Research shows: higher wages through collective and sectoral bargaining

Mid-November, the European Commission released its annual review on the labour market and wage developments. As many have all felt in the grocery shops, wages did not rise at the same pace as prices did. While many European workers have seen some nominal wage increases, their real wages have declined. In the words of the commission, there is “room for further wage increases”, particularly in the services sectors. Moreover, the EU’s ambition for upwards wage convergence between member states is in jeopardy. In fact, since 2019, wage convergence has stalled completely.

One solution, as suggested by the European Commission, is strengthening collective bargaining, particularly at the sectoral level.  

Not only the European Commission is saying so. A couple of weeks after the publication of its review, a study published in the British Journal of Industrial Relations looked at the impact of collective bargaining on wages. The study’s co-authors, ETUI researchers Wouter Zwysen and Jan Drahokoupil, found that workers with a collective agreement generally have higher wages.

This is particularly true for sectoral agreements, as they reduce inter-firm competition on wages, enabling them to pay higher salaries and provide better working conditions.  

Trade unions, too, are in favour of sectoral bargaining, A UNI Europa study published this year showed that an overwhelming 94% of the trade union respondents were in favour of stronger sectoral bargaining in their sector.  

It is now up to national level politicians to act upon this broad consensus. As required by the EU Directive on Adequate Minimum Wages, most EU countries will be obliged to draw up national action plans to strengthen collective bargaining in their countries in the coming years and reach the 80% target of collective bargaining coverage. These plans should include effective steps towards sectoral bargaining. Without them, the European economy will continue to have “room for further wage increases” and European workers will continue to feel this when paying for their groceries.