Wage Cyclicality Under Different Regimes of Industrial Relations

25 Pages Posted: 20 Mar 2013

See all articles by Hermann Gartner

Hermann Gartner

Government of the Federal Republic of Germany - Institute for Employment Research (IAB); Friedrich-Alexander-Universität Erlangen-Nürnberg

Thorsten Schank

Johannes Gutenberg University Mainz

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2013

Abstract

We analyze the effect of collective wage agreements and of works councils on the cyclicality of real wages. Using employer–employee data for western Germany (1995–2004), we find that wage adjustments to positive and negative shocks are generally not symmetric. Wage growth increases in all industrial relations regimes when unemployment is falling, but this inverse relationship is weaker when unemployment is rising. Moreover, in plants with individual‐level bargaining, wages do not adjust at all to rising unemployment. Works councils increase wage growth only in firms covered by sectoral agreements, but they do not affect the cyclicality of wages.

Suggested Citation

Gartner, Hermann and Schank, Thorsten and Schnabel, Claus, Wage Cyclicality Under Different Regimes of Industrial Relations (April 2013). Industrial Relations: A Journal of Economy and Society, Vol. 52, Issue 2, pp. 516-540, 2013, Available at SSRN: https://ssrn.com/abstract=2236013 or http://dx.doi.org/10.1111/irel.12022

Hermann Gartner (Contact Author)

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

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Thorsten Schank

Johannes Gutenberg University Mainz ( email )

Claus Schnabel

University of Erlangen-Nuremberg ( email )

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