T2-18: Trends in collective bargaining

Decentralised bargaining in Australia and Denmark compared

Søren Kaj Andersen, FAOS, University of Copenhagen
Russell D. Lansbury, The University of Sydney Business School
Chris F. Wright, The University of Sydney Business School

This paper departs from recent debates in Australia and Denmark on low wage growth (Wright 2018, Andersen 2018). These two countries are typically characterized as ‘most different’ employment relations systems in as much as the Australian labour market is liberal while the Danish is embedded in a Social Democratic coordinated economy. The question – or puzzle – is why do we see apparently similar debates on low wage growth in these two countries? What are the differences and similarities in the debates; is low wage growth equally outspoken in the two countries; is it effecting specific parts of the economy or a more general phenomenon?

In answering this question, we adopt a two-phase approach, firstly presenting and discussing wage trends in manufacturing and private services in the past ten years. Manufacturing is included as this is the key-bargaining sector in the two countries to varying degrees setting the pace for wage trends in other parts of the economy. Contrary we expect that private services to a lesser or larger extend is lagging behind wage trends in manufacturing.

Secondly, we will do a case study of how wages are actually being settled in the two sectors in the both Australia and Denmark. Both countries have over recent decades been through a decentralization of wage bargaining, although this has happened in very distinct ways in the two countries. Australia characterized by a legalistic pathway based on the award system creating a floor for wages with the possibility of company agreements replacing the industry award. In contrast, Denmark is enshrined in a system of coordinated sectoral bargaining with certain bargaining competences delegated to the company level (Andersen, Kaine & Lansbury 2017). Further, this approach allows a testing of theories of sectoral institutions and their influence across national systems (cf. Katz & Darbishire 2000; Bechter et al. 2012). In this case by an in depth comparison of two identical sectors in a European coordinated market economy (Denmark) with a non-European liberal market economy (Australia) through a ‘most different’ case study lens.

A number of assumptions will guide the case study. Firstly, we expect that company level wage bargaining in Danish manufacturing is more encompassing compared to the Australian case, also meaning that Danish employees have a stronger position vis-à-vis employers than Australian manufacturing employees. This assumption is building on previous research showing that the negotiation based Danish employment relations system offer better opportunities for reproducing the local partnership than the legally enacted Australian system of company level bargaining (Ilsøe, Pekarek & Fells 2018). Secondly, we expect that wage trends in service sectors will be lagging behind manufacturing due to lower collective bargaining coverage and weaker trade union presence in both countries, although with significant differences between the two countries, as we expect the coordinated Danish bargaining system to ensure at least partly wage catch-up for service sector workers. Thirdly, we expect both sectors in both countries to be affected by certain global trends. These include a low inflationary economic regime potentially hindering wage growth; changing global value chains including manufacturing firms offshoring production and service sector companies employing migrant workers all affecting wage trends in the industries.

The assumptions will be analyzed and discussed in the paper.

The applied methods will include interviews with representatives of employers’ associations and trade unions in Australia and Denmark, statistical data, documents and secondary literature.

Networks and the relational approach to wage-setting

Oscar Molina, Universitat Autonoma de Barcelona

The network as a theoretical framework or as a metaphor has also been referred in industrial relations studies (Saundry et al 2011, Fichter and Sydow 2016), but few of them have applied the methodology in a rigorous way. Networks have been used in industrial relations first of all in relation to actors, and more specifically, trade unions. However, when it comes to analysing the network relations underpinning collective bargaining, we find several references to the network idea in transnational or cross-border collective bargaining (Gollbach and Schulten 2000, Schulten 2003) but hardly anything when it comes collective bargaining at national level. One possible explanation for this lack of scholarly attention is the view that collective bargaining at national level does not conform to the idea of a network. In this view, collective bargaining would be better depicted in terms of a small number of actors who meet regularly and take decisions based on routine negotiations and with little scope for innovation.

The analysis of collective bargaining coordination has attracted the attention of scholars and policy-makers since the early 1990s, but has witnessed a renaissance more recently in the context of generalised de-centralization and the new constraints imposed by the EMU. Originally, coordination was presented as a dimension of collective bargaining considered alternative to centralization, as it focused on processes rather than structures. However, the reality was that all coordination indexes and scores made so far have tended to reflect structural characteristics of collective bargaining, and have provided very little insights on the processes and relational aspects underpinning coordination.

In this way, most studies have paid attention to the level where coordination occurs, assuming a correspondence between formal roles across levels and actors. A too strong focus on structures has resulted in limited knowledge about the actual mechanisms that industrial relations actors deploy in order to solve coordination problems. Despite growing research on the comparative analysis of collective bargaining coordination and its impact, we still lack profound knowledge about: the mechanisms sustaining coordination; how information flows between actors in the collective bargaining structure; the exact role played by different organisations / actors or the way in which actors and the different levels of the collective bargaining structure are articulated, including the national and trans-national levels.

The objective of the paper is to provide an alternative assessment of how coordination takes places in different collective bargaining systems and sectors. In order to do so, the paper adopts a behavioural and relational view based on the methodological and analytical tools of Social Network Analysis (SNA). By doing so, it will provide very valuable complementary evidence on collective bargaining coordination to the institutional information already available.

The relational view on coordination pays attention to the actual roles and interactions of actors, not their formal attributions in the collective bargaining structure. Social network methods are particularly well suited for dealing with multiple levels of analysis and multi-modal data structures, as is the case of collective bargaining systems in most EU countries. In particular, two-mode networks provide a specific type of network where individual actors are embedded in networks (organisations) that are embedded in networks (collective bargaining).

Gerhard Bosch, Institute for Work, Skills and Training, University of Duisburg-Essen

During the last several decades, income inequality in most OECD countries has increased significantly and the trend shows no sign of reversing. Such high levels of inequality are not incompatible with widely held norms of social justice and equality of opportunity.

It will be shown that the level of inclusiveness of the wage-setting system is the main factor in explaining inequality of market incomes for dependent employees, under and above the median wage level. By contrast, inclusive systems allow wage negotiations to be managed collectively by employees with varying degrees of bargaining power. The agreed terms are then made universal for all employees working in that particular company or industry or for the overall economy. If these agreements are to achieve macroeconomic distributional effects, they have to be implemented at an industry-wide or national level. In exclusive wage-setting systems, employees with strong bargaining power negotiate only the terms of their own wages and social security benefits, which means that the outcomes of their negotiations have no bearing on the wages and benefits of those employees with fewer bargaining powers, thus fuelling the social divide between well-paid and poorly paid employees. It is therefore unsurprising that the only systems that actually reduce income inequality are coordinated wage-setting systems with a high coverage by collective agreements.

In this contribution it will be firstly shown that a high coverage by collective agreement reduces the share of low-wage workers to a much greater extent than minimum wages. This is hardly surprising, since the pay scales negotiated by collective bargaining are generally higher than the minimum wage and extend into the intermediate or even higher pay brackets.  By comparing the distribution of hourly wage (in so called “wage curves”) of selected EU countries with a high and low coverage of collective bargaining it will secondly be shown that in countries with a low coverage the peak of the wage curve is near the minimum wage with low ripple effects on higher wages while in countries with a high coverage the peak is in the middle income group and similar to a normal (Gauss) distribution. This supports the hypothesis that the middle income classes are stabilized through inclusive collective bargaining.

Thirdly there will be presented a typology of an interaction between minimum wages and collective bargaining to understand the architecture and building stones of inclusive wage systems in Europe. Ripple effects of minimum wages depend on the overall architecture of the wage system. In the isolated minimum wage type (UK, Baltic states), in which the minimum wage is not combined with inclusive collective agreements, the ripple effects depend on decisions taken by firms and are instable and low.  In the direct interaction type (France), policymakers and trade unions concentrate on raising the minimum wage, which impacts on the entire pay structure through the mechanism of generally binding collective agreements. In the distanced coexistence type (Belgium, Netherlands), the interconnection is not so close, since collectively agreed rates of pay are higher than the minimum wage in many industries. In the independent collective bargaining type (Denmark, Sweden), there is no statutory minimum wage. The high level of collective agreement coverage means that the social partners are able to set effective lower limits on pay and require no state assistance because of their organisational strength. In the extensive minimum wage type (Hungary), there is an absence of adequate independent wage bargaining and the state tries to establish pay differentials in the labour market by introducing minimum wages graded by skill or qualification level. In the mixed models (Germany), the absence of one dominant model means that various models are combined within the same economy.

Fourthly there will be discuss possibilities to strengthen collective bargaining and rebuilding institutions for sectoral collective bargaining which has nearly disappeared in many countries.  The main focus will be on three instruments for institution building. The first is the strengthening of procedural rights (Sengenberger 1994) like codetermination which helps unions to organize members and thereby their bargaining power. The second is the extension of collective agreements. Often the criterion are too restrictive in an increasingly fragmented economy with high shares of SME’s and low wage industries with high turnover.  The traditional criterion of 50% coverage needs to be replaced by a “public interest” criterion. A high share of low wage earners or/and high turnover rates could be indicators of such a public interest in reintroducing collective bargaining to avoid poverty and high levels of in-work-benefits. The third instrument helps to build up collective bargaining in industries where it does not exist. Here it is crucial to avoid stalemates between employers and unions in the bargaining process. In Uruguay collective bargaining coverage was increased from less than 20 to over 90% with the establishment of “wage councils” with equal representation of employers and unions and an independent arbitrator in all industries. In “A Manifesto for Labour Law” a group of British labour lawyers proposed a similar model with „sectoral employment commissions“ and a public arbitrator (Ewing / Hendy / Jones 2016).

The conclusion that for reducing the inequality of market incomes it is not sufficient to raise the minimum wages. Fair wages rewarding skills, hard working conditions, and management tasks require differentiated wage grids which have to negotiated by the social partners.