The determinants of pay settlements: the influence of the national context

Abstract

This article studies the influence of national context and collective bargaining on the factors taken into account when adjusting wages. Using data from Spanish and British manufacturing establishments, we examine the relative importance of the cost of living, the ability to recruit or retain employees, the financial performance of the organisation and the industrial relations climate on wage adjustments of manual workers at the establishment level. Our findings show that there are significant differences on the importance given to these factors in both countries. In part, these are related to differences in the incidence of collective bargaining.

Keywords:

• collective bargaining
• compensation
• national context
• pay settlements
• wage adjustments

Acknowledgements

This research has received financial support from Fundación BBVA and the Spanish Ministry of Science and Innovation (ECO 2010-21393-C04-03 and ECO 2011-24304).

Notes

1. This is not the only possible re-codification of the Spanish scale variables. We performed the estimations using two other transformations of the variables (6–10 on original scale takes value 1 in dummy variable, and 2–10 on original scale takes value 1 in dummy variable), and the differences in the results were negligible. Eventually, we opt for the first re-codification as we considered it to be the most consistent with the dichotomous measures of the dependent variables.