A Reassessment of the Institutional Determinants of Wage Inequality: Examining the Role of Law and Legal Institutions in ‘Inclusive' Pay-Setting Institutions and Pay Equity Outcomes

A reassessment of the institutional determinants of wage inequality: Examining the role of law and legal institutions in ‘inclusive’ pay-setting institutions and pay equity

 

Keywords: wage inequality, inclusive labour relations, labour law, collective bargaining.

Political economy and quantitative work found in and around the Russell Sage project, resting on PSID, EU KLEMS, LIS and OECD datasets, have enhanced enormously our understanding of cross-national patterns of income inequality. The insights of the Low Wage Work in a Wealthy World volume (2009), and the country-focused Low Wage Work volumes that fed it, have been particularly useful – particularly in citing the crucial role ‘inclusive’ labour relations play in low pay and wage outcomes.

In focusing on the role of collective wage bargaining arrangements as ‘institutional determinants’, the Russell Sage project has included some useful qualitative examinations on those relationships that exist between collective bargaining and legal minimum wage and wage extension regimes. There is considerable scope for this line of enquiry to be extended further to examine more deeply the role of legal institutions. This would be particularly valuable with the different forms of legal extension mechanisms and those legal means of supporting multi-employer bargaining and union density rates. The key point however, rather than attempting to contend law’s primacy in this area, is the importance of the relationships between these legal institutions and collective bargaining in gauging the ‘inclusiveness’ of collective bargaining arrangements.

In an era where collective bargaining institutions across the OECD have suffered clear, albeit variegated, decline, the employment relationship has become a notably more ‘juridified’ one. Law, through both collective labour law and individual labour law in particular, has taken an increasingly important but paradoxical role in labour market regulation: On the one hand providing compensatory support for collective bargaining institutions, but on the other being used to precipitate this decline; in many national contexts this has occurred simultaneously (particularly in Europe). In the pursuit of understanding how wage inequality can be arrested and corrected, our research agendas should provide more space to understanding the different roles and types of legal intervention in the constantly changing labour relations contexts.

The objective of this proposed paper, directed toward the Reducing Inequality, Yes we can? theme of this panel, is to explore the effects of legal interventions on labour relations systems’ inclusiveness with an eye on those policy and legal reforms that might alleviate the problems of low pay and wage inequality. Using a comparative and qualitative approach, four national case studies – comprising of Germany, France, the Netherlands and Austria – to explore the role of labour law and how it interacts those multi-employer bargaining, union density and legal extension arrangements. Although some evidence might offer clear and strong general support for legal interventions  extending collective agreements’ reach (as erga omnes extensions in France suggest), the findings are in fact more mixed. However, there is evidence to suggest a ‘real’ labour market reform agenda that seeks to strengthen collective bargaining should be the focus of policy attempts to tackle rising wage inequality.

Preliminary Structure

1)    Introduction: wage inequality and low pay in comparative perspective

2)    Review of the literature:

• Economic-industrial, partisan political influences over labour market institutions and their inclusiveness
• Focus upon ‘inclusive’ labour market institutions and legal influences in theoretical terms

3)    Empirical applications Exploring four cases:

• Context: EU KLEMS and OECD data on low pay and wage inequality
• France, the Netherlands, Germany, Austria

4)    Reducing Wage Inequality - Yes We Can? Some Policy implications

Preliminary References

1. Grimshaw, D eds. (2013) Minimum wages, Pay Equity and Comparative Industrial Relations. Routledge. Oxon. UK.
2. Kenworthy, L. and Pontusson, J. (2005) ‘Rising Inequality and the Politics of Redistribution in Affluent Countries’.  Perspectives on Politics. Vol. 3, No. 3 (Sep., 2005), pp. 449-471
3. Keeley, B. (2015), Income Inequality: The Gap between Rich and Poor, OECD Insights, OECDPublishing, Paris.
4. Nolan, B., and Smeeding, T. (eds) (2009), The Oxford Handbook of Economic Inequality, Oxford, Oxford University Press.
5. Pontusson (2013) ‘Unionization, Inequality and Redistribution’ in British Journal of Industrial Relations, December 2013 0007–1080 pp. 797–825
6. Pontusson and Rueda (2000) ‘Wage Inequality and Varieties of Capitalism’. World Politics.
7. Salverda and Mayhew (2009) ‘Wage Inequality in capitalist economies’. Oxford Review of Economic Policy, Volume 25, Number 1, 2009, pp.126–154
8. Schmitt, J., and Gautie, J. (eds) (2009), Low-wage Work in a Wealthy World, New York, Russell Sage, forthcoming.
9. Traxler, F. Blascke, S. & Kittel, B. (2001) National Labour Relations and Internationalized Markets - A Comparative Study of Institutions, Change and Performance. Oxford University Press.