Wage drift

The concept of wage drift in industrial relations refers to the difference between negotiated and actual wages paid by an employer. Negotiated wages are the result of collective bargaining between trade unions and employers, usually at sectoral level. Wage drift can be positive or negative: positive wage drift occurs when actual wages or actual wage increases are higher than the negotiated ones; negative wage drift is when they are lower.

The difference between negotiated and actual wages can be explained by several factors that influence wage dynamics in Europe. Some differences are the result of ad hoc arrangements that distort the expected outcomes of nationally agreed wage settlements – for example, due to overtime work or any other type of payment at company level, such as performance-related pay or a bonus. These additional payments result in a wage that is higher than that negotiated by a company or – when there is no company-level agreement – at sectoral level. Another cause of wage drift is skill shortages in the labour market: this happens when firms must compete to attract skilled workers and therefore may raise wages to a higher level than that set in collective agreements. Wage drift can also be the result of factors related to industrial relations, including the level of coverage of collective bargaining or a company’s derogation from national or sectoral standards.

Some comparative analyses have shown that, during the 2000s, there was a more or less pronounced ‘positive’ wage drift in most countries, meaning that the average increase of actual wages was above that which was concluded in collective agreements. The two exceptions were Austria and Germany where wage drift was ‘negative’. ^[1]

See also: coordination of collective bargaining ; wage spillover.