Pay Developments 2005 This review of trends in pay in 2004 and 2005 finds that average collectively agreed nominal wage increases across the EU rose from 4.1% in 2004 to 4.5% in 2005 (though with major variations between countries), reversing a previous steady downward trend. Taking into account inflation, the rate of real increase rose more sharply, from 1.1% in 2004 to 1.9% in 2005. In the EU 15, the average agreed nominal wage increase remained unchanged in 2005 at 3.0% and the rate of real increase fell from 1.0% in 2004 to 0.7% in 2005. However, in the 10 new Member States that joined in 2004, the average nominal increase rose from 5.6% in 2004 to 6.7% in 2005, and the rate of real increase climbed from 1.4% to 3.6%. The overall picture is thus of rather differing overall pay trends in the ‘old’ and ‘new’ EU. This review also looks at collectively agreed pay increases in six selected sectors (metalworking, chemicals, banking, retail, local government and the civil service), increases in average earnings (and current levels), increases in minimum wages (plus current rates), the gender pay gap and labour costs. Author: Mark Carley, SPIRE Associates/IRRU, University of Warwick 10 July 2006 The European Industrial Relations Observatory (EIRO), which started operations in 1997, is based on a network of leading research institutes in all EU countries, Norway, Bulgaria and Romania and at EU level, coordinated by the European Foundation for the Improvement of Living and Working Conditions. Its aim is to collect, analyse and disseminate high-quality and up-to-date information on key developments in industrial relations in Europe, primarily to serve the needs of a core audience of national and European level organisations of the social partners, governmental organisations and EU institutions. www.eiro.eurofound.europa.eu Pay developments - 2005 This annual update from the European Industrial Relations Observatory (EIRO), based on contributions from its national centres, aims to provide a broad, general indication of trends in pay increases over 2004 and 2005 across the EU Member States, two candidate countries (Bulgaria and Romania) and Norway. It looks at: collectively agreed pay rises across the economy as a whole and in six selected sectors; national minimum wage increases and rates; gender pay differentials; average earnings rises and levels; and labour cost increases and levels. The report does attempt to produce a fully scientific and comparable set of pay comparisons, given that EIRO is not a statistical service and that pay is an area where meaningful international comparisons are particularly difficult. Differing national systems of pay formation, industrial relations, taxation and social security, and the divergent ways in which pay-related statistics are collected and presented, mean that comparisons between countries are hard to draw. Nevertheless, given the key importance of pay in industrial relations, EIRO provides these general indications of recent developments while pointing out the problems, reservations and qualifications. The figures provided should be treated with extreme caution, and the various notes and explanations read with care. Average collectively agreed pay increases Figure 1 below provides figures for average nominal collectively agreed basic pay increases in each country (or a broadly equivalent indicator, where these are not available). Where possible, the figures cover the whole economy, though there are exceptions (see the notes for the figure). Data are not yet available for the whole of 2005 in a number of cases. Variations in the 2004 figures from those appearing in the EIRO pay update for 2004 (TN0503103U) are explained mainly by the replacement of provisional or partial figures with more reliable ones, plus in some cases changes in the data used, where more appropriate sources have been identified. (In this and subsequent figures and tables, the data are sorted in order of increase (highest to lowest) for 2005. Where there is no 2005 figure, the country is ranked by its 2004 figure in comparison with the 2005 figures for the other countries.) Collective bargaining plays a significant role in pay setting in all countries considered here (TN0401101F). Some two-thirds of the workforce of the European Union have their pay and conditions set, at least to some extent, by collective agreements - though the proportion considerably lower in many new Member States (e.g. Estonia and Latvia) and the UK, and higher in some of the EU 15 (e.g. France, Belgium, Sweden, Finland and Italy). The role of collective bargaining in pay determination differs widely. Notably, the various bargaining levels (intersectoral, sectoral, company etc) play different parts, while the importance of bargaining in pay determination differs considerably between economic sectors and groups of workers. These differences in national pay formation and industrial relations systems are illustrated by the varying ways in which the increases referred to in figure 1 are arrived at. Free collective bargaining, primarily (though not entirely in all cases) at sectoral level, plays the main role in Austria, Cyprus, Denmark, France, Germany, Italy, the Netherlands, Norway, Portugal, Slovakia, Spain and Sweden. National intersectoral agreements are responsible for setting the relevant increases, or laying down guidelines for lower-level bargaining in Belgium, Finland, Greece, Hungary, Ireland, Romania (2005), Slovenia and Spain. In the UK and the majority of the new Member States and candidate countries, it is company- level bargaining (or bargaining at lower levels within the company) that is predominant. In several central and eastern European countries - Bulgaria, Estonia, Latvia, Lithuania and Poland - low levels of bargaining coverage and/or lack of systematic data collection make it impossible to produce figures for average collectively agreed pay increases (other indicators are thus used in figure 1). Automatic pay indexation represents a significant proportion of the increases in Belgium and Luxembourg. The role of the increases referred to in the figure also differs: in countries such as Austria, Denmark, France and Italy, the increases referred to are sectoral minima, subject to subsequent lower-level bargaining (or in the case of Austria, the application of actual pay increases agreed at sector level); while in decentralised-bargaining countries such as the UK, the figures are more likely to represent actual increases. 1 Nominal pay increases EU 15 and Norway Bearing in mind these qualifications, the following points emerge from figure 1. The first group of countries to be analysed is the 15 pre-May 2004 EU Member States and Norway. • In 2004, nominal pay increases varied between 6.0% in Greece (the increase in minimum rates laid down in the National General Collective Agreement) and 1.3% in the Netherlands (where a virtual wage freeze was in force). Increases of 4% and over were recorded in two countries, increases of 3%-4% in five countries, increases of 2%-3% in eight countries, and increases of 1%-2% in one country. The average increase stood at 3.1% (3.0% in the EU 15 alone). • In 2005, nominal pay increases varied between 5.5% in Greece (again the increase in minimum rates laid down by intersectoral agreement) and 0.8% in the Netherlands (see previous point). Increases of 4% and over were recorded in two countries, increases of 3%-4% in six countries, increases of 2%-3% in six countries, increases of 1%-2% in one country, and increases of 1% or less in one country. The average increase stood at 3.0% (also 3.0% in the EU 15 alone). • The average increase thus fell very slightly from 2004 to 2005. This followed a fall from 3.8% in 2001 to 3.5% in 2002, 3.1% in 2003 and 3.1% in 2004. The average rate of increase seems to have been fairly steady for three years, after falling over 2001-3. • With regard to possible convergence, the range between the highest and lowest increases fell from 5.4 percentage points in 2001 to 3.6 points in 2002 and 2.4 points in 2003. However, it increased to 4.7 points in 2004 and remained the same in 2005. In 2004, the increases in 12 countries out of 16 were within 1 percentage point of the overall average rise, while in 2004 this was true of 13 countries. • Averaging the annual increases over the five-year period 2001-5, the 16 countries can be divided into: ‘low’ nominal pay-increase countries - those where pay increases averaged 2%- 3% (Austria, Belgium, Denmark, Finland, Germany, Italy and Sweden); ‘medium’ nominal pay- increase countries - those where pay increases averaged 3%-4% (France, the Netherlands, Portugal, Spain and the UK); and ‘high’ nominal pay-increase countries - those where pay increases averaged over 4% (Greece, Ireland, Luxembourg and Norway). The overall average annual pay increase over the five-year period was 3.3%. • There were, as usual, divergent trends in pay increases in the various countries. While the average increase fell from 2004 to 2005 in eight of the 16 countries (with pay moderation appearing most evident in Spain, Greece, Ireland and the Netherlands), following the overall slight downward trend, the rate of increase rose in five countries (most notably Austria and Belgium) and remained stable in three. Looking at the five-year period starting in 2001, the average overall trend - for increases to drop off from 2001 to 2003 then steadying before falling slightly in 2005 - has been mirrored to varying extents in Portugal, Ireland and Luxembourg. The Netherlands has seen a continuing fall since 2002, and Germany and Norway since 2003. Sweden and, to a lesser extent Denmark, maintained a high degree of stability over the whole period. Otherwise, few countries have displayed a clear trend in nominal pay increases, with most varying up and down from year to year.