Bargaining Agreement Extensions May Cause Unemployment and Firm Closures. Findings in the GLO Discussion Paper of the Month October.

The GLO Discussion Paper of the Month of October investigates the economic effects of sector-wide bargaining agreements in Portugal, finding that extensions may contribute to unemployment and firm closure.

GLO Discussion Papers are research and policy papers of the GLO Network which are widely circulated to encourage discussion. Provided in cooperation with EconStor, a service of the ZBW – Leibniz Information Centre for Economics, GLO Discussion Papers are among others listed in RePEc (see IDEAS, EconPapers)Complete list of all GLO DPs downloadable for free.

GLO Discussion Paper of the Month: October

GLO Discussion Paper No.  413, 2019

30,000 minimum wages: The economic effects of collective bargaining extensionsDownload PDF
Martins, Pedro S.

GLO Fellow Pedro Martins

Author Abstract:  Many governments extend the coverage of collective agreements to workers and employers that were not involved in their bargaining. These extensions may address coordination issues but may also distort competition by imposing sector-specific minimum wages and other work conditions that are not suitable for some firms and workers. In this paper, we analyse the impact of such extensions along several economic margins. Drawing on worker- and firm-level monthly data for Portugal, a country where extensions have been widespread, and the scattered timing of the extensions, we find that, while continuing workers experience wage increases following an extension, formal employment and wage bills in the relevant sectors fall, on average, by 2%. These results increase by about 25% across small firms and are driven by reduced hirings. In contrast, the employment and wage bills of independent contractors, who are not subject to labour law or collective bargaining, increases by over 1% following an extension.

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419 Social Contacts, Dutch Language Proficiency and Immigrant Economic Performance in the Netherlands –  Download PDF
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415 Gender Gaps in Education –  Download PDF
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414 Trans People, Transitioning, Mental Health, Life and Job Satisfaction –  Download PDF
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413 30,000 minimum wages: The economic effects of collective bargaining extensions –  Download PDF
Martins, Pedro S.

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410 Gender Identity Minorities and workplace legislation in Europe –  Download PDF
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Senior Editors: Matloob Piracha (University of Kent) & GLO; Klaus F. Zimmermann (UNU-MERIT, Maastricht University and Bonn University).
Managing Editor: Magdalena Ulceluse, University of  

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