Affects of Collective Bargaining on Minimum Wages in Europe

Abstract

The EU policy agenda to ensure adequate wages for workers relies on two major instruments: statutory minimum wages and collective wage bargaining. The extent to which minimum wages and collective wage bargaining reinforce or weaken each other is a contested issue. This working paper, which constitutes deliverable 2.2 of the BARWAGE project (European Union social dialogue grant 101052319), uses linked cross-sectional microdata on applicable statutory minimum wage rates and earned wages, and asks to what extent coverage by a collective agreement on pay affects the probability of earning between 100% and 110% of the statutory minimum wage. To take into account differences in the ability of wage bargaining to set wages above the statutory minimum, we then ask to what extent the impact of collective bargaining varies by bargaining level and depending on the ratio of the statutory minimum to the median wage (Kaitz index).

Keywords: minimum wage, wage bargaining, Kaitz index