Large Wage Differentials in Austria's Manufacturing Sector

Labor costs in Austria's manufacturing industry are among the highest in the OECD area, exceeding the EU average by almost 20 percent. The average figure for labor costs masks, however, substantial variation between manufacturing branches. The remuneration for blue-collar workers and for white-collar workers varies greatly across the branches of Austria's manufacturing sector. Even at the collective bargaining level, where wages and salaries are set in negotiations between unions and employers (negotiated wage and salary rates) wage differentials are substantial. If only the rate for the lowest skill categories where differences in working conditions play no role is considered, some high-wage industries pay twice as much as low-wage industries. At the level of earnings, even larger wage differentials emerge, both for wage earners and salaried workers. Inclusion of fringe benefits in the comparison further increases wage differentials across industries. Only a small portion of wage differentials can be explained by differences in the composition of the work force by skill category. A large portion of the wage differentials is due to institutional factors: what matters is the question of ownership, private or government ownership, and whether a branch belongs to the sheltered or open sector of the economy. This interpretation is supported by an international comparison which puts Austria into the group of countries with very high wage dispersion.