Collective Wage Contracts, Opt-Out Clauses, and Firm Wage Differentials: Evidence from Linked Employer–Employee Data

Authors

  • ALFRED GARLOFF,

  • NICOLE GUERTZGEN

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    • The authors’ affiliations are, respectively, Institute for Employment Research (IAB), Saonestrasse 2-4, 60528 Frankfurt a.M., Germany. E-mail: alfred.garloff@iab.de; Centre for European Economic Research, Department of Labour Markets, Human Resources and Social Policy L 7.1, 68161 Mannheim, Germany, E-mail: guertzgen@zew.de. We thank the participants of the Third User Conference of the Research Data Centre (FDZ) at the Institute for Employment Research (IAB) in Nuremberg as well as two anonymous referees for their helpful comments. The usual disclaimer applies.


Abstract

Using a large linked employer–employee data set, this article studies whether the existence and use of flexibility provisions within centralized collective wage agreements alter the structure of pay across employers. Using level regressions and first-difference methods, we find that—compared with contracts without any flexibility—wages under opt-out clauses are more responsive to local profitability conditions in below-average-performing establishments. In contrast, the sensitivity of wages to local profitability is smaller in high-performance establishments. Our results provide further evidence for a threat potential of the existence of opt-out clauses whose impact on flexibility is larger than the real application.

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