Pay in Europe in different wage-bargaining regimes

As in all market economies, wage bargaining in the European Union Member States is fundamental to enabling labour as a factor of production to obtain its fair share of the production output (and thereby participate in prosperity) and to securing a high level of employment in the economy (thereby supporting aggregate demand and contributing to social inclusion). In the EU, around two-thirds of workers are covered by some form of collective agreement, which demonstrates the importance of wage bargaining to macroeconomic outcomes in the European social model.

This report provides a quantitative analysis of how the features of national wage-bargaining regimes affect pay outcomes. The analysis builds on the theoretical propositions that both highly centralised and highly decentralised regimes align wages and productivity, ensuring a high level of employment, and that a high degree of coordination of wage bargaining can moderate wage increases, leading to macroeconomic stability.