The economic policy forum discusses the question of whether the German system of autonomous wage bargaining is still up-to-date. Wolfgang Franz considers two aspects. First, he examines to what extend the existing unemployment rate can be reduced by wage policy. Due to certain forms of unemployment, this can be done only partly by lower real wages. In addition, he shows that it can be rational for employees as well as for employers to agree on wages which are higher than the equilibrium wage. In the second part, he considers the question of whether centralised or decentralised negotiations over wages are more likely to solve the problem of unemployment. Arguments in favour of both options can be found. The paper concludes with some suggestions to make collective agreements more flexible.
Wernhard Möschel compares the German system of autonomous wage bargaining with a cartel agreement which results in prices higher than the equilibrium price. Moreover, the globalisation of markets and new orientations in the international division of labour require more flexible solutions. However, the autonomous wage bargaining is a constitutional right which is rather unlikely to be changed. An agreement by the social partners on common measures such as setting minimum wages lower than the equilibrium wage is also not very likely. The paper thus suggests that employers may undertake unilateral actions such as restructuring their associations. This should be accompanied by specific government measures.
Karl-Heinz Paqué argues that countries with a system of autonomous wage bargaining are characterised by persisting unemployment. This characteristic is the result of both structural changes of the economy and its consequences for the market value of labour. Two mechanisms exist in order to adopt to the different market conditions: a flexibilisation of the agreed wage rate structure or a general restraint in wage bargaining. However, both mechanisms have failed so far due to the lack of willingness by the social partners. Competition by outsiders on the labour market and a political “alliance for employment” could increase employment while keeping the system of autonomous wage bargaining. The paper concludes with stating that in the near future unemployment will be unavoidable.
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