Losing control? Unions' Representativeness, ‘Pirate’ Collective Agreements and Wages

This paper documents the evolution of sector-level collective agreements in Italy and investigates wage differentials associated with the diffusion of non-representative agreements, often signed by unknown organizations – i.e. the so-called “pirate” agreements. Using employer-employee data from Social Security Archives, we find that non-representative agreements are associated with significant wage penalties (up to -8%) compared with regular collective agreements. Wage penalties are heterogeneous across firm size and industry affiliation. It is also shown that half of the wage differential is due to selection effects. Finally, we provide suggestive evidence of firms’ coping strategies, showing that “pirate” agreements exhibit comparatively higher employment levels.