Collective bargaining and power: Wage premium of collective agreements in Europe 2002–2018

Abstract

This article uses the European Structure of Earnings Survey to describe the evolution of collective bargaining coverage in European countries during 2002–2018 and how this affected the pay premium associated with being covered. Pay premia are an outcome of negotiations, reflecting the bargaining power on behalf of employees as well as the system of coverage, separately for the public and private sector. Descriptively, we show a decline in collective bargaining coverage linked to a general reduction in the pay differences. This hides much variation though. In a multivariate analysis of changes over time, we show that centrally bargained agreements are associated with larger pay premia if more people are covered and in countries and sectors with stronger trade unions. As this power declines over time, so do wage premia. At higher rates of coverage, there can be a spillover effect where wages for all workers increase, thereby reducing the premia.