WAGE SETTING SYSTEMS AND WAGE DEVELOPMENTS

Transcription

1 EUROPEAN SEMESTER THEMATIC FICHE WAGE SETTING SYSTEMS AND WAGE DEVELOPMENTS 1. Main features of wage setting institutions and their implications for wage outcomes In Europe, there are different systems for setting wages; and different factors affect how wages react to changes in economic fundamentals for example, social contributions, labour taxation, unemployment benefit systems, and employment protection legislation. However, several characteristics of wage setting institutions have a bearing not just on wages, but on the emergence of internal and external macro-economic imbalances. Table 1: Union density, Wage bargaining characteristics (value of indicators by country, years from 2008 to ) Coordination of wage bargaining, The dominant level(s) at which wage bargaining takes place, Minimum Wage Setting, Bargaining coverage, adjusted, Extension index, Employers organisation density, 2008 AUT * * BEL * ** BGR 19.8** 2* 2* 5* 18.0* 1* 55.0 CYP *** CZE 17.3** ** DEU * DNK 68.5* : ESP 15.6* * EST 8.1* ** ** FIN ** 2 : Union density, Coordination of wage bargaining, The dominant level(s) at which wage bargaining takes place, Minimum Wage Setting, Bargaining coverage, adjusted, Extension index, Employers organisation density, 2008 FRA 7.9* *** GBR 27.1* GRC *** HUN 16.8** ** IRL * 1 : ITA * LTU 10.0* * LUX 37.3*** *** LVA 14.8*** Thematic fiches are supporting background documents prepared by the services of the Commission in the context of the European Semester of economic policy coordination. They do not necessarily represent the official position of the Institution.

2 Table 1: Wage bargaining characteristics (value of indicators by country, years from 2008 to ) MLT *** NLD * POL 14.1* * 1 : PRT 19.3* *** ROM 32.8*** 2* 1 8* * : SVK SVN ** ** SWE 68.9* ** * Data 2010; ** Data 2009; ***Data 2008; De-facto extension on the basis of interpretation of the Constitution not taken into account. Note: See the Annex for a description of the ICTWSS indicators. Source: Jelle Visser.. The ICTWSS Database: Database on Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts in 34 countries between1960 and AIAS, University of Amsterdam, available at: Factors relevant to aggregate wage developments include the degree of centralisation (the level at which wage bargaining takes place); the way in which wages reflect differences in productivity (across sectors, firms and geographical areas); and the extent to which bargaining takes into account national level objectives. However, it is difficult to demonstrate a robust relationship between the centralisation of wage bargaining and economic outcomes 1. Wage bargaining may either be highly decentralised (taking place mostly at firm level, e.g. UK), highly centralised (wage formation at national level, e.g. Slovenia), or may take place at an intermediate level, normally at the level of sectors (e.g. Italy), and in some cases at the level of regions (e.g. Spain) or occupations. Table 1 above shows indicators of wage bargaining characteristics. Generally speaking, in countries where the sector level is dominant, company level agreements cannot be less favourable to employees than sectorial agreements. Even if firms can legally avoid sector-level clauses (as in Austria and France), such 'escape clauses' are not often used in practice. Escape clauses have, however, been commonly used in Germany, allowing for more flexibility at the company level. Decentralisation at firm level can also be associated with strong unions, at least in companies of a certain size, or where the German co-decision model (Mitbestimmung) implies strong employee participation. Pressures for increasing wages may be stronger at firm level if the firm faces increasing labour shortages. 1 See Aidt and Tzannatos (2005) and Flanagan (1999). 2

3 Wage developments may also depend on the actual degree of coordination among various actors 2. Coordination may take place in different ways (e.g. bipartite or tripartite national agreements setting guidelines for wage negotiations at lower level; sectorial wage agreements used as a reference by other sectors) and may coexist with decentralised wage bargaining. This has played an important role in countries where the external constraint imposed on the export sector is also internalised by sheltered sectors, helping to maintain international competitiveness in the economy as a whole. The evidence seems to suggest that coordinated sectorial wage bargaining may lead to similar outcomes as centralised bargaining systems and that semi-coordinated bargaining can lead to higher levels of employment. Wage behaviour and bargaining power of wage-setters depend on employer and union density and collective bargaining coverage. Empirical studies suggest that the relationship between union density and economic outcomes is unclear, because this depends to a larger extent on employer density. Theoretically, therefore, in countries with high union density, unions may be more likely to succeed in pushing up negotiated wages if this is also associated with high employer density 3. The impact may be significantly reduced if unions participate in productivity-enhancing activities at the firm level. There is robust evidence 4 that higher levels of bargaining coverage and more centralised or coordinated bargaining, as well as high union density, are associated with a compression of the wage distribution and a reduction of earnings inequality. The existence of a procedure for legal extension of collective agreements, making them binding for non-unionised employees or non-signatory firms, can significantly broaden the coverage of collective agreements. Extension mechanisms are widespread in the EU and generally concern occupational and sector-level contracts and cover both wage and non-wage conditions. In most countries, the extension is the outcome of an explicit decision by the government, and in many cases it is granted upon request of one or both of the parties (e.g. Germany, France and the Netherlands). In other countries, the extension is either automatic (Spain) or quasi automatic (e.g. Italy and Finland) 5, or is the result of the fact that all employers are obliged to be members of the employers' association (e.g. Austria) Most European countries operate under some form of wage coordination. Coordination can be 'horizontal' - where some sectors act as leaders in setting wage agreements with others following them (so-called 'pattern bargaining', notably in Austria, Germany and Sweden) or where interassociation agreements are concluded - or 'vertical', where agreements at national level, for instance a tripartite national agreement sponsored by the government and peak social partner organisations, set the guidelines for wage negotiations at the lower levels (e.g. in Belgium). Horizontal coordination in the form of national inter-association agreements has gained importance over the last decade and is often the dominant mechanisms of wage coordination, as in Belgium and Spain. European Commission, Industrial Relations in Europe (2008, 2010). Industrial Relations in Europe 2008, Chapter 3. As shown by the Court rulings related to posted workers, the absence of a procedure ensuring a general/universal application of collective agreements may lead to legal uncertainty with regard to the extent of the implementation. 3

4 As a result of extension of collective agreements, wages may not be able to fully adjust to differences in productivity across firms or geographical areas within the same sector. The more important these differences are, the stronger the risk that the extension results in a misallocation of labour, with high wages (and low employment and output) in lowproductivity firms. Extension mechanisms are also likely to reduce the responsiveness of nominal wages to shocks, as wages are less responsive to local conditions. However, the extension may help overcome coordination problems and improve working conditions in small firms, as long as the extension does not lead to competitiveness problems because wages are too high. In the medium-to-long term, the extension might raise the overall wage level. The literature also suggests that the average duration of wage agreements may also influence relative wage flexibility. The average length of collective agreements varies between one and three years in Europe. All EU countries have some form of minimum wage floor that is fixed either centrally and/or legislated by the government (statutory) or collectively agreed by social partners. 6 In many countries, social partners tend to play an active role in the statutory minimum wage setting. In July 2013, 21 Member States had national legislation setting a statutory minimum wage by statute or by national inter-sectorial agreement. There is no clear-cut answer to the question of the effect of a minimum wage on jobs. If fixed too high, a minimum wage may negatively affect the employment of lower-paid and younger, less experienced workers, where costs can be driven above productivity levels. Others, such as the less experienced, unskilled workers, women and part-time workers in low-paying sectors, and small enterprises, can be adversely affected as well. However, minimum wages may increase the incentives to work and help prevent in-work poverty, although this may also be achieved through well-designed in-work benefits. In times of severe economic downturn, appropriate minimum wages help to sustain aggregate demand and underpin prices, reducing the risk of deflation. They also help to boost wage equality by maintaining an adequate living standard for the most vulnerable workers. Acting as wage floors, they need to be sufficiently adjustable to reflect overall economic developments. Different wage indexation mechanisms regulated by law are currently in place in four EU countries: Belgium, Cyprus, Luxembourg and Malta (see Table 2). Wage adjustment is automatic and is based on price inflation in the recent past. In addition to these four 6 Collectively agreed minimum wages are applied in Germany, Italy, Austria, Finland, Sweden, Denmark and Cyprus. Cyprus has the statutory minimum wage only for a few specific occupations in which unionisation and collective agreement coverage are low and the employees have weak bargaining power. Austria has a dual system with both minimum wages for some sectors and collective agreements for others. However, collective agreements dominate. Germany has statutory sectorspecific minimum wages in four branches (the main construction industry, the roofing industry, the painting industry and the demolition/wrecking industry), based on the German Posted Workers Act. In Belgium the minimum wage is set through a national agreement between social partners. However, in terms of coverage and universality, it is equivalent to the statutory minimum wage as it is legally binding in all sectors. This was also the case in Greece before reforms passed in 2013, which stipulated that the national minimum wage be defined by law, following consultation with the social partners. 4

5 Member States, a number of other EU countries used to have such a system in the past but have now abolished it (e.g. Denmark, France, Italy and the Netherlands). In Spain, ex-post indexation used to be common in collective agreements, although it is no longer prescribed by law, but it was put on hold through a social partners' agreement for the period In Cyprus, the system is currently being reformed. Table 2: Summary of automatic wage indexation systems, by country Coverage Method of adjustment Regularity of adjustment Type of collective bargaining Derogation procedure Belgium Cyprus Luxembourg Malta Pay, minimum wage, social benefits Pay and, to some extent, minimum wages and social benefits Pay, minimum wage, social benefits Pay, minimum wage, pensions at all levels of workers Health index = CPI excluding tobacco, alcohol, petrol, diesel 50% of CPI, excluding excise taxes on tobacco, alcohol, fuel + other items Only applied if CPI rises above 2,5% RPI Diversity of indexation arrangements according to sectorial conventions Every year Irregular, depending on evolution of CPI. In the last 25 years one increase every months on average. Every year Negotiation at sector level monitored by negotiation at central level Decentralised but with some monitoring at central level Rather decentralised Decentralised at company level Yes, but rarely used Yes (indexation is collectively agreed) Yes, if Tripartite Coordination Committee finds it necessary Yes Source: Eurofound; European Commission, Industrial Relations in Europe 2010, updated as of November The mechanical application of indexation to wages risks making adjustment more difficult. First, indexation can easily create a wage-price spiral and is likely to make any nominal shock (e.g. a worsening of terms of trade) lasting; especially in the case of a country in a monetary union with irreversible nominal exchange rates. Second, indexation makes real wages more rigid and consequently works against adjustment in the labour market. The macro-economic effects of indexation depend very much on the way it is designed and implemented: relevant variables include, for instance, the coverage (what is indexed), the method of adjustment (ex-ante or ex-post inflation, the Consumer Price Index or a refined indicator), derogations (the possibility of opting-out), monitoring, and the regularity of adjustments. Indexation clauses may make it easier to conclude multi-annual agreements, which provide stability in industrial relations and reduce the risk of recurrent conflicts in relation to wage negotiations. As a general principle, while indexation systems can be an effective tool to preserve the purchasing power of wages and salaries, they need to be designed to be flexible enough to ensure cost competitiveness relative to a country's trading partners, and adequate adjustment capacity. 5

6 2. Elements for assessing the main challenges in the Member States Key concepts The role of wage developments in influencing macroeconomic performance has received increased attention in recent EU economic surveillance: Wage changes are one of the major channels of labour supply-demand adjustments and directly influence employment outcomes. Therefore too high or too low wage growth (compared to productivity and price growth) could signal internal imbalances in the labour and product markets. This can induce costpush inflationary or deflationary pressures and make it less or more attractive to hire and maintain workers, thus affecting employment opportunities (although a severe deflationary situation will also influence recruitment negatively). Wage developments affect external price competitiveness. Wage increases may lead to higher Nominal Unit Labour Costs (ULC) and the Nominal ULCbased real Effective Exchange Rate (REER) if they are not offset by productivity developments or mark-up reductions, or matched in partner countries or offset by changes in nominal exchange rates (outside a monetary union). The converse of this argument holds for wage developments that decrease ULC. Thus, excessive wage growth may lead to external imbalances in price competitiveness. Wages are a major part of income and have an impact on aggregate demand through household consumption and through the indirect effect on business profits, in turn affecting their investment decisions. An increase in wages will lead to a decrease in profits. To the extent that the propensity to spend out of wage income is larger than the propensity to spend out of profits, the rise in wages will induce an increase in total demand. The distribution of wages across employees also influences aggregate domestic demand. The specific characteristics of countries and where they are in the business cycle need to be taken into account in interpreting the abovementioned transmission mechanisms. Modernising wage-setting systems plays an important role in correcting the large macroeconomic imbalances observed in a number of Member States and in reducing unemployment. This is particularly important in the euro-area, since cost and price adjustment is the only way of nominal adjustment in a monetary union. Such adjustment has already started, but needs to continue to reduce internal imbalances (notably high and persistent unemployment) as well as external ones (progressive competitiveness deterioration leading to current account imbalances). Wages are not the only drivers of international competitiveness: other costs (such as bureaucratic costs and capital costs) affect price competitiveness, while non-price competitiveness (e.g. productivity levels and developments, geographical and technological specialisation) also play a key role. Furthermore, some of the underlying 6

7 causes of wage increases (such as easy availability of cheap credit for consumption and construction) might be exogenous to the labour market, but still push up labour demand and thus wages. Governments have a number of levers they can use to affect labour costs: Public sector wages can signal desired wage developments in the economy. The level and conditions of employment in the public sector, often a major employer, affect labour demand and supply in the private sector. Minimum wage policies affect wage distribution and increases in minimum wages also play a signalling role. In some countries, statutory wage indexation is another tool with an impact on labour costs. If the system does not allow for changes in the terms of trade, its effects can be damaging for competitiveness if, for instance, a cyclical increase in energy prices translates into wage increases. Changes in social security contributions and direct labour taxation affect competitiveness: as policies that increase non-wage labour costs increase unit labour costs in the short to medium term. More broadly, labour market reforms can affect wage responsiveness. For instance, changes to unemployment benefit systems and activation policies can reduce reservation wages (the lowest wage at which a worker would accept a job), increasing labour supply and therefore reducing wage pressures in the economy. Recent policy developments To create jobs, rebalance EU economies and support structural change towards dynamic sectors, the Annual Growth Survey 2014 recommended that Member States pursue "further reform efforts to ensure that wage developments are in line with productivity and thus support both competitiveness and aggregate demand." Trends in unit labour costs are also subject to surveillance and recommendations under the Macroeconomic Imbalances Procedure (MIP). This is reflected in some Country-Specific Recommendations. A number of countries were asked in June 2014 to review their wage setting mechanisms, including wage indexation, respecting the role of social partners and in conformity with national practices, in order to ensure that wage developments contribute to external cost competitiveness and support labour market adjustment and job creation. Some countries (e.g. Spain and Italy) have introduced far-reaching reforms of their wage setting systems to increase wage responsiveness to economic conditions at firm level. Major reforms were also passed as part of the reform packages agreed under the financial assistance programmes in Greece, Ireland, Portugal and Romania. This includes a drastic overhaul of the wage setting system in Greece, Portugal and Spain. It also includes a move towards greater decentralisation of collective bargaining in Italy, as well as the reform of sectorial agreements in Ireland. The automatic extension of 7

8 collective agreements after they expire was also eliminated in Estonia. In France, an inter-professional agreement broadened the scope of firm-level collective negotiations, allowing hours worked and wages to derogate from those agreed in sectorial contracts. Limited progress was made in countries with less urgent need for reform, but where the functioning of certain wage setting and wage indexation systems has been identified as a possible threat to competitiveness. In Belgium, a law intending to contain wage growth is still under discussion, while changes were introduced to the health index used as a basis for wage indexation. Wage flexibility was also supported by temporary restrictions on the application of the wage indexation system in Luxembourg. In Greece, reforms towards decentralisation of collective bargaining took place in two phases. In 2010, framework conditions were introduced to allow, under certain conditions, firm-level derogations from sector and professional agreements. In, the use of firm-level agreements on wage and non-wage matters was further facilitated by suspending the extension of sector and occupation collective agreements to nonsignatory parts, suspending the "favourability clause" and easing the requirements for bargaining at firm-level. Other reforms to the collective bargaining system in 2012 included reducing the minimum wage and the maximum duration of collective agreements. In Ireland, the Industrial Relations (Amendment) Act of July 2012 imposed a stricter legal framework for the setting of the terms and conditions defined by Registered Employment Agreements (REAs) and Employment Regulation Orders (EROs), including sectorial minimum wages. In Spain, the 2012 labour market reform aimed to promote decentralisation of bargaining, by giving priority to firm-level collective agreements on a number of issues and by making it easier to opt out of higher-level collective agreements. Moreover, the reform reduced the automatic extension of collective agreements which expired but were not renewed. In Portugal, reforms meant collective contracts could allow certain firm-level derogations; collective agreements could only be extended if sufficiently representative; expired collective agreements could only survive for a maximum of 12 months; and collective agreements could be suspended in case of industrial crisis. In Italy, the social partners agreement of 2012 acknowledges the need to link wages set in national contracts not only to expected inflation, but also to the economic and competitive conditions of the country and relevant sectors, and promotes further decentralisation of collective bargaining by strengthening second tier bargaining. In Croatia, the ultra-activity of expired collective agreements was limited to cases where explicitly stipulated, the criteria on extending the scope of implementation of the collective agreement was refined, and faster dispute resolution mechanisms were introduced. Cyprus suspended wage indexation during the crisis and is extensively reforming its wage indexation system. The extension of collective agreements was made easier in Germany and Slovakia. Recent wage developments In 2014, wage developments continued to support the adjustment of external macroeconomic imbalances and, in the longer term, unemployment divergences. This means big differences between those countries more strongly needing to reduce unemployment 8

9 and rebalance external positions, and countries with a more sustained recovery and current-account surpluses. 7 Within the euro area, this resulted in a sharp downward wage adjustment in countries facing stronger rebalancing needs (with Cyprus, Greece, Portugal and Slovenia recording negative growth in nominal compensation per employee); and positive and above average growth rates in countries such as Estonia, Latvia and Lithuania. In Germany, compensation per employee grew by 2.5% on the back of an increase in the number of hours worked per employee. In the non-euro area countries, developments were also uneven, with robust growth rates in nominal compensation per employee in Romania and Hungary. By contrast, wages declined by about 5% in Croatia. In the United Kingdom, wage growth accelerated to 2.8%, higher than the average rates recorded since the onset of the crisis. Graph 1: Nominal compensation per employee, year-on-year % change Countries are displayed in ascending order of the unemployment rate in Source: DG ECFIN AMECO database and Eurostat. In , real wages evolved, on average, in line with productivity. Nonetheless, the aggregate picture conceals a high degree of heterogeneity across countries. Substantial deviations between growth in real wages and productivity occurred in Cyprus, Greece, Romania and Spain, where the average productivity growth in this period was at least 2 percentage points higher than the average growth in real compensation per employee. Real wages over the last three years grew substantially faster than productivity in Latvia, Bulgaria and Estonia. 7 In the period that preceded the crisis, surplus countries saw more subdued wage dynamics than after 2008, when they also started to record stronger growth than other countries. Germany, in particular, saw strong wage moderation, which led to increased employment in the export industries and constrained domestic demand. 9

10 Graph 2: Real compensation per employee and productivity, average growth rates Source: DG ECFIN AMECO database. Recent developments in nominal unit labour costs (NULC) have also supported adjustment. 8 After strong divergences during the last decade, NULC began to converge moderately at the onset of the crisis, as Greece, Portugal and Spain started to show a declining trend in nominal unit labour costs as a result of productivity increases and wage moderation. In Germany, labour costs continued to increase, outpacing wage and nominal unit labour cost developments in Southern Europe. With a growth rate of around 1%, NULC continued to decelerate in the euro area and the EU in This evolution results from the deceleration in the growth rate in compensation per employee and a stabilisation of productivity growth at very low levels. Generally, unit labour costs were more moderate in countries under higher adjustment needs. Cyprus registered the sharpest fall due to the decline in compensation per employee. Unit labour costs also fell in Croatia, Slovenia, Greece and Spain, and broadly stabilised in Portugal. In Slovenia and Spain, the decline was mainly driven by the increase in labour productivity, while in Portugal the stabilisation in unit labour cost occurred on the back of equal decreases in both compensation per employee and productivity. The Baltic countries registered the fastest increase. The dynamics of real unit labour costs normally reflect those of unit labour costs. Graph 3 plots the variation in real unit labour costs (RULC) in 2014 against the unemployment rate. In the past there was a strong negative correlation between the two variables, indicating a market-driven adjustment, showing the real cost of labour has been 8 Nominal unit labour costs are defined as the total wage compensation per unit of output. They are obtained by dividing the wage rate per employee by the real GDP per person employed (labour productivity). 10

11 adjusting (in comparison with productivity adjustments) more in Member States with high unemployment rates than in Member States with low unemployment rates 9. In 2014 this correlation line is flat. 10 Graph 3: Real unit labour costs year-on-year change 2014 and unemployment rate in 2013 Source: DG ECFIN AMECO database. This may indicate that real unit labour costs are becoming less responsive to the unemployment rate, as a substantial adjustment has already taken place in previous years and various countries continue to record negative growth rates in real unit labour costs with downward rigidities starting to play a bigger role. In particular, countries like Spain, Greece and Portugal, which still record very high unemployment rates, have seen their real unit labour costs decreasing in recent years. The Baltic countries and Slovakia, despite continuing high unemployment rates, recorded a growth rate above 2% in real unit labour costs. However, in the Baltic countries there has been a substantial adjustment in real unit labour costs in previous years and unemployment has also receded, especially in Latvia and Lithuania. Monthly statutory minimum wages in the EU varied widely as of January 2015, from 184 in Bulgaria to 1923 in Luxembourg (see Graph 4). When adjusted for price differentials across countries, the disparities among Member States are reduced from a range of one to ten (in EUR) to a range of one to four in purchasing power standards 9 10 However, the beneficial effects of the adjustments in wages and in ULC may not be fully reaped if they are not reflected in similar price-competitiveness adjustments or if the corresponding increase in the share of profits does not translate into higher aggregate demand through higher investment by business. Real unit labour costs are obtained by dividing nominal unit labour costs by price level. 11

12 (PPS). At the opposite ends of the scale were Bulgaria (380 PPS) and Luxembourg (1561 PPS). Graph 4: Statutory minimum wages (in euros) in EU Member States, Turkey and the USA, 1 January In 2012, the statutory minimum wage level varied between 30% and 50% of average gross monthly earnings in industry, construction and services. The highest values are reported for Greece (50.1% in ) and Slovenia (51.4%) followed by France, Luxembourg and Lithuania. At the lower end of the scale, the Czech Republic, Estonia, and Spain report minimum wages below 35% of the average gross monthly earnings. 11 No universal statutory minimum wages exist in the seven MS not covered by this chart. 12

13 Graph 5: Statutory minimum wages as a proportion of the mean value of average gross monthly earnings in EU Member States, Turkey and the USA, 2013 Information about the labour market relevance of the minimum wage is provided by the share of workers earning the minimum wage, or less than 105% of that wage. The latest available data from Eurostat refer to October 2010 and show considerable differences in such "effective coverage" across countries with statutory minimum wages (from 0.2% in Spain to 19.2% in Slovenia). Higher statutory minimum wages (as a percentage of the average wage) may not unambiguously imply a higher effective coverage. Overall, effective coverage depends also on the country s educational and age structure of workers. A relatively low effective coverage may also reflect the importance of collective agreements in wage setting and/or individually negotiated wages set above the minimum wage. Tighter labour market conditions may push wages further above the minimum wage, thus additionally reducing effective coverage. 13

14 Union Density Union Density rate, net union membership as a proportion wage and salary earners in employment (0-100) = NUM*100/WSEE Coordination of wage bargaining The dominant level(s) at which wage bargaining takes place Minimum Wage Setting Bargaining coverage, adjusted 5 = economy-wide bargaining, based on a) enforceable agreements between the central organisations of unions and employers affecting the entire economy or entire private sector, or on b) government imposition of a wage schedule, freeze, or ceiling. 4 = mixed industry and economy-wide bargaining: a) central organisations negotiate non-enforceable central agreements (guidelines) and/or b) key unions and employers associations set pattern for the entire economy. 3 = industry bargaining with no or irregular pattern setting, limited involvement of central organizations, and limited freedoms for company bargaining. 2 = mixed or alternating industry- and firm level bargaining, with weak enforceability of industry agreements 1 = none of the above, fragmented bargaining, mostly at company level 5 = national or central level 4 = national or central level, with additional sectoral / local or company bargaining 3 = sectoral or industry level 2 = sectoral or industry level, with additional local or company bargaining 1 = local or company bargaining 0 = No statutory minimum wage, no sectoral or national agreements 1 = Minimum wages are set by (sectoral) collective agreement or tripartite wage boards in (some) sectors; 2 = Minimum wages are set by national (cross-sectoral or inter-occupational) agreement ( autonomous agreement ) between unions and employers; 3 = National minimum wage is set by agreement (as in 1 or 2) but extended and made binding by law or Ministerial decree; 4 = National minimum wage is set through tripartite negotiations; 5 = National minimum wage is set by government, but after (non-binding) tripartite consultations; 6 = Minimum wage set by judges or expert committee, as in award-system; 7 = Minimum wage is set by government but government is bound by fixed rule (index-based minimum wage); 8 = Minimum wage is set by government, without fixed rule. Employees covered by wage bargaining agreements as a proportion of all wage and salary earners in employment with the right to bargaining, expressed as percentage, adjusted for the possibility that some sectors or occupations are excluded from the right to bargain; ranges from 0 to