Pattern Bargaining as a Means to Coordinate Wages in the Nordic Countries

This article reviews the various forms of pattern bargaining under which manufacturing, as the representative of the tradables sector, sets the norm for wage increases in the Nordic countries. Such bargaining has been consistent with strong international competitiveness and has widespread support among practitioners based on informal analysis. However, using more formal modelling it is hard to build a convincing case for the idea that wage leadership by the tradables sector is particularly conducive to wage restraint. Rather, the conclusion is that norm setting per se, irrespective of the actors, promotes wage moderation. In the future, when changing demographics may motivate a reallocation of labour to welfare services and a worsened international security situation to the armed forces, a rigid application of international competitiveness norms might lead to an undesirable status-quo bias. More weight should probably be given to overall labour market conditions and more flexibility allowed in relative wages.