Chapter 4: The Effect of Collective Bargaining Agreements on Employees' Welfare at the Firm Level: Evidence from Spain

This study examines the effects of firm-level collective bargaining agreements (CBAs) on workers’ welfare within Spanish firms, focusing on the trade-off between wage inequality and mean wage levels within firms. Results indicate that while firm-level CBAs contribute to increased intra-firm wage inequality, they also significantly enhance intra-firm average wage levels, with these positive effects being consistently observed across firm types and employee skill levels. Most notably, the increase in mean wages tends to offset the adverse effects associated with wage disparities, thereby leading to an overall improvement in workers’ welfare within firms. These findings provide crucial policy implications, advocating for tailored approaches in supporting effective collective bargaining practices that can foster equitable wage growth and enhance workers’ welfare, particularly in smaller firms and those employing low-skilled workers. Our results underscore the importance of firm-level negotiations in shaping equitable and prosperous labour market outcomes in contemporary economic settings.