Lorenzo Cappellari (Catholic University of Milan)
Bernardo Fanfani
This study investigates how pay floors set by collective bargaining shape the wage structure in Italy. Using administrative records for private-sector employees matched to collective agreements, we adopt an individual-level design to estimate distributional regressions using a stacked DiD approach around contractual minimum wage hike events. On average, contractual pay floor hikes raise mean daily wages by 2.2%, but the effects are tilted toward the upper tail of the distribution (about 4.5% at the 90th percentile and near zero at the 10th), implying inequality-enhancing wage-rate responses. This effect occurs partly because lower wages within a given collective contract are less responsive to contractual minimum wages and partly because collective contracts covering low-wage workers tend to be less responsive to pay floors. Monthly earnings show a similar, but less pronounced, asymmetric response to pay floors. Considering possible mechanisms, we find that non-compliance is higher in low-wage contracts, but its level is not affected by contract renewals. Moreover, we uncover negative employment effects concentrated at the bottom of the pay distribution and among full-time workers, suggesting that collective bargaining renewals may reduce labor demand for formal low-paid jobs.