Minimum wage and collective bargaining shocks: a narrative database for advanced economies

Afonso, António; Jalles, João Tovar; Venter, Zoe

Minimum wage and collective bargaining shocks: a narrative database for advanced economies

IZA Journal of Labor Policy

Volume 13 (2023): Issue 1 (January 2023)

By:

António Afonso, João Tovar Jalles and Zoe Venter

Open Access

|Jul 2023

Figures & Tables

Number of Major Shocks and Counter-shocks (26 advanced economies, 1970–2020).Note: In blue are pro-competitive shocks; in red are anti-competitive counter-shocks. CB, collective bargaining; MW, minimum wage.

Distribution of Major Shocks and Counter-Shocks across Time (26 advanced economies).Note: In blue are pro-competitive shocks; in red are anti-competitive counter-shocks. CB, collective bargaining; MW, minimum wage.

Number of Major Shocks and Counter-shocks by Country (1970–2020).Note: In blue are pro-competitive shocks; in red are anti-competitive counter-shocks. CB, collective bargaining; MW, minimum wage.

The Average Effect of Major Minimum Wage Shocks on real labor productivity (percent).Note: “DB” stands for “database” and refers to the new narrative data created. “Gradual changes” are yearly changes in the indicator. “Large changes” are those associated with a change in the OECD indicator in the top 5th percentile of the sample distribution of annual changes in the indicator. The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid lack lines denote the response to a reform shock, the dark gray area denotes 90% confidence bands, and the light gray area denotes 68% confidence bands, based on standard errors clustered at the country level. MW, minimum wage.

The Average Effect of Major Minimum Wage Shocks on real GFCF (percent).Note: “DB” stands for “database” and refers to the new narrative data created. “Gradual changes” are yearly changes in the indicator. “Large changes” are those associated with a change in the OECD indicator in the top 5th percentile of the sample distribution of annual changes in the indicator. The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid black lines denote the response to a reform shock, the dark grey area denotes 90% confidence bands, and the light gray area denotes 68% confidence bands, based on standard errors clustered at the country level. MW, minimum wage; GFCF, gross fixed capital formation.

The Average Effect of Major Minimum Wage Shocks on employment rate (percentage points).Note: “DB” stands for “database” and refers to the new narrative data created. “Gradual changes” are yearly changes in the indicator. “Large changes” are those associated with a change in the OECD indicator in the top 5th percentile of the sample distribution of annual changes in the indicator. The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid black lines denote the response to a reform shock, the dark grey area denotes 90% confidence bands, and the light gray area denotes 68% confidence bands, based on standard errors clustered at country level. MW, minimum wage.

The Average Effect of Major Minimum Wage Reforms on unemployment rate (percentage points).Note: “DB” stands for “database” and refers to the new narrative data created. “Gradual changes” are yearly changes in the indicator. “Large changes” are those associated with a change in the OECD indicator in the top 5th percentile of the sample distribution of annual changes in the indicator. The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid black lines denote the response to a reform shock, the dark grey area denotes 90% confidence bands, and the light gray area denotes 68% confidence bands, based on standard errors clustered at country level. MW, minimum wage.

The Average Effect of Major Collective Bargaining Shocks on macroeconomic outcomes (percent for real variables and pp for rates).Note: The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid black lines denote the response to a reform shock, the dark gray area denotes 90% confidence bands, and light gray area denotes 68% confidence bands, based on standard errors clustered at country level.

The Average Effect of Major Minimum Wage Shocks on macroeconomic outcomes: the role of the business cycle (percent for real variables and pp for rates).Note: The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid black lines denote the response to a reform shock, the dark gray area denotes 90% confidence bands, and the light gray area denotes 68% confidence bands, based on standard errors clustered at country level. The red line denotes the unconditional baseline result from estimating Eq. (1).

The Average Effect of Major Collective Bargaining Reforms on macroeconomic outcomes: the role of the business cycle (%).Note: The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid black lines denote the response to a reform shock, the dark gray area denotes 90% confidence bands, and the light gray area denotes 68% confidence bands, based on standard errors clustered at country level. The red line denotes the unconditional baseline result from estimating Eq. (1).

The Average Effect of Shocks on macroeconomic outcomes, controlling for shocks in all other areas (percent for real variables and pp for rates).Note: The x-axis indicates the number of years; t = 0 is the year of the reform shock; and t = 1 is the first year of impact. The solid black lines denote the response to a reform shock, the dark grey area denotes 90% confidence bands, and the light gray area denotes 68% confidence bands, based on standard errors clustered at country level. CB, collective bargaining; MW, minimum wage.

Country examples of reforms identified according to different criteria

Shock (+) or counter-shock (−)	Implementation year	Area	Country	Content	Normative language featured in OECD Country Survey	Mention in later Surveys	Large change in OECD indicator
−	1975	Minimum Wages	Australia	The decision provides an immediate increase of 3.6% in all wages under Federal award and an increase of $ 4 per week in the minimum wage, effective from the first period on or after May 15.		1976, 1980	No
+	1984	Minimum Wages	Denmark	Agreement on additional budget improvements, amounting to Kr. 1 ½ billion in 1984 and some Kr. 5 billion in 1985.	(…) Major steps to improve the wage formation process were taken already in 1979/80 by first excluding energy prices from the index regulating wage increases and then partially suppressing automatic wage adjustments. After a 2-year pause, efforts to break the wage–price spiral were intensified by the present Government, which, in 1982, decided to suspend the automatic indexation scheme until 1985. (…)	1986	No
+	1993	CB	Australia	Industrial Relations Reform Bill 1993	(p. 89, 1994): The Federal Government has introduced the Industrial Relations Reform Bill 1993 in order to provide an effective framework for the further spread of enterprise bargaining throughout the Australian economy. A major part of the Reform Bill is the introduction of more effective arrangements for direct bargaining, including the establishment of a new stream of enterprise flexibility agreements to be made directly between employers and employees. These agreements will be of particular relevance to non-unionized and lightly unionized enterprises. (…)	1994, 1995, 1997, 1998	No
+	1984	CB	Greece	The 1984 national collective agreement.	The 1984 national collective agreement is signed, providing for full indexation of minimum salaries and wages.	No	Yes