The Effects of the Decentralization of Collective Bargaining on Wages and Worker’s Well-being

Summary

This report analyses the effects of the decentralization of collective bargaining on the incidence of wage increases, wage dispersion and worker’s well-being in Finland. This project is funded by the Finnish Work Environment Fund. We use linked employer-employee panel data for the 2005–2013 period, matched with information on collective agreements, sickness absence and mental health disorders. Our regression results from models with high-dimensional individual and firm fixed effects show that decentralized bargaining leads to 1–2 percent higher wage increases. Decentralized bargaining decreases wage dispersion among blue-collar employees and slightly increases it among white-collar employees. We argue that these differences reflect the different preferences of the employee groups. We also show that decentralization is positively related to objectively measured indicators for worker’s well-being, such as decreased job quits and long-term sickness absence. However, there is some evidence to show that decentralized bargaining could lead to increased mental health problems among blue-collar workers. Whether the mechanism between bargaining systems and worker’s well-being is explained by actual or relative wages needs to be explored further.

Publication info

Results of research
Impacts of collective agreement on wage increases and work capacity
Research group
Labour market and education
Series
ETLA B 279
Date
08.02.2021
Keywords
Decentralization, Collective agreements, Wage bargaining, Wage increase, Wage dispersion, Worker’s well-being
ISSN
0356-7443
ISBN
978-951-628-737-2 (nid.)
978-951-628-738-9 (pdf)
Pages
47
Price
20 €
Language
Finnish