DP1563 | Centralized Bargaining, Multi-Tasking, and Work Incentives

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The paper examines the implications of an important aspect of the ongoing reorganization of work ? the move from occupational specialization towards multi-tasking ? for centralized wage bargaining. The analysis shows how, on account of this reorganization, centralized bargaining becomes increasingly inefficient and detrimental to firms? profit opportunities, since it prevents firms from offering their employees adequate incentives to perform the appropriate mix of tasks. The paper also shows how centralized bargaining inhibits firms from using wages to induce workers to learn how to use their experience from one set of tasks to enhance their performance at other tasks. In this way, the paper helps explain the increasing resistance to centralized bargaining in various advanced market economies.