Intra-union politics and wage-setting coordination in Eurozone countries

Abstract

This article revisits one of the established hypotheses in the literature on European industrial relations. Focusing on the context in which wages are set via central coordination, the hypothesis explores why the wage-setting system often collapses and is replaced with sectoral or company-level bargaining. The answer revolves around the issue of wage costs, with the main claim being that the change (that is, de-coordination) occurs when employers are not satisfied with the performance of cost control. This article asserts that the hypothesis has only limited applicability. In particular, it holds only if central coordination remains a potential source of high wage costs. If the system turns to a reliable mechanism for wage moderation, which is true in the Eurozone countries, the hypothesis does not hold. Under this circumstance, employers will no longer consider de-coordination as a means of cost control. Instead, de-coordination can occur as a consequence of intra-union politics, as diverse union actors interact with each other in their response to the wage issue. The article will examine this new hypothesis of de-coordination in the context of three Eurozone countries in the 1990s and 2000s: Finland, Ireland, and Belgium.