Union Bargaining,Wage Differentials and Employment

Abstract. Reviewing empirical studies concerning the corporatism-flexibility-performance nexus the paper discusses decentralized and centralized bargaining systems. Revenue pay systems, concession bargaining and two-tier wage systems as means to enhance wage flexibility at the firm level are also considered. Both theoretical and empirical evidence is presented, showing that unions are bargaining for greater employment security for the already employed (the insiders). In return, unions are ready to accept greater wage flexibility and even wage decreases. By contrast, the insider-outsider theory does suggest how unions may accentuate involuntary unemployment, because there may be ways in which a union can help to raise the wages of the insiders without reducing their chances of continued employment.