Decentralized wage bargaining and health

Abstract

This study examines the association between decentralized wage bargaining and worker health in Finland. We utilize unique data on collective agreements matched with total population administrative data on mental health disorders and sickness absence for the 2005–2013 period. We find that decentralized wage bargaining is related to mental health among blue-collar workers. Specifically, local wage increase allowances are associated with improved mental health in firms with a high concentration of white-collar employees, whereas this association is reversed in firms where blue-collar workers predominate. No consistent links to sickness absences are observed. Further analyses indicate that higher earnings under local wage agreements may explain the observed improvement in mental health in white-collar intensive firms, whereas decreased employment could partially explain the worsened mental health in blue-collar intensive firms.