[U]nion bargaining strength is a better way of raising wages than legislation. This is because minimum wage laws are inflexible. They apply both to cash-rich firms that could raise wages without cutting jobs and investment, and to firms on the margin of profitability that would close down if labour costs rose. (Yes, the left exaggerates the prevalence of the former just as the right exaggerates that of the latter.) Living wage laws can’t distinguish between these cases. But union bargaining can. Strong trades unions, then, are better able than laws to raise wages without job loss.
The same is true for other forms of labour regulation: health and safety, working time and suchlike. Union bargaining can protect workers more flexibly than “one size fits all” laws. It can distinguish between cases where regulation would be too costly and where it wouldn’t.
In this sense, legislation and unions are alternatives. It is no accident that the UK introduced minimum wage laws in 1999, after trades unions were weakened, and that this weakness has been followed by more “red tape“ on firms.
A paper by Philippe Aghion and colleagues formalizes this. They point out that there is a negative correlation between union strength and minimum wage laws. Scandinavian countries have traditionally had strong unions but little wage legislation, whilst Greece, France and Spain have weaker unions but tighter minimum wages. And which countries have usually had the healthier labour markets?
Thursday, December 15, 2011
Publicada por Miguel Madeira em 14:19