The Rise in Orientation at Collective Bargaining Without a Formal Contract

Abstract

While firm participation in collective bargaining between unions and employers’ associations has been decreasing in Germany over the last two decades, orientation at collectively bargained wages has increased in popularity. Orientation implies that employers claim to set wages according to collective agreements but they are not formally bound by the respective bargaining contract, and in fact, I observe that they pay significantly lower wages than firms that are formally covered. Dynamic nonlinear panel estimation applied to establishment‐level data shows that this orientation is a stepping stone into formal participation. However, the decline in formal participation and the opposing rise in orientation are mostly due to a changing establishment composition rather than to behavioral transitions.

Delivering the goods? German industrial relations institutions during the COVID‐19 crisis

“…Not only do workers covered by collective agreements feel less worried about losing their jobs due to the pandemic than their non‐union counterparts, but they also benefit from top‐up payments that supplement limited government subsidies during periods of short‐time work. Our findings thus add weight to prior research highlighting the benefits of collective bargaining for employees (Bossler, 2019 ; Lübker & Schulten, 2021 ).…”

Collective bargaining coverage, works councils and the new German minimum wage

“…In the first column, we analyse the alignment to collective bargaining without any formal contract. Although collective bargaining coverage decreased over the last two decades in Germany, an increasing number of establishments align wages to collectively bargained wage levels without a formal commitment (Addison et al, 2016; Bossler, 2017). This alignment to collective bargaining could also be affected by the minimum wage if employers now align their wage levels to the legal minimum wage and no longer to collectively bargained wages (Ellguth and Kohaut, 2016).…”

Making collective bargaining more inclusive: The role of extension

“…In Sweden, substitution agreements applied to 4 per cent of all employees in 2018, down from 8 per cent in 2008(Kjellberg 2019). 5 Voluntary extension binds employers and must not be confused with the practice, documented in Germany and applicable to about half of all workers not covered by agreements, whereby unorganized employers "orientate" their pay policies on the sectoral agreement(Addison et al 2016;Bossler 2019). Orientation does not bind the employer, who can change course without legal consequences.6 Estimates of coverage effects are approximate and based on two assumptions.…”