ABSTRACT
In the chapter we investigate the link between inefficient and eroding collective bargaining and weak wage coordination in Bulgaria and Poland. We argue that the general collapse of collective bargaining triggered by deliberate political choices in the beginning of transformation and further deepened by the weakness of both trade unions and employer organisations in each country has not only pushed pay determination to the enterprise level but also left the process largely in the hands of individual employers. The pursuit of a low-wage competitive advantage in both countries has had visible consequences in the international division of labour by driving sizeable shares of the domestic workforce abroad (to EU-15), thus leaving widening gaps in national labour markets which have been filled by incoming migration from non-EU countries. The process seems to be weakly affected by fluctuations in the current economic situation, as leading indicators (GDP dynamics, unemployment and employment rates) suggest.
