Banque de France Bulletin no. 217: Article 2 Wage bargaining in Europe: a wide range of increasingly decentralised models since the crisis

Thematic: Macroeconomics, microeconomics and structures

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There is no single European wage bargaining model. Wage bargaining takes place between social partners at the national and regional level in the Nordic countries. This is also the case in Germany, despite the decentralisation of wage bargaining at industry and company level that began in the early 2000s. In Belgium, Spain, and even Italy, the government intervenes sometimes strongly in wage bargaining. In France and Portugal wage bargaining is less centralised but the minimum wage set by the government can have a significant impact on negotiated wages.
Since the crisis, there has been a general trend towards decentralised wage bargaining, which enables companies to better adjust to the economic situation.

1 Different situations in Europe despite a general trend towards decentralisation and wage moderation during the crisis

Wage bargaining systems differ across Europe according to two criteria: the importance given to bargaining in relation to legal and regulatory standards or to the provisions in the employment contract; and the degree of centralisation, i.e. the prevailing bargaining level (national, industry or company).

Multiple wage bargaining systems across Europe

Government involvement in wage bargaining varies greatly across Europe: it is non-existent in the United Kingdom, but particularly strong in Belgium where a law regulates wage developments. In countries where wage bargaining is centralised (Germany, the Netherlands, Sweden), the law sets an institutional framework for consulting the social partners. In France and Portugal, negotiations take place at a less centralized level, but changes in the minimum wage affect the setting of industry-level wage floors. According to Fougère, Gautier and Roux (2016), the elasticity of industry-level wage floors to an increase in the French minimum wage is thus between 0.15% and 0.4%, less strong when wages are high.

A European trend towards decentralised wage bargaining

Even though there is no single model, a common trend towards the decentralisation of wage bargaining emerged during the crisis. The objective was to better tailor conventional law – resulting from collective agreements – to individual companies’ situation. In particular, industry-level wage bargaining was more regulated, while company-level agreements were relaxed. For example, in Spain, since 2012, company-level collective wage agreements now have priority over higher-level agreements for all matters falling under Article 84.2 of the Workers’ Statute (base wage and additional compensation, overtime compensation, working hours, occupational classification, adaptation of the employment contract and family conciliation measures).