Wages for most workers continue to be set through employer-union bargaining in a large number of OECD countries, despite the fact that membership to trade unions has tended to decline in recent years (see Chart 3.4) This is because bargaining coverage rates can substantially exceed union membership rates (union “density”). Indeed, density and coverage are at similar levels in only half a dozen OECD countries, primarily those where bargaining occurs at firm or establishment-level. In other countries, the values differ by a factor of often 3 to 1, and even up to 9 to 1 (France). Three factors are responsible for these differences:
(i) a primary determinant of bargaining coverage is not the share of workers belonging to a trade union, but rather the share of employers belonging to employer associations that negotiate collective contracts;
(ii) it has been common practice for a large majority of employers to voluntarily apply the terms of contract to their total workforce; and
(iii) in some countries, an important additional variable is the administrative extension of agreements, covering all employers in a given sector. In countries where these forms of extension are not common, low union density translates into low coverage. For example, fewer than one worker in five is covered by collective bargaining in Japan, Korea and the United States.