Wage Cyclicality Under Different Regimes of Industrial Relations

Gartner, Hermann; Schänk, Thorsten; Schnabel, Claus

doi:10.1111/irel.12022

Cited by 33 publications

(32 citation statements)

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“…Our results are also useful to understand why aggregate real wages have been downward rigid in France, in particular during the recent crisis (see, for recent evidence on other European countries, Gartner et al, 2013, andAddison et al, 2015). In France, since 2008, real wages have been increasing at a rate close to 1% per year whereas the unemployment rate has also been rising steadily.…”

Section: Introductionmentioning

confidence: 77%

The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France

2016

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Abstract:This paper examines empirically how industry-level wage floors are set in French industrylevel wage agreements and how the national minimum wage (NMW) interacts with industrylevel wage bargaining. For this, we use a unique dataset containing about 48,000 occupationspecific wage floors, in more than 340 French industries over the period [2006][2007][2008][2009][2010][2011][2012][2013][2014]. We find that the NMW has a significant impact on the seasonality and on the timing of the wage bargaining process. Inflation, past sectoral wage increases and real NMW increases are the main drivers of wage floor adjustments; elasticities of wage floors with respect to these macro variables are 0.6, 0.3 and 0.25 respectively. Wage floor elasticities to inflation and to the NMW both decrease along the wage floor distribution but are still positive for all levels of wage floors.Keywords: minimum wage, collective bargaining, wages. For that purpose, we collect a large and unique new data set containing all industry-specific scales of wage floors for more than 340 French industries (covering more than 90% of workers of the private sector) over the period 2006-2014. In each industry, wage floors are defined for a specific classification of representative occupations and are used by firms as a reference to set their wages. In our data set, we are able to compute the size of wage floor adjustments between two wage agreements for each occupation. Overall, our data set contains more than 48,000 wage floors for more than 6,000 different occupations defined in industry agreements.Our paper provides new stylized facts on how wage floors are adjusted in France. We first find that the frequency of wage floor adjustments is highly time-and duration-dependent: industrylevel wage agreements are much more frequent during the first quarter of the year, and the usual duration between two wage agreement signing (and so, between two wage floor adjustments) is one year. The frequency of wage floor adjustments is also positively affected by variations of macro variables such as inflation and the growth rate of aggregate wages. Concerning the size of wage floor adjustments, we provide evidence that past inflation plays a key role in 4 explaining the size of wage adjustments. Industry-specific shocks contribute to wage floor increases as long as NMW or inflation increases are not binding.Our second contribution is to investigate the interactions between NMW adjustments and the setting of industry-level wage floors. In France, one important channel of transmission of NMW increases to other wages may come from industry-level wage agreements. To assess the impact of the NMW increases on wage floors, we rely on a Tobit model to disentangle the simultaneous effects of NMW increases on the frequency of wage agreements and on the size of wage floor adjustments. Using changes in the macro variables since the last wage agreement in a given industry, we are able to construct industry-specific variables and to better identify their effects on wage floor...

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Section: Introductionmentioning

confidence: 77%

The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France

2016

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“…decreasing collective bargaining coverage, the increasing share of workers with fixed‐term contracts, and skill‐biased technological change) is required. Further research on real wage cyclicality should also consider asymmetries in this cyclicality (Martins, ; Gartner et al ., ).…”

Section: Discussionmentioning

confidence: 97%

The Real Wage Cyclicality of Newly Hired and Incumbent Workers in Germany

Stüber

2016

Econ J

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Several recent macroeconomic models assume that real wages are rigid. The wage rigidity of newly hired workers assumes a crucial role in these models, as the decision of whether to open a vacancy is primarily inuenced by real hiring wages. This paper analyses the cyclical behaviour of real wages in Germany. It considers recent concerns that not controlling for cyclical job up-and downgrading leads to biased results. The results indicate that wages are not rigidneither for all workers nor for newly hired workersbut instead respond considerably to business cycle conditions. In the 1930s, Dunlop (1938 and Tarshis (1939) observed the failure of real wages to move countercyclically; the observed correlation between hours and aggregated wages was procyclical but close to zero. However, the early empirical literature on real wage cyclicality did not reach a denite conclusion on whether wages move procyclically or countercyclically. 1 This paper considers recent concerns that not controlling for cyclical job up-and downgrading leads to biased results. The results indicate in Germany neither the wages of all workers nor those of newly hired workers are rigid, but instead respond considerably to business cycle conditions. One potential reason for the inconclusive results in the existing literature is the use of aggregated data. Solon et al. (1994) show that using aggregated time series data instead of longitudinal microdata leads to an underestimation of wage cyclicality due to a composition bias in aggregated statistics. Hence, several papers have used micro-panel datasets to analyse the cyclicality of real wages using the unemployment rate as the business cycle indicator (see, e.g., Solon et al., 1994;Shin, 1994;Devereux and Hart, 2006;Martins, 2007). These studies have provided new insights into the discussion about business cycle uctuations and wage rigidity. All of the studies nd procyclical wage movements; they further show that wage cyclicality diers for dierent categories of workers. Devereux and Hart (2006), for example, show that wages of job stayers are less procyclical than those of within-company job movers and between-company job movers. Recent studies on real wage cyclicality have also been motivated by the so-called Shimer-puzzle (see, e.g., Martins et al., 2012). The canonical Mortensen-Pissarides search-and-matching model (Mortensen and Pissarides, 1994) is unable to explain the cyclical volatility of unemployment (see, e.g., Shimer, 2005). To solve this puzzle, Shimer (2005, p. 45) suggests [a]n alternative wage determination mechanism that generates more rigid wages in new jobs, measured in present value terms [...]. Shimer's suggestion of introducing real wage rigidity into search-and-matching models to generate realistic unemployment volatility has been widely shared (see, e.g., Hall, 2005;Hall and Milgrom, 2008;Kennan, 2010).Nonetheless, the notion of introducing real wage rigidity into (search-and-matching) models has also been challenged (Haefke et al., 2013;Pissarides, 2009). Pissarides (2009, p....

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“…In particular, when we estimate the composition and match quality controlled average wages of a) new hires from employment and b) new hires from unemployment they appear to have the same (asymmetric) cyclicality to other workers (incumbents). In addition Gartner et al (2013) look at asymmetric wage adjustment with respect to unemployment changes for Germany, 1995Germany, -2004 small and medium sized firms (fewer than 500 employees). They find evidence that wages adjust less in downswings to changes in regional unemployment, and that uncovered wages are more flexible and downward real wage rigidity, where the latter is defined as some form of wage indexation.…”

Section: Empiricsmentioning

confidence: 99%

Downward real wage rigidity and equal treatment wage contracts: Theory and evidence

Snell

Stüber

Thomas

2018

Review of Economic Dynamics

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Recent dynamic contracting models of downward real wage rigidity with "equal treatment"-newly hired workers cannot price themselves into jobs by undercutting incumbents-imply that real wages are relatively rigid in "bad" times but upwardly flexible during "good" times. We use an administrative panel dataset to establish that such asymmetries are a feature of West German labor markets. We find that the elasticity of real wages with respect to output is very close to zero in downswings but positive and highly significant in upswings. In a separate analysis we find that after controlling for match fixed effects, the cyclicality of new hire wages is approximately the same as that for incumbent wages, regardless of whether or not they joined the establishment from unemployment. This is supportive of equal treatment. We also show that a four parameter version of the equal treatment contracting model of Snell and Thomas (2010) can replicate reasonably well the salient time series properties and co-properties of real wages, output, and unemployment, in particular the asymmetric response of wages to output that we find in the data.

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Wage Cyclicality Under Different Regimes of Industrial Relations

Cited by 33 publications

References 31 publications

The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France

The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France

The Real Wage Cyclicality of Newly Hired and Incumbent Workers in Germany

Downward real wage rigidity and equal treatment wage contracts: Theory and evidence

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