Are Collective Agreements Losing their Bite? Collective Bargaining and Pay Premia in Europe, 2002-2018

This paper describes the evolution of collective bargaining coverage in European countries during 2002-2018 and links it to changes in the evolution of the pay premia received by workers covered by collective bargaining. It uses evidence from the European Structure of Earnings Survey (ESES) to map developments in 28 European countries. We analyse collective bargaining coverage through multi-employer and firm-level agreements as well as the premia associated with being covered by agreements at different levels. In order to identify the key differences and trends in the industrial relations system, we analyse collective bargaining in publicly and privately owned companies separately. We also investigate the extent to which pay premia can be explained by trade union density and by the share of workers covered by an agreement. We find that declining collective bargaining coverage is a key indicator, if not source, of workers’ declining bargaining power which shows in reduced pay premia. While the coverage rates of collective agreements have generally declined over time, there is greater variation in the trends concerning premia. Multivariate analysis shows that a decrease/increase in the coverage rate is associated with a decrease/increase in the relative pay of those covered compared to those who are not covered