Industrial Relations-Western Europe

MGT 4330

Western EuropeMass standardized production

quality ‘high-tech’ productsManufacturing Service Manual white-collarEuro-zone: tighter international

monetary regimeTraditional family structure

individualization of life stylesCollective bargaining: national or

industry-wide firm level

EU vs. USA◦Trade unions have an important

representative and legitimate function in European enterprises with much co-operation with management. This means while having wide levels of representation, unions must also consider the enterprise’s interests.

◦Employees also have greater right to be informed about decisions both at a workplace and company level. They have a right to influence decisions that affect them and a high level of job security

EU vs. USA(cont’d)The European employers argue

that the relatively high labor standards in Europe, compared with the USA, are contributory factor to the problems facing European companies when competing in world markets and have led to a rise in unemployment

ParticipationThere has been considerable debate throughout

Europe about the most appropriate forms of employee participation in decision-making within the enterprise◦ Indirect participation: The main instrument for Indirect

forms of participation is the works council. It is elected by all employees in a firm regardless of their union affiliation

◦ Direct participation: Opportunities which management provide at workplace level for consultation with and delegation of responsibilities and authority for decision making to their subordinates either as individuals or as groups of employees relating to their immediate work task or working conditions

Nordic model

Nordic model holds the highest level of social insurance. These countries are characterized by important expenditures in active labor market policies. These countries are also characterized by a high share of public employment. Trade unions have a high membership and an important decision-making power.

Continental modelIt has a higher share of its expenditures

devoted to pensions. The model is based on the principle of "security" and a system of subsidies which are not conditioned to employability

As regards the labor market, active policies are less important than in the Nordic model and in spite of a low membership rate, trade-unions have important decision-making powers in collective agreements.

Anglo-Saxon modelThis model features a lower level of

expenditures than the previous ones. Subsidies are directed to a higher extent to the working-age population and to a lower extent to pensions. Access to subsidies is (more) conditioned to employability

Active labor market policies are important. Instead, trade unions have a smaller decision-making power than in the previous models, this is one of the reasons explaining their higher income dispersion and their higher number of low-wage employments.

Mediterranean model

It is the model with lowest share of expenditures and is strongly based on pensions and a low level of social assistance.

The main characteristic of labor market policies is a rigid employment protection legislation and a frequent resort to early retirement policies as a means to improve employment conditions. Trade unions tend to have an important membership which again is one of the explanations behind a lower income dispersion than in the Anglo-Saxon model.

Protection against labor market risks

Protection against labor market risks is generally assured by two means:◦Regulation of the labor market by means of

employment protection legislation which basically increases firing costs and severance payments for the employers. This is generally referred to as providing "employment" protection.

◦Unemployment benefits which are commonly financed with taxes or mandatory public insurances to the employees and employers.

Different position of labor market protectionThe Mediterranean countries have chosen a higher

"employment" protection while a very low share of their unemployed workers receives unemployment benefits.

The Nordic countries have chosen to protect to a lesser extent "employment" and instead, an important share of their unemployed workers receives benefits.

The continental countries have a higher level of both mechanisms than the European average, although by a small margin.

The Anglo-Saxon countries base their protection on unemployment benefits and a low level of employment protection.

Evaluation of Social Models Sapir (2005) proposes as a general mean to evaluate the

different social models, the following two criteria:◦ Efficiency, that is, whether the model provides the incentives

so as to achieve the largest number possible of employed persons, that is, the highest employment rate.

◦ Equity, that is, whether the social model achieves a relatively low poverty risk.

According to these two criteria, the best performance is achieved by the Nordic model. The Continental model should improve its efficiency whereas the Anglo-Saxon model its equity. The Mediterranean model underperforms in both criteria.

Some economists consider that between the Continental model and the Anglo-Saxon, the latter should be preferred given its better results in employment, which make it more sustainable in the long term

High Low

High Nordic Continental

Low Anglo Saxon Mediterranean

Efficiency

Equity

Union Membership

High % Medium % Low %

Denmark 88 Ireland 45 Portugal 29

Sweden 79 Austria 40 UK 29

Finland 79 Italy 36 Netherlands

27

Belgium 69 Greece 33 Spain 15

Luxembourg

50 Germany 30 France 9

Union Density in 2002 (P.74)

Union Membership (cont’d)

1993-2003 union density◦Portugal drop 40%◦France all-time low◦Germany lost 24%◦Austria decline 13%◦UK drop 20%◦Norway rise 13%◦Sweden static◦Denmark increase 2%

Collective bargainingIn 1970s collective bargaining took place at the

national or sartorial level◦ The unions saw it as means of controlling and reducing

wage differentials between firms, sectors and regions as well as between occupational and skill groups

◦ Large corporations support it because they realized that it was less prone than workplace bargaining to interfere with managerial prerogative at the point of production

◦ Government supported the centralization of both collective bargaining and union organization. It enable them to monitor wage agreements so that settlements were reasonable and could be reconciled with democratic capitalism’s core commitment to maintain full employment

Collective bargainingFrom 1980s onwards there were

growing pressures from employers and some governments to decentralize elements of the bargaining process in order to promote more flexibility.

While it has been most pronounced in the UK, and generally less so in countries like France, Italy, Portugal and Spain

Collective bargainingIt is said that collective

bargaining itself is threatened not only by the decline of trade unions and trends towards decentralization but also by the rise of human resource management.

But…..empirical study does not support this argument. (See supplement article)

EU-Level Trade UnionEach member Country Submit

annual report to European Commission

 European Trade Union

Confederation (ETUC)◦Established in 1973 ◦ 85 National Trade Union

Confederations◦ Current President:  Lgnacio

Fernández Toxo (Secretary General of CCOO Spain)

Assignments- IR in deferent Country Which Type of social model?What is the Labor Law in Germany?What is the main characteristic of

German industryWhat is the structure of German

Union◦Introduce the main unions◦Union density and trend◦Collective bargain process

GermanThese trade union members are

divided into three large and competing trade union confederations, as well as a number of unaffiliated trade unions

The proportion of employees who are trade union members – was around 19 per cent, which is around 5 percentage points lower than 10 years previously.

The biggest trade union confederation in Germany is the German Confederation of Trade Unions (DGB), founded in 1949, whose eight affiliated trade unions represented around 6.2 million members at the end of 2011, more than three-quarters of all trade union members in the country

The DGB is financed as a confederation by the individual trade unions. Workers are not members of the DGB as such, but of its affiliated trade unions, to which they pay their membership dues

The important policy decision-making is carried out by the individual trade unions. As a rule, the DGB is not directly involved in negotiations with employers’ organizations and companies or in collective bargaining and industrial action.

In Germany, only trade unions have the right to negotiate collective agreements, whether with employers’ organizations or individual enterprises. Most collective agreements are concluded by DGB trade unions