Lower coverage but stronger unions? Institutional changes and union wage premia

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Lower coverage but stronger unions? Institutional changes and union wage premia in Central Europe In this paper we use the national samples from the European Structure of Earnings Survey (ESES) to analyze the evolution of the wage premium of firm- and industry-level agreements in the Czech Republic, Hungary, and Poland (the CE3) around the time of their accession to the EU. We find that despite a generalized reduction in union coverage in these countries, the union wage premium after accession to the EU became bigger and statistically more signif- icant for Poland and Hungary, particularly for industry-level agreements. We interpret these findings in terms of the institutional reforms that occurred in the CE3 between 2002 and 2006. These reforms, which were prompted by the EU Commission’s requirements for EU acces- sion, increased the social partners’ ability to bargain and enforce wage agreements, and made industry-level unions more effective in guaranteeing the protections provided by labor stan- dards. Results are less conclusive for the Czech Republic, probably due to factors that attenuate the effect of bargaining coverage upon wages, e.g. a smaller effect of institutional reforms, a greater use of mandatory extension mechanisms, the more radical firm restructuring during transition in that country. Journal of Comparative Economics 44 (3) (2016) 638–656. Warsaw School of Economics and Institute for Structural Research, Poland; Centre for Economic Per- formance, London School of Economics and Political Science, United Kingdom;Dipartimento di Economia e Finanza, UniversitàCattolica di Milano, Italy and Centre for Research in Economic Analysis, Universitédu Luxembourg , Luxembourg.

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关键词：Institution Stronger coverage changes change stronger

Overall, these results shed light on an interesting phenomenon: although the presence of trade unions (measured by their density and collective bargaining coverage) continues to decline, the unions that still operate appear to have reinforced and increased their bargaining power, which is reflected in the appearance of (or increase in) wage premia associated with col- lective agreements. Rising wage premia suggest that the unions which were strong enough to maintain their position and presence—most likely because of their effect on efficiency, with a benefit for employers as well—managed to achieve their goals in terms of wage agreements. We link these changes to the developments in the CE3  s labor market institutional reforms and developments. There was no single policy reform which resulted in a sudden increase in the bargaining power of trade unions. Rather, we have identified a series of small steps which together led to a higher degree of engagement of the social part- ners in policy-making, and thus to an improvement of their negotiating position (as well as of their negotiating skills). These steps included direct actions aimed at reforming the social dialogue (such as the EU working councils directive), as well as various changes in the CE3  s labor market policy which required active involvement on the part of trade unions. Although our measure of firms’ restructuring during the transition allowed us to control for a great deal of the unob- served differences between firms in the CE3 countries, some of our results may be affected by residual selection issues. In particular, the selection of less efficient low paid firms into the unionized sector may attenuate any positive measured effect of unions on wages. Accordingly, our results are likely to underestimate the true effect of collective agreements on wages. A number of questions about future institutional developments remain open. On the one hand, changing labor market struc- ture and segmentation observed in several of the EU countries are likely to undermine the presence of trade unions. On the other hand, further changes could improve the relative position of the weaker unions in the CE3. For example, the Czech Republic introduced in 2006 changes to its labor code (effective as of 2007) which broadened the scope of issues which may fall under collective bargaining agreements ( EC , 2010 ).