Collective bargaining, wage dispersion and the economic cycle: Spanish evidence

This research analyses the effect of a two-tier' system of collective bargaining (firm bargaining and multi-employer bargaining levels) on wage dispersion in Spain. The effect of collective bargaining on the two main concepts that make up wages (the contractual or basic-bargained wage, and the wage cushion) are analysed during the last period of the upward cycle (2002-2006) and the beginning of the global financial crisis (2006-2010). The wage cushion is defined as the difference between the earned wage and the basic-bargained wage. The results show that workers covered by firm bargaining experienced greater wage dispersion than workers covered by multi-employer bargaining. On the other hand, wage dispersion for all workers decreased during the analysis period, mainly during the first stage of the current economic crisis, and particularly among workers covered by multi-employer bargaining. Both the decreasing relevance of the wage cushion in actual wage formation and its reduced dispersion make it possible to explain this wage compression.