September 1999

IZA DP No. 56: Centralized Bargaining, Multi-Tasking and Work Incentives

published as 'Centralized bargaining and reorganized work: Are they compatible?' in: European Economic Review, 2001, 45 (10), 1851-1875

The paper examines the implications for wage bargaining of an important aspect of the ongoing reorganization of work - the move from occupational specialization toward multi-tasking. The analysis shows how, on account of such reorganization, centralized bargaining becomes increasingly inefficient and detrimental to firms’ profit opportunities, since it prevents firms from offering their employees adequate incentives to perform the appropriate mix of tasks. The paper also shows how centralized bargaining inhibits firms from using wages to induce workers to learn how to use their experience from one set of tasks to enhance their performance at other tasks. In this way, the paper may also help explain the increasing resistance to centralized bargaining in various advanced market economies.