Collective bargaining during inflation: trade union responses

Collective bargaining during inflation: trade union responses

Fresh UNI Europa research titled All Rise – Automatic Wage Increases in Collective Agreements in Europe looks at how trade unions bargain in times of high inflation.

Europe has experienced a sudden surge in living costs since 2021. Caused by supply-chain disruptions due to the COVID-19 pandemic, rising energy prices following the Ukraine conflict, and increasing corporate profits, inflation reached double digit figures in many parts. It is having a major impact on the purchasing power of workers and is therefore a prime topic in collective bargaining.

Trade unions traditionally bargain for fixed wage increases. Yet, during times of high and unpredictable inflation, this approach is challenged. One potential solution is the implementation of (semi-) automatic wage increases linked to inflation. These systems are often referred to as ‘automatic wage indexation’ or Cost-Of-Living Adjustments (COLA).

By including such clauses in collective agreements, wages are adjusted to future inflation rates, providing wage security in real terms and flexibility in nominal terms. The purchasing power of workers is guaranteed, even under high inflation. At the same time, the bargaining parties do not know exactly how much the wages will increase over the negotiated period. During periods of higher inflation, wage indexation systems or COLA clauses generally become more popular.

The report shows firstly that in many countries trade unions are currently experimenting with such clauses. At the same time, the diversity of systems is considerable, both in the scope and the way wages are linked to inflation. Yet while the spread of wage indexation systems is more widespread than previously conceived, it remains absent in a number of countries where social partners are against the use of such clauses in collective agreements.

The report aims to help trade unions by giving concrete examples of how collective bargaining can contribute in fighting the effects of high inflation.

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