Explaining the desire for local bargaining: Evidence from a Finnish survey of employers and employees

The aim of this paper is to describe divergences in employers’ and employees’ opinions on the proper share of local bargaining in contract wage gains, and explain when these divergences are particularly large or small. The paper shows that employers want the locally bargained wage share to be approximately half of the total wage rise, while the majority of employees would prefer this share to be in the region of 1-24%. Employers in firms that are large or operate in the financial services industry desire the largest locally bargained share of contract wages. Employees in large firms are, instead, afraid of losing their bargaining power and tend to resist local bargaining. Employees in firms with profit sharing plans believe that local bargaining should be afforded a large role. It is likely that employer and employees agree on not having much local bargaining in firms that operate in an uncompetitive product market and that they agree on substantial local bargaining in firms that are domestically owned and whose majority of employees work abroad.