Institutions for Wage Determination in the EU and Turkey

Abstract

This study provides information on wage floor determining institutions, the statutory minimum wages, and collective bargaining agreements, in the EU countries to examine differences and commonalities of these institutions between the EU countries and Turkey. The interaction between these institutions and the labor market performance of the EU Member States and Turkey is also investigated. Therefore, the minimum wage levels and the collective bargaining coverage with the labor market indicators, namely the wage inequality measured with D1/D9 ratio and the incidence of low-wage workers, are compared. Findings indicate that the wage inequality and the incidence of low-wage workers are relatively lower in the countries with comprehensive collective bargaining systems characterized by high rates of collective bargaining coverage and union density. Turkey is one of the countries with the highest wage inequality compared to the EU countries. Improving the coverage rate of collective bargaining might help to reduce wage inequality.