The Decentralization of Bargaining Did Not Lead to Wage Cuts in Finnish Forest Industries and IT Services

Recently, Finnish forest industries shifted from sectoral collective bargaining to firm-level bargaining, and the IT services industry shifted to a hybrid of sector- and firm-level bargaining. These changes meant that all issues previously covered by sectoral agreements would now be negotiated at the firm level, which could lead to notable contract changes. The decentralization of bargaining in these industries lead to a heated debate, where it was often argued that wages would be cut significantly as a result of firm-level bargaining. Results from a study that uses Incomes registry, an administrative database that cover all Finnish employees, shows that decentralization of bargaining had only modest impacts on the level and dispersion of wages. For blue-collar workers in paper industries, decentralization led to higher wages and increased wage dispersion within firms. Other groups studied were white-collar workers in paper industries, blue- and white-collar workers in mechanical forest industries, and IT services. For these groups the impact estimates are mostly similar, but not statistically significant. This study shows that the worry that decentralization of bargaining would lead to significant wage cuts is overstated.