Ratio Working Paper No. 337 Wage Setting as a Discovery Process

Abstract

Local wage setting is when companies in their collective agreements with unions formulate local rules for determining wage increase criteria, in contrast to central wage setting where the industry agreement specify the rules for all companies covered. HR-managers should promote local wage practices more than they currently do. I identify reasons behind HR-managers (and unions) skepticism towards local wage practices and go on to argue that in the end a local wage practice will be better organizational-practice because it will develop organization specific knowledge and this will promote discovery and develop organizational integrity. Hence, HR-managers should embrace local wage practices because it is good for the organization, although it means more work and higher demands on the managers themselves. The social outcome of local wage practices is that firm-specific explorations in HR-management schemes is HR-intrapreneurship which in combination with competition is likely to foster inter-organizational learning and stronger firms.