Organizational Determinants of Wage Moderation

Abstract

t His article deals with one of the founding themes in the literature on comparative political economy-the impact of industrial relations institutions on cross-country differences in macroeconomic performance-and focuses on the internal governance characteristics of trade union confederations. the literature on the economic effects of industrial relations structures is large and spans several decades. Yet most of it, particularly the newest, ignores internal governance conditions and implicitly assumes that once the structure of collective bargaining is coordinated or centralized, no other organizational factor needs to be in place for wage moderation to materialize.1 recent political economic studies either disregard the internal decision-making process of trade unions 2 or take at face value the conclusions of neocorporatist studies from the 1980s. 3 We argue that the internal governance processes within trade union confederations are important for wage moderation but that the relationship is very different from the one hypothesized by classic neocorporatist studies. Controlling for a number of factors, including the degree of collective bargaining coordination, the organizational variable that correlates with moderate wage growth is the degree to which trade union confederations engage in a democratic organizational process that directly involves workers in collective bargaining approval; it is not the leaders' ability to impose their decisions upon lower-level structures and affiliates. furthermore, the evidence indicates that the coordina-*the authors wish to thank Joseph Doyle, thomas Kochan, Peter Hall, Bob Hancké, rickard locke, steve Pischke, Kenneth scheve, David soskice, and Peter swenson for helpful comments on previous versions. marco simoni gratefully acknowledges financial support from the British academy.1

Successful Wage Concertation: The Economic Effects of Wage Pacts and Their Alternatives

“…3 3 Baccaro and Simoni (2010) use wage growth in efficiency units which is defined as the ratio of real wages and factor productivity as a dependent variable for their analysis of the economic effects of industrial relations institutions. The analysis in this work controls for factor productivity but uses the direct dependent variables. …”

Monetary Union, Fiscal Crisis and the Pre-emption of Democracy

“…The monetarist regime worked in Germany because wage leadership was exercised by large and economically sophisticated industrial unions that had learned to operate within the monetary constraints. In contrast, countries with powerful but fragmented and competitive unions and decentralized wage-setting institutions simply did not have the capacity to contain the infl ationary pressures of wage competition (Baccaro/Simoni 2010).…”

“…In Germany, the same effect is traditionally achieved by the wage leadership of the big industrial unions. But where such institutions do not exist, union competition and egalitarian norms of "comparability" will favor the diffusion of wage increases achieved in branches with the greatest ability to pay, or the least ability to resist (Scharpf 1991;Baccaro/Simoni 2010). In the traded sector, therefore, wages may rise even as employment is shrinking.…”

“…Spain and Ireland at least tried to achieve some restraint through the instruments of macroeconomic policy that were still available nationally. But their attempts to contain wage infl ation through a series of social pacts (Baccaro/Simoni 2010) and to practice fi scal constraint by running budget surpluses ( Figure 15) proved insuffi cient. What could have made a difference was monetary restraint, which would have impeded the credit-fi nanced overheating of the Greek, Irish and Spanish economies.…”

The Revenge of Baumol’s Cost Disease?: Monetary Union and the Rise of Public Sector Wage Inflation

“…The most widely used measurement of wage inflation across recent, yet limited, empirical scholarship on unemployment dynamics and shifts in the wage curve (Estevão, 2005;Simoni, 2007;Baccaro and Simoni, 2010) is Blanchard's wageefficiency-unit (WEU; Blanchard and Wolfers, 2000;Blanchard, 2006). Blanchard's WEU is equal to the change in the real product wage minus the change in labour productivity, the latter defined as the change in total factor productivity minus the change in the labour share of GDP.…”