Influence of collective bargaining model on gender wage gap

A research report published in June 2007 by the Institute for Social Research examines the effects of the Norwegian bargaining model on the gender pay gap. The report concludes that the main reason for the wage gap is due to men and women being subject to unequal pay within the same collective agreement area. Moreover, gender-based wage differences are greatest in those areas of working life where the so-called ‘trend-setting trades’ model is weakest.

In June 2007, the Institute for Social Research (Institutt for samfunnsforskning, ISF) published a report (in Norwegian) analysing the wage differences that exist between men and women in the largest collective agreement areas in Norway. The study places a particular emphasis on the effects of the Norwegian bargaining model on the pay gap between both sexes. The report also serves as an input to the work of the Gender Equality Commission to deliberate measures to reduce the wage gap between men and women in Norwegian working life (NO0607019I).

A key topic of the study is the effect of the so-called ‘trend-setting trades’ model on gender differences in relation to pay. Central to this model is the notion that wage growth within the industries most vulnerable to international competition must provide the basis for wage growth achieved in other parts of the national economy. The model has been criticised by female-dominated trade unions in the public sector, because they believe it has allowed women in public sector jobs to fall behind comparable male-dominated jobs in the private sector.

Existing wage gap

The overall wage gap – measured as pay per hour – between men and women in the six largest agreement areas considered collectively (blue and white-collar workers within the manufacturing industry, financial services, wholesale and retail trade, and the public sector at state and municipal level) amounted to 13.5% in 2004. The pay gap narrows to 9.9% when controlling for employee characteristics such as education, working time and work experience. In addition, when comparing employees within the same sector, the gender-based pay gap further declines to 8.5%.

The study shows that only 15% of the observed wage difference between both sexes may be attributed to the agreement area alone – that is, the fact that men and women tend to work in different sectors. Much of this effect is due to the fact that male white-collar workers within the manufacturing industry receive significantly higher pay than other groups. Overall, the report concludes that most of the wage difference is caused by men and women within the same agreement area and with practically the same qualifications being paid unequally.

Effects of bargaining system on wage gap

The authors of the research report have considered the effects of several features of the national bargaining system on the gender pay gap.

  • Wage differences between both sexes – even after controlling for factors such as individual employee characteristics – are greatest among white-collar workers in the manufacturing industry and in the banking and insurance sector. These are either areas without central wage formation, for example among white-collar workers in the manufacturing industry, or areas where neither the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) nor the Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon, NHO) is represented, as is the case in banking and insurance. The researchers thus point to the fact that gender-based wage differences are greatest in those areas of working life where the trend-setting trades model is weakest. At the same time, these are the areas in which the average wage is at its highest.
  • The research aims to assess the effects of sector-wide general increases on the wage gap between both sexes. Although sector-level pay increases are given in large parts of Norwegian working life, the report concludes that these increases alone have not influenced the pay differences that exist within individual agreement areas. In the first place, these increases are mostly gender neutral, and secondly, they are not large enough to have a significant impact on the wage gap between men and women.
  • The report also considers matters connected with the relationship between the private and public sectors. Increased decentralisation has not changed the relative pay difference between men and women within the public sector. The researchers point out, however, that the changes witnessed in the bargaining model, in isolation, have contributed to a reduction in the disparity in wage levels between workers in the public and private sectors.

Commentary

The main findings of the research report, commissioned by the Gender Equality Commission, seem to suggest that the equal pay challenge is not primarily connected to the present bargaining model. Achieving equal pay remains a challenge both within areas with a relatively strong regulation of wage formation, as well as in areas where central negotiations have little effect; indeed, the equal pay challenge is greatest in the latter areas.

The report concludes that little evidence emerges to suggest that the so-called ‘trend-setting trades model’ contributes to an increase in the wage gap between men and women within Norway’s national economy. The adjustments made to the bargaining system in recent years are more likely to have contributed to a levelling of imbalances between the public and private sectors (NO0705029I), thus also having an equal pay effect.

Kristine Nergaard, Fafo Institute for Applied Social Science

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