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wage drift


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Is the tendency for earnings to rise more rapidly than collectively bargained rates of pay. Wage drift was identified as a major source of inflation in the UK in the 1960s when it became apparent that earnings were advancing much more rapidly than might be expected from the formal increases in pay agreed through multi-employer industry agreements. The source of the increase in earnings was the growth in informal workplace bargaining and poorly managed incentive schemes that allowed workers to raise their earnings well above the agreed rates at industry level. An element of wage drift will emerge in any system of centralized pay determination and is an important feature of the labour market in many different national economies. It can provide a valuable source of flexibility within centralized systems of pay determination and allow some differentiation of wage rates in the face of variable labour and product market conditions. Although multi-employer industry bargaining has declined in the UK since the 1960s, the phenomenon of wage drift can still be identified, but within companies, as workers rely on supplementary and premium rates to boost their pay above the agreed basic rate. [See degeneration and grade drift.]

Subjects: Human Resource Management.


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