Losing Control? Unions’ Representativeness, Pirate Collective Agreements, and Wages

Abstract

This paper documents the evolution of sector-level collective agreements in Italy and investigates wage differentials associated with the diffusion of non-representative agreements, often signed by unknown organizations-that is, the so-called pirate agreements. Using employer-employee data from Social Security Archives, we find that non-representative agreements are associated with significant wage penalties (up to −8 percent) compared with regular collective agreements. Wage penalties are heterogeneous across firm size and industry affiliation. It is also shown that half of the wage differential is due to selection effects. Finally, we provide suggestive evidence of firms' coping strategies, showing that pirate agreements exhibit comparatively higher employment levels.

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“…As a result, in Italy wage dumping does not occur ‘vertically’ – that is, via derogation through lower-level bargaining – but rather ‘horizontally’, through the application of the most convenient national collective agreement (Lucifora and Vigani, 2021). The domain of an agreement is only defined by the signatories.…”

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“…The others have been signed by smaller, and sometimes fictitious, unions and employers' associations, which in some cases are negotiated with the explicit purpose to establish wage floors below the existing ones with the consent of a poorly representative union or a ‘yellow’ union (a workers' organization set up or influenced by an employer). The enforcement of wage floors negotiated by representative trade unions and employers' organizations is severely limited by the absence of clear and stringent rules on the representativeness of social partners and the lack of significant initiatives by regulators to contrast the spread of ‘pirate agreements’ (Tomassetti 2015; D'Amuri and Nizzi 2017; Lucifora and Vigani 2021), implicitly out of fear of harming employment prospects of employees in the less developed areas of the country.…”