Paying More than Necessary? The Wage Cushion in Germany

16 Pages Posted: 20 May 2011

See all articles by Sven Jung

Sven Jung

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

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Date Written: June 2011

Abstract

In Germany, more than 40 per cent of plants covered by collective agreements pay wages above the level stipulated in the agreement, giving rise to a wage cushion between actual and contractual wages. Cross‐sectional and fixed‐effects estimations indicate that the wage cushion mainly varies with the profit situation of the plant and with indicators of labour shortage and the business cycle. Whereas plants bound by multi‐employer agreements seem to pay wage premiums in order to overcome the restrictions imposed by the rather centralized bargaining system in (western) Germany, plants that use single‐employer agreements are significantly less likely to have wage cushions.

Suggested Citation

Jung, Sven and Schnabel, Claus, Paying More than Necessary? The Wage Cushion in Germany (June 2011). LABOUR, Vol. 25, Issue 2, pp. 182-197, 2011, Available at SSRN: https://ssrn.com/abstract=1847328 or http://dx.doi.org/10.1111/j.1467-9914.2010.00514.x

Sven Jung (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

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Erlangen, DE Bavaria 91054
Germany

Claus Schnabel

University of Erlangen-Nuremberg ( email )

Institut für Wirtschaftsforschung
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Germany
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