The paper looks at how a specific wage-setting system in Europe works in a way that keeps unemployment low and makes wages flexible. They studied Portuguese workers, companies, and wage agreements to see how these factors affect negotiated wages and how they might change over time. The study found that while collective bargaining can lead to higher wages overall, it also affects how different worker qualities impact pay. Moreover, allowing some flexibility in wages (wage drift) helps balance out the influence of collective bargaining, giving companies more say in determining pay. So, in Portugal, both bargaining and wage drift play important roles in setting wages and making sure workers and companies benefit fairly.