Bringing in the state: The politics of wage regulation and low-wage employment

The project analysed the policies states use to deal with low-wage employment. In particular, it sought to explain why states differ in their tools to address low-wage employment. Working for very low wages has become more common in many developed countries. States have various tools to address this situation. They can introduce minimum wages by law, they can pay public benefits to top up low wages (so-called in-work benefits), or they can try to strengthen collective wage bargaining between trade unions and employers. Empirically we found three distinct approaches to low-wage employment in developed countries. Nordic countries and several Continental European ones focus mostly on strengthening collective bargaining. Several Eastern and Southern European countries protect low-wage workers through a statutory minimum wage but not much else. English-speaking countries but also some Eastern European ones and others, combine minimum wages with significant in-work benefits. The first of these approaches (supporting collective bargaining) works best in containing low-wage employment. The second (mostly minimum wages) can be effective if the minimum wage is high enough. In the third (minimum wages and in-work benefits) we find most low-wage employment, because in-work benefits make it easier for employers to pay low wages. Since the middle of the 20th century ever more countries have adopted statutory minimum wages. This trend was driven by the decline of collective bargaining, especially eroding collective bargaining coverage. But we also found that political parties matter. Left-wing parties in government are more likely to introduce minimum wages (if and when collective bargaining has weakened) and left-wing parties raise minimum wage levels more than other parties. Interestingly, it tends to be the other way round with in-work benefits: Right-wing parties are, on average, more likely to expand them. A case study of the politics of low-wage policies in the United Kingdom showed how liberalization of industrial relations led to increased intervention by the state through more substantial public transfers to low-paid workers as well as through the new statutory minimum wage. The reason for this development was largely governing parties’ need for electoral legitimacy. In a case study of Norway, we observed the opposite government reaction, in a certain sense: When collective bargaining appeared threatened by labour immigration from the European Union, the state stepped in to stabilize it through extending collective agreements by the force of law. Generally, this research has shown how politics shapes different states' reactions to the problem of low-wage employment. Democracy creates incentives for governments not to ignore the erosion of collective bargaining. Depending on existing institutions and electoral majorities, governments either prop up collective bargaining or substitute it with state measures like minimum wages or in-work benefits.

Vi forventer at WAGEREG vil endre forskningsfeltet på særlig tre måter: (1) fremheve de ulike og sammenkoblede måtene stater kan påvirke lavlønnsarbeid på; (2) gi viktig innsikt i politiske prosesser i dette politikkfeltet; (3) sette i gang nye refleksjoner om hva lovfestet minstelønn er bra for, men også dets begrensninger. Når det gjelder kompetanseutvikling har WAGEREG gitt én person mulighet og veiledning til å fullføre doktorgrad. Postdoktoren fant jobb i britisk statsforvaltning. Forskningsassistenten skrev sin masteroppgave om en problemstilling relatert til WAGEREG og fikk jobb i en forskningsorganisasjon. WAGEREG forskning og funn har også blitt formidlet til studenter i UiB sitt bacheloremne om arbeidslivspolitikk i fire år. Funnene til WAGEREG har blitt formidlet gjennom norske og internasjonale aviser, og blitt målrettet kommunisert til brukeraktører gjennom relevante norske og europeiske nettpublikasjoner. Det er derfor rimelig å forvente at WAGEREG vil hjelpe beslutningstakere til å bedre forstå «menyen» av politiske valg angående lavlønnsarbeid, deres implikasjoner og forholdene som gjør noen løsninger politisk mer gjennomførbare enn andre – og at WAGEREG dermed kan bidra til å redusere lavlønnet arbeid.

Low pay and in-work poverty are major challenges to our societies. This project will illuminate how states react to these challenges as well as the politics determining their choice of action. In doing so, the project will devise a new conceptual framework that brings the state into the analysis of wage regulation. It will assess whether and, if so, why the role of the state in wage setting has increased over the last decades. While wages are often regulated through collective bargaining between trade unions and employers, research has neglected the influence of the state and the politics behind it. After all, the state can regulate wages directly, for example through statutory minimum wages, or indirectly, for example by regulating collective bargaining or through public benefits that affect wage levels. The surge of low-wage employment results from rising service employment, new information technologies, declining collective bargaining, global economic competition, and low-skill immigration. Governments have three main options of responding: (1) legal rules to strengthen collective bargaining, (2) public benefits to supplement low wages, or (3) minimum wages to establish a legal wage floor. This project therefore deals with the policies that affect the worst off in the labour market. The project will first analyse the use of these policies descriptively across developed states. It will then explain their variation. The main descriptive hypothesis is that direct state regulation through statutory minimum wages has increased. The main explanatory hypothesis is that this trend is driven by the weakness of trade unions and employer associations, a weakness that consists not only of declining membership but of weakening ties between these organizations and political parties. Consequently, the new politics of wage regulation is increasingly shaped by political parties.