Dissertations submitted to the Hertie School
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01/2023
Wage formation in Europe has undergone considerable changes over the past decades. In particular, the Global Financial Crisis (GFC) and the Eurozone crisis have significantly accelerated and enhanced liberalization reforms in wage bargaining and industrial relations in several European countries. Moreover, decreasing collective bargaining coverage, lower union membership rates, weaker social actors and increasing low-wage employment have allowed the state to play an increasingly important role in the regulation and the stipulation of wage minima. The growing importance of governments in the political economy of wage formation is nowhere clearer to observe than in the politicization of statutory minimum wages: minimum wages have not only progressively become the ‘going rate’ for low-wage employment in a variety of countries displaying different political-economic characteristics, but have also featured prominently in electoral debates. Using state-of-the-art quantitative research methods, I examine this remarkable transition in Chapters 2-3 and provide empirical evidence contextualizing the transformation of Europe’s low-wage policy space. As it is also important to acknowledge the important role played by the EU institutions in structuring member states’ wage-setting systems, I examine in Chapter 4 the growing relevance of the new European economic governance in determining member states’ labour markets and wage bargaining mechanisms.
This dissertation is composed of three single-authored chapters and is structured as follows: Chapter 1, serve as this thesis’ introduction. Here, I present the rationale for focusing on minimum wages and wage formation, I describe the main debates in the academic literature and lay out how the papers I have worked on contribute to the topics I address. This is followed by the presentation of the three chapters, which examine the topic of change in the political economy of wage formation and in particular of minimum wages over the last decades in Europe. Chapter 2 offers a first assessment of the political, economic and institutional determinants of minimum wage growth in Europe. By using quantitative text analysis and statistical methods, I show that the electoral salience of minimum wages has increased. Chapter 3 builds upon the increased politicization of minimum wages, which I find empirical evidence for in Chapter 2, by contextualizing the role of minimum wages in different European political economies. By building on new research in the field of European comparative political economy, which has focused on the drivers of aggregate demand, I examine the existence of long-term equilibria between minimum wage growth, taken as proxy for government-determined wage-led growth, and household consumption and exports. As the EU institutions have been found to be important actors in driving change in wage-setting mechanisms, I devote my final paper (Chapter 4) to an assessment of the wage bargaining preferences of the European Commission within the framework of the new European economic governance. In particular, I focus on the drivers of country-specific recommendations (CSRs) in wage bargaining. In this paper, I find that recommendations in the field of wage bargaining are mostly decoupled from time-varying economic indicators and are instead tied to country-specific institutional factors. Finally, I conclude by summarizing my results on change in the European low-wage policy space, my contributions to evolving and still far from resolved debates in the literature of the political economy of advanced European capitalist democracies’ wage formation and point to possible future avenues of research.