Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2014:10: Negotiated wage increases and the labor market outcomes of low-wage workers: evidence from the Swedish public sector

Tove Eliasson () and Oskar Nordström Skans ()
Additional contact information
Tove Eliasson: Uppsala University, Department of Economics,, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Oskar Nordström Skans: Uppsala University, Department of Economics, Postal: P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper investigates the impact of a collective agreement stipulating a one shot increase in establishment-specific wage levels in a public-sector setting where wages otherwise are set according to individualized wage bargaining. The agreement stipulated that wages should increase in proportion to the number of low-paid females within each establishment. We find that actual wages among incubents responded to the share of females with a wage below the stipulated threshold, conditional on the separate effects of the share of low wage earners, and the share of females. We find clear evidence of path-dependence in wages, covered workers remained on higher wage levels 4 years after the agreement took effect. The increase in wages resulted in a reduced probability of exit among young workers with relatively good grades and a lower frequency of new hires at the establishment level.

Keywords: Collective bargaining; wage growth; turnover; wage rigidity; hours of work; labor costs

JEL-codes: J23; J31; J52; J63

35 pages, May 9, 2014

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