Pay Developments in Britain and Germany: Collective Bargaining, ‘Benchmarking’, and ‘Mimetic Wages’

Abstract

This article examines the impact of national industrial relations institutions on pay movements in Britain and Germany between 1980 and 2000. Pay increases are slightly higher in Britain, despite the breakdown of multi-employer bargaining and agreements in the UK and their persistence in Germany. Evidence shows that pay decisions in Britain are mainly determined by imitation and not by markets. The article suggests that a system of ‘pay benchmarking’ in Britain acts as a substitute for the German ‘sectoral agreement model’ and explains similarities in pay movements.

The determinants of pay settlements: the influence of the national context

“…The differences only emerge in relation to the influence of industrial action. This general pattern fits well with the observations made by Schmidt and Dworschak (2006) regarding mimetic wages. In their paper, they state that isomorphism and pay benchmarking in non-bargaining contexts act as a substitute for sector agreements, leading to similarities in pay movements.…”

“…This result contradicts our idea that, under a firm collective agreement, the employer gives less importance to recruitment and retention issues due to the wage premium associated with this type of agreement that reduces turnover (see Card and de la Rica, 2006). This outcome could be justified in the context of the efficiency wages theory, which arguments that wages may not be the result of power relations between employers and workers (see Schmidt and Dworschak, 2006). Hence, it seems that the importance given to the need to recruit and retain workers on pay settlements depends on factors other than the level at which collective agreements are negotiated.…”

“…However, these arguments in favour of a positive effect of collective bargaining on the significance that the ability to recruit or retain employees has in pay settlements are not shared by efficiency wage theories. According to these, wages are neither purely determined by the market nor necessarily an outcome of power relations between employers and workers (Schmidt and Dworschak, 2006).…”

Social regulation of the gender pay gap in the EU

“…Yet even in the absence of multi-employer bargaining, mimetic behaviour by firms promotes similarities across wage structures within sectors (Schmidt and Dworschak, 2006). Rubery et al (2003) argue that social partners have views and expectations concerning labour wage structures that help form wage outcomes alongside economic factors.…”

Workplace Change and Productivity: Does Employee Voice Make a Difference?

“…However, the minimum pay levels agreed upon at the industry level in France are typically well below the minimum wage, which limits their practical relevance. Conversely, it has been argued that the practice of imitation pay increases in the UK has brought that country closer to centralized bargaining systems in practice (Schmidt and Dworschak 2006). Union membership dropped in both countries in the 1980s and 1990s and in both countries union decline seems to have halted since the late 1990s, but union density remains much higher in the UK.…”