Indicators of collectively-agreed pay increases in the Eurozone

1. Indicators of collectively-agreedpayincreases in the Eurozone A qualityreport – Roadmaptoharmonisation GUY VAN GYES EMCO Indicators group, 7 March, Brussels, 2013

2. IntroductiononCAWIE-project • Collectively agreed wages in Europe • Improvingexisting data and indicators • To support social dialogue and economic governance in the EU • Co-Funding 80% Grant Budget heading 04.030301 EC DG Employment and Social Affairs

3. Project consortium: TURI Project team Co-ordinators • HIVA-KULeuven, BE Contact person: Guy van Gyes • Wirtschafts- und SozialwissenschaftlichesInstitut in der Hans BöcklerStiftung (WSI), DE Contact person: Thorsten Schulten Project partners

4. Project goals • Coordination – Intervention is a fact • Making abstraction of the fundamentaltheorems (supply-side; wagegrowth not aboveproductivitygrowth) • To deal withtwo issues on CAWIE • Assessment of the methodologicalquality of the usedevidence • >< simple reasoning on wage setting systems • A comparison of collectively agreed and “actual” wage developments allows for an analysis of “wage drift” which can be used to identify other factors than collective agreements which influence wage dynamics in Europe. • Start withsectorapproach

5. Project results • https://hiva.kuleuven.be/nl/extra/CAWIE.php • 10 national reports • Policy conference Brussels 29 November 2012 • 2 EU policy papers • Trends in CAWIE 1995-2010 • A harmonisedstatistical system onCAWIE: building blocksfrom a quality-basedusers’ perspective

6. Quality report Part I

7. Introduction • Importance of collectivebargaining in wage-settingsystems • Distinct feature Europeansocial model • Coverageabove 60% and higher in Eurozone • No official European-wide database or statistics on collectively agreed wages • Experimental Index of negotiatedwages ECB • PaydevelopmentsEuroFound

8. Collectivelyagreedwages in the EurozoneECB index of negotiatedwages 8

9. Overview • Designs and methods • Basic definition • Origins and uses • Method of calculation • Choice of index numbers • Coverage • Sampling and weighting • Periodicity and revisions • Comparative quality assessment • Relevance, coherence and comparability • Changing needs • Coherence and comparability • Completeness • Accuracy • Organisational quality • Timeliness and punctuality • Accessibility and clarity • Roadmapforharmonisation

10. National indexes of collectively-agreed pay increases, Eurozone

11. Collectively agreed wages (real values) and productivity 2001-2010, total economy 11

12. Design & methods

13. Basicdefinitions • a measure of the proportionate, or percentage, changes in a set of prices over time – the price of labor. • limited to changes in the compensation of workers, which are agreed in a collective way, i.e. by a collective agreement (ILO = voluntary agreement). • the average nominal (basic) pay increase as set by collective agreements for full-time workers.

14. National statistical indicators • Twoapproaches • Monitoring of average increases in collectiveagreements • FR, PT, ES (UK) • Monitoring of collectivelyagreedincreases of average workers • BE, DE, IT, AT, NL – FI • FI: % of index of wages of salaries = negotiated

15. Calculation: twobasicapproaches • Price index – Laspeyres index • Comparison of the aggregate values of collectively-agreed wages in two time periods. • These values include a price and quantity element. A change in wage costs can be attributed to an increase of the wage (price element), but also to a change in how many workers get this wage (quantity element). • Measures the price component • just like the consumer price index measures the price component of the change in households’ consumption expenditures. • Holding the quantities constant. This given set of quantities can be described as the ‘basket’ of collectively-agreed wages that is compared. • BE, DE, IT, NL, AT, FI • Main approach

16. Calculation: twobasicapproaches • Alternative approach • Collective agreements in a month; quarter or year • Average negotiated pay increase • PT, ES, (FR) • Simple

17. Two basic methodological issues • COVERAGE • What set of agreed pay increases or collective prices of labour are covered by the index? • WEIGHTING • What is the way in which the price movements are averaged?

18. Weightingprocedure – calculationaverage Employmentweight 1:between collective agreements/sectors Sample: Others Population:PT, ES, BE Base year: BE, DE, AT, IT Mix: NL, FI Currentyear: PT, ES, FR Employmentweight 2: within collective agreement Simple: median: BE Subjective: ES, (FI)

19. Relevance, coherence, comparability Accuracy Organisationalquality Qualityassessment

20. Coherence • Twoapproaches • Monitoring of average increases in collectiveagreements • FR, PT, ES (UK) • New agreements are bettercovered • Monitoring of collectivelyagreedincreases of average workers • BE, DE, IT, AT, NL – FI • Zero agreements are bettercovered When in a country most of the collective agreements foresee no wage increase (probably because no agreement will be signed) and only one, which covers 5% of the employement, foresees an increase of 5%, the Portuguese and Spanish indexes would end up with a 5% increase (averaged to a yearly figure). The Laspeyres indexes would only indicate a 0.25% increase. Of course this is a theoretical case, but it shows how sensitive the Portuguese and Spanish indicators are for ‘zero’ or ‘no’ agreements.

21. Relevance • Relevance is the degree to which statistics meet current and potential user needs. It depends on whether all statistics that are needed are produced and the extent to which concepts used reflect user needs • Completeness • Lower-levelcollectiveagreements • IT, BE, … AT, FI, FR • Sectoral ‘gaps’ • BE, FR, PT

22. Accuracy • The degree of closeness of estimates to the true values • No strongreportedproblems of accuracyreported • Within the limitations of coverage • Biggest issues • ‘Subjective’ answers of base data: ES, FI • Integratingexceptions: Lump-sum, opting-out, newwage tables

23. Pending questionson index number formula • Laspeyres index • Arithmeticweighted averages of priceratios; fixed-weights base year • Cfr. Discussion CPI • Substitution effect: peopleswopproductswithincreasingpricesforproductswithlowerprices – cyclical => Laspeyres index overstating • Fisher index: usingweights of base year and currentyear • Geometricmean • New product bias: in basket whenpricesalreadyrising • Composition effect: • Anti-cyclicallow-wageemployment • Trend from (higher-paid) industryto (lower-paid) services • Laspeyres index overstating? • Annualchaining – Indicator on the composition effect • Base year – Controlforpoint in the economiccycle

24. Toconclude • 9 of 17 Eurozone countries; 90% of GDP (Ireland, Greece) • Accuracy high whenbasicinformationonemployment x wage tables of collectiveagreement • Pending questionsontechnical details • Challenge: coherence & completeness • Sectors, wagedefinition • Price index

25. Toconclude • Belgian: (expected) quantum leap • Spain: subjective basic data • Italy: beyond national agreements • France: regularstatistical publication • Portugal: potential for price index • Netherlands: data weightreferenceperiod • Germany: keepcovering fragmentation • Austria: otherforms of remuneration • Finland: transparency on basic data

26. Roadmapforharmonisation Part II

27. Rationale for harmonisation • Horizontal coordination: Social dialogue: globalisation – comparisonbeyond the national borders – Germanwage leadership in Eurozone – Growingattempts for coordination • Vertical coordination - Macro-economics • Timelyforecasting – monetarypolicy • Instrument of Europeangovernance • Evidence-based: better science

28. Step-by-step building quality • Level 1: Open coordination – Community-of-practice • Level 2: Minimal harmonisation – Organisation-of practice • Level 3: Full harmonisation – Regulation-of-practice • Cumulative learningprocess • Experimentation • Informeddebatewithusers • Institutional/organisational leadership? Union fait la force • ECB; EESC; EMCO; Eurofound; Eurostat; ILO

30. SHARING • Quality procedures statistical offices • Transparancy: weights (cf. CPI) • Mutual references • Exchange solutions for accuracy problems • Company agreements: threshold • Revisions: preliminary with coverage warning • Opting-out • Decreases • Working time changes • Base wage / premium: more than one-index; other periodisation

31. MOTIVATING - SHAMING • WhenitisEuropean …. • Shaming, as example: • Belgianexpected quantum leap • Spain: basic data • Netherlands: data weightreferenceperiod • Italy: beyond national agreements • France: regularstatistical publication

33. Minimal – weak harmonisation • Lessis more – pragmaticrule • Besides national practices/needs (Cf. HCPI) • Co-operationstatistical office – Ministry of Labour • Quarterly – annual data • Average nominal basic pay increase as set by collective agreements for full-time workers • Sector-level • Private sector (Nace-letters) • Laspeyres Index; comparison with a base year

34. On the road to minimal harmonisation

36. Strong harmonisation • From basic wage developments to earnings concept • Definitional work to-do • Wage rates quaterly (fast available) • Earnings annual • Regular payments – Special payments • National/sector and lower-levels • Public/private sector • Representative weight sampling • Laspeyres and other index

37. Full (?) – Strong harmonisation • International regulation – ILO Resolutionconcerningstatistics of collective agreements (1926) • Structure of Earningssurvey – Weight data problem solution • what part of wage and wage increases determined by collective agreements; info on wage classification for individual • Germanexample to follow? • Paylevels? • Expansion to other countries

38. To end A long march starts from the veryfirst step