Who sets wages? The legal and institutional foundations of collective bargaining in Austria

Abstract

This article presents an overview of the Austrian system of collective bargaining that is characterized by largely autonomous wage-setting between social partners and high coverage rates. The paper outlines the historical origins and the fundamental ideas behind the Austrian regulatory system, which is designed to facilitate negotiations between actors in industrial relations without undue interference from lawmakers. A detailed account is given of the legal and institutional framework of collective agreements, including various erga omnes rules and extension clauses, that protect the system from fragmentation into decentralized wage regulations. Future challenges for the Austrian wage negotiation system are identified, such as maintaining the constituency for collective agreements, ensuring that collective agreements remain comprehensive, and avoiding the disintegration of the informally coordinated wage-setting system.