration from Visser's (2016) distinct forms of organised decentralisation and combine these with insights from the broader literature on IR and institutional change. We find that bargaining practices and institutions at company level depend on a combination of provisions for company-based wage bargaining within individual sector agreements and strong union-affiliated workplace representation.

The role of wage bargaining institutions in the Phillips curve flattening

The role of wage bargaining institutions in the Phillips curve flattening

Defending institutional power? Unions’ positions towards the extension of collective agreements in Finland, Germany, and the Netherlands

AbstractStatutory bargaining extensions of collective agreements are an effective instrument to stabilise multi-employer bargaining. For unions, this means tensions between the logic of influence and membership. On the one hand, the extension constitutes a central institutional power resource. On the other hand, it might impede collective action if workers are covered without contributing. This article analyses unions’ preferences for extensions in Germany, the Netherlands and Finland, three countries that differ in union power and the trajectories of their bargaining institutions. The article has two findings. First, unions value extensions as a power resource because they prevent wage dumping. Second, union-supporting institutions counteract free-riding. Given new legislative efforts at the EU level, statutory extensions could become more important in the future.

From ‘Protecting Indigenous Workers’ towards Protecting Labour Standards?

AbstractThe article examines how the Austrian trade union movement has responded to increased cross-border mobility in the context of labour market opening in 2011. Instead of opting for restrictions, an unrealistic policy in any case, the main emphasis now is on the enforcement of labour standards. Unions pursued this issue primarily through the Austrian social partnership, which fostered a comprehensive re-regulatory response. However, under the radar of inclusive bargaining institutions, incidents of non-compliance remain a challenge, especially involving cross-border subcontracting. Thus, a nationally-bounded enforcement strategy reaches its limits in transnational labour markets. This is increasingly acknowledged by unions who are complementing their partnership approach with more emphasis on transnational cooperation and initiatives that are geared towards the inclusion of mobile workers.

Fatherhood and wage inequality in Britain, Finland, and Germany.

ObjectiveThis study investigates whether and how fatherhood shapes the wage distribution in Britain, Finland, and Germany.BackgroundExisting research debates whether fatherhood is associated with greater wages. However, it remains unclear whether the association between fatherhood and wages varies along the wage distribution as well as institutional contexts. To explore this, we compare three countries that differ in their wage bargaining institutions and family policies.MethodWe use unconditional quantile regression on longitudinal data from the 1995 to 2016 waves of the Finnish Linked Employer Employee data, German Socio‐Economic Panel, and UK Longitudinal Household Study. To control for selection into fatherhood, we combine quantile regressions with fixed effects techniques.ResultsResults show little evidence of substantial fatherhood wage effects along men's wage distribution. In all countries, fathers' higher wages at the median and top of the wage distribution are mostly accounted for by selection, but fatherhood shifts the bottom part of the distribution to the left particularly in the UK.ConclusionsThe extent to which having a child affects men's wages across the wage distribution is similar across three diverse policy contexts. Yet, differences across the wage distribution are larger in the UK. We argue this may be linked to its higher level of inequality typical of liberal labour markets.

Labor Market Deregulation & In-Work Poverty: Considerations on the Future of Social Policy

Over the past few decades, labor market deregulation has dominated the policymaking agenda. These practices entailed, among others, easing the regulatory framework for employment protection, weakening collective bargaining institutions and promoting non-standard forms of employment as a means to achieve the desired degree of flexibility. Meanwhile, conventional analyses failed to investigate the correlation between deregulation and in-work poverty. In fact, poverty was examined exclusively as a consequence of unemployment, thus obscuring its multidimensional nature. This policy brief aims to present the core arguments for and against deregulation, as well as to provide a literature review on the relation between deregulation and in-work poverty. Finally, some remarks are made on the urgent need for change in the orientation of policymaking in a post-covid era.

Reforms of collective bargaining institutions in European Union countries: Bad timing, bad outcomes?

This paper investigates whether flexibility-enhancing reforms of national collective bargaining systems have positive outcomes in terms of employment in the short term, especially when implemented during an economic downturn. The analysis consists in applying local projections to a novel panel database of reforms of collective bargaining institutions in EU countries in the period 2000–2018. There is no evidence that making collective bargaining institutions more flexible during a recession has a positive effect on employment in the short term. More specifically, reforms that decentralize bargaining closer to the firm-level have negative short-term effects, particularly on the employment of 15–54 year-olds and low-educated workers. They also tend to favor temporary employment in the medium term. The results do not support the idea that collective bargaining institutions should be reformed during a recession to boost employment.

The intensification of work in Europe: A multilevel analysis

AbstractUsing the most recent two waves of the European Working Conditions Survey (2010 and 2015) in a multilevel setting, the paper argues that national institutions have a significant effect on shifts in work intensity. We find that work has intensified in the aftermath of the economic crisis, but that intensification is restricted by labour market regulation and collective bargaining institutions. However, the effect of working time regulations varies across employment groups, with intensity levels for temporary agency workers increasing as regulations become more stringent. Furthermore, higher levels of unemployment intensify work for agency workers but not for workers on a fixed‐term contract relative to workers on a permanent contract.

The role of wages in the Eurozone

There are two main political economy explanations of the Eurocrisis. The labor market view regards cross-country differences in wage bargaining institutions as the root cause of the crisis. The finance view, instead, emphasizes cross-border financial flows and downplays labor market institutions. For the first time, we attempt to assess these two explanations jointly. We find that financial flows are better predictors of nominal wage growth than labor market institutions. At the same time, we show that wage moderation matters for bilateral export performance in the important case of Germany, but not for other countries. These results suggest that imposing wage moderation and labor market reforms onto the countries of the European periphery was unlikely to improve their plight. In contrast, stimulating wage growth in Germany might have contributed to rebalancing the Eurozone.

How Collective Bargaining Shapes Poverty: New Evidence for Developed Countries

Although many studies point to the significant influence of collective bargaining institutions on earnings inequalities, evidence on how these institutions shape poverty rates across developed economies remains surprisingly scarce. It would be a mistake, though, to believe that the relationship between earnings inequalities and poverty is straightforward. Indeed, whereas earnings inequalities are measured at the individual level, poverty is calculated at the household level using equivalised (disposable) incomes. Accordingly, in most developed countries poverty is not primarily an issue of the working poor. This paper explicitly addresses the relationship between collective bargaining systems and working-age poverty rates in 24 developed countries over the period 1990-2015. Using an up-to-date and fine-grained taxonomy of bargaining systems and relying on state-of-the-art panel data estimation techniques, we find that countries with more centralised and/or coordinated bargaining systems display significantly lower working-age poverty rates than countries with largely or fully decentralized systems. However, this result only holds in a post-tax benefit scenario. Controlling for countryfixed effects and endogeneity, our estimates indeed suggest that the poverty-reducing effect of collective bargaining institutions stems from the political strength of trade unions in promoting public social spending rather than from any direct effect on earnings inequalities.

Do collective bargaining institutions crowd out discussion and implementation of firm‐related training programs? Evidence from Japan

The paper empirically examines labor‐management communication concerning in‐house training programs and its relation to the actual on‐ and off‐the‐job training policy and wage structure. Using governmental datasets from Japan, we study how different labor‐management communication institutions may affect the training interests of employers and employees differently. We classify these institutions in terms of whether they have a legal (i.e. statutory) foundation (‘de jure’) or not (‘de facto’). We find that collective bargaining, with legal grounds, may crowd out employees’ willingness to communicate about training. However, the existence of ‘de facto’ communication channels such as joint labor‐management councils or shop floor committees is positively correlated with both on‐ and off‐the‐job of training. At the same time, the existence of unions is positively correlated with the steepness of wage profiles for mid‐career workers, which is consistent with the fact that employers and employees assume a long‐term relationship. Thus, we show that a multi‐tiered structure of labor‐management communication, together with a long‐term orientation toward the employment relationship, contributes to strengthen employees’ voice in training matters.