Paying more than necessary? The wage cushion in Germany

Sven Jung and Claus Schnabel

No 63, Discussion Papers from Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics

Abstract: Using a representative establishment data set for Germany, we show that more than 40 percent of plants covered by collective agreements pay wages above the level stipulated in the agreement, which gives rise to a wage cushion between the levels of actual and contractual wages. Cross-sectional and fixed-effects estimations for the period 2001-2006 indicate that the wage cushion mainly varies with the profit situation of the plant and with indicators of labour shortage and the business cycle. While plants bound by multi-employer sectoral agreements seem to pay wage premiums in order to overcome the restrictions imposed by the rather centralized system of collective bargaining in Germany, plants which make use of single-employer agreements are significantly less likely to have wage cushions.

Keywords: wages; wage cushion; wage determination; bargaining; Germany (search for similar items in EconPapers)
JEL-codes: J30 J31 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Paying More than Necessary? The Wage Cushion in Germany (2011)
Working Paper: Paying More than Necessary? The Wage Cushion in Germany (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:faulre:63

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