Wage drift in Finnish industry: an individual-level analysis
The microeconomic distribution of wage drift is in itself an interesting subject of study. But the microeconomic foundations of wage formation are also important for understanding how a bargaining system based on binding collective agreements functions in the national economy. Do collective agreements truly determine the rise in the general level of earnings in the national economy, or does wage drift render the entire system meaningless? Do the collective agreement system and wage drift together necessarily lead to high and economically harmful wage inflation? Are real wages or nominal wages rigid, and does the collective agreement system prevent wage flexibility? Research into wage drift also offers indirect answers to these questions.
The present study makes use of panel data drawn from workers and salaried employees in Finnish industry and presents a preliminary analysis of how the wage increase of individual workers and salaried employees is determined as a result of structural changes, negotiated increases, and wage drift. Using wage data and collective, framework, and general agreements, an estimate is calculated for each worker and salaried employee in the sample of what proportion of the wage increase is attributable to structural changes in the employment relationship, what proportion to contractually agreed increases, and how large a proportion can be regarded as genuine wage drift. This makes it possible to present an estimate of the contribution of the different components to the rise in the average level of earnings.
Using this calculation, wage drift and its distribution among different workers, salaried employees, and companies are analysed and explained. Statistical models of wage drift offer an opportunity to assess, in the light of new information, the microeconomic foundations of wage formation at the firm level and the individual level. (AI translation)
- ISSN: 1236-7176
- ISBN: 951-9282-74-2
