Minimum Wages and Collective Bargaining: What Types of Pay Bargaining Can Foster Positive Pay Equity Outcomes?

AuthorDamian Grimshaw,Gerhard Bosch,Jill Rubery
Published date01 September 2014
Date01 September 2014
DOIhttp://doi.org/10.1111/bjir.12021
Minimum Wages and Collective
Bargaining: What Types of Pay
Bargaining Can Foster Positive Pay
Equity Outcomes?
Damian Grimshaw, Gerhard Bosch and Jill Rubery
Abstract
Using data from interviews and collective agreements in five European countries,
this article analyses the relationship between collective bargaining and the
minimum wage. In a context of changing minimum wage policy and competing
government objectives, the findings illuminate how pay bargaining strategies of
trade unions and employers shape the pay equity effects of minimum wage policy.
Two general forms are identified: direct responses to a changing national
minimum wage, and responses to the absence or weakness of a national minimum
wage. The article explains how particular intersections of minimum wage policy
and collective bargaining, together with country and sector contingencies, shape
the form of pay bargaining and pay equity outcomes.
1. Introduction
Minimum wage legislation may have significant but variable pay equity
effects, generally confined to the bottom half of the wage distribution.
Research highlights how minimum wages interact with collective bargaining
systems to shape both the extent of low pay and the form and strength of
‘ripple effects’ through the wage structure (European Commission (EC) 2008;
Gautiè 2009; Lucifora et al. 2005; Wicks-Lim 2008). This research confirms
not only the potential for minimum wages to redistribute earnings to the
lower-paid (Brosnan 2001; Craig et al. 1982; Freeman 1996; Vaughan-
Whitehead 2009a) but also the argument that wage-setting institutions —
including the degree of bargaining centralization and the strength of unions as
well as the level of minimum wages (Blau and Kahn 1996; Fortin and Lemieux
1997; Rubery and Fagan 1995) — have long-term impacts on pay equity.
Damian Grimshaw and Jill Rubery are at the University of Manchester. Gerhard Bosch is at the
University of Duisburg-Essen.
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British Journal of Industrial Relations doi: 10.1111/bjir.12021
52:3 September 2014 0007–1080 pp. 470–498
© Blackwell Publishing Ltd/London School of Economics 2013. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Nevertheless, research has so far had little to say on the specific role that
social actors may play, in specific country and sectoral contexts, in shaping
the pay equity effects. These actors include governments, which, under stable
conditions of job growth, may intervene to raise the value of a statutory
minimum wage with the explicit purpose of either improving pay equity
indicators (as in Spain) or increasing tax revenues (as in Hungary) (Cebrián
et al. 2010; Kohl and Platzer 2007). Employers also shape the extent to which
there is resistance against, or compliance with, pressures to restore pay
differentials following minimum wage rises, dependent on the importance
attached to avoiding added labour costs, tolerating high worker turnover, or
maintaining a ‘fair’ customary reward for qualifications or experience (Falk
and Huffman 2007; Lester 1994; Reich 2010). Perhaps the most significant
but least studied set of actions are those driven by unions, especially given the
traditional industrial relations tensions between statutory and voluntary
forms of wage-setting. Unions may be expected, contingent on their commit-
ments to pay equity norms and the state of the economy (Checchi et al. 2010;
Heery 2000), to design and implement specific types of pay bargaining that
directly shape the pay equity effects of minimum wage changes, but also in
some contexts to be wary of minimum wage increases that threaten to crowd
out unions’ roles.
This article analyses the role of social actors in shaping the pay equity
outcomes of minimum wages in diverse country and sectoral contexts. An
empirical focus on the interaction between minimum wage policy develop-
ments and collective wage agreements in key sectors sheds new light on the
types of pay bargaining that can promote pay equity. The article is organized
as follows. Section 2 reviews the literature concerning the pay equity effects
of minimum wages. The research methodology is set out in Section 3, and
Section 4 assesses the tensions and complementarities in five country wage-
setting systems selected for investigation — Croatia, Germany, Hungary,
Spain and the UK. Section 5 analyses the types of pay bargaining, and
Section 6 identifies the implications for the pay equity effects of minimum
wages and collective bargaining.
2. Does a higher minimum wage improve pay equity?
The redistributive impact of a minimum wage depends on both its level and
effective enforcement. Due to lack of data on enforcement (although see
Hwang and Lee 2010), the most common investigative approach is to take
the Kaitz index, which expresses the value of the minimum wage as a per-
centage of median earnings, and to use bivariate and multivariate methods to
analyse its relationship with measures of pay equity. Three measures of pay
equity are most often investigated — wage inequality in the bottom half of
the wage distribution, the incidence of low pay and gender pay equity;
women’s over-representation in low-wage employment means that they are
more likely than men to benefit from minimum wage protection (Rubery
et al. 2005).
Minimum Wages and Collective Bargaining 471
© Blackwell Publishing Ltd/London School of Economics 2013.

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