T3-08: New dynamics of political economy

Collective bargaining in Chile as a journey to the potential future of European systems

Gonzalo Duran, Institute for Work, Skills and Training, University of Duisburg-Essen

» Full paper: ilera-2019-paper-179-DURAN.pdf

Umberto Romagnoli, an Italian labour lawyer in industrial relations, once pointed out that European countries are taking now, the early and nowadays consolidated Latin-American neoliberal experiences, as an inspiration for their labour reforms and their conceptions of labour rights. To him, travelling to Latin America is, to some extent, a journey to the future.

The Chilean system of industrial relations could be portrayed as a showcase of radical neoliberalism policies. In 1979, under the rule of the civic and military dictatorship of Augusto Pinochet, sectoral collective bargaining was dismantled and even banned. Along with that, strike action was severely restricted. Following the power resources approach, those transformations sought to reduce the organisational power of unions.

A few decades later, in 2012, the Spanish government implemented a labour reform aimed at decentralising its collective bargaining system. The Chilean model was carefully analysed before.

Between 2014 and 2016, the Chilean government conducted a labour reform to give back some minimal labour rights taken away in 1979. In such a discussion, the IMF pointed out that the Chilean system of collective bargaining works fine and they thus recommended keeping the structure or level without changes. In late 2015, IMF organised an international workshop of collective bargaining structure and fostered an industrial relations agenda expressing its inclination towards a more decentralised collective bargaining, with a clear preference at the firm-level. The key point defended by IMF was that this type of configuration (with the firm-level as predominant or exclusive) is not necessarily related to low coverage. However, it would seem this assessment has not had empirical support.

David Harvey, for example, has sustained that the liberal transformations which occurred in Chile during the dictatorship in the mid-70s were used as an experiment for the implementation of a new model for the core capitalist countries: “...thus, and not for the first time, a brutal experiment carried out at the outskirts would become a model to formulate policies in the core capitalist countries”. Taking into account this move as a possible future of European industrial relations, it seems meaningful to study the Chilean model of fragmented collective bargaining.

This paper examines the introduction and consolidation of what I shall call “abolitionist decentralisation” in collective bargaining. In this model, unionism and the negotiating of collective agreements are confined to the plant-level (the most decentralised one), and legal possibilities of articulated sectorial action are interdicted. The new scheme was released during Pinochet’s regime (1973-1990), and it was only minimally challenged or changed by the subsequent governments between 1990 and 2017. This paper suggests that unions’ reduction in organisational power opened up room for the shaping of a specific socio-technical configuration for the capital accumulation dynamic based in the super-exploitation of labour (using the formulation by Ruy Mauro Marini) intertwined with a fierce control of the labour process.

This institutional setting represents the first piece in a triangular circuit - which I have called “Penrose's triangle of working control” - that undermines the collective action at the workplace, reinforcing control over the workers. The second piece, right next to the institutional base, is the high fragmentation driven mainly by large companies. Particularly relevant here is the on-site subcontracting, the external subcontracting, the upsurge of temporary work agencies, and the pervasive use of the split-up method (where one company divides itself into several new companies, all of which belong to a single owner), among other variants. The triangle closes with a high-level of labour instability, which is characterised by temporary contracts, easy dismissal policies and discontinuous and flexible wages. Although this type of interactions has re-configured work all around the world, there are some specific traits in the Chilean case that merit a focused analysis. Throughout almost 40 years of neoliberal policies, it is possible to identify an effect, which one could label as turbo-stimulation, on this process of fragmentation. This, in turn, reinforces the organisational atomisation of workers.

In the present article, the following questions are addressed: What role does the Chilean system of collective bargaining play in the dynamics of capital accumulation? How does the “abolitionist decentralisation of collective bargaining” work? How does this Penrose's triangle model of analysis may be useful in illuminating these matters? What have its development in recent years been? What are the implications of this type of restructuration? What insights can be posited to building and renewing institutions?

To answer these questions, the empirical analysis uses a combination of methodological approaches. Firstly, with the aim of organising pieces of information into larger categories, Thematic Analysis (TA) will be used. Collected through direct field research, the dataset is grounded in my own involvement as a part of the economic advisory board in different trade unions (as a member of Fundación SOL). The dataset was built between 2007 and 2016 and includes informal conversations with union officials, the rank and file and managers, extensive field notes, and organisational documents including technical reports written by the crew of Fundación SOL (www.fundacionsol.cl). By using TA, this work aims to show the severity of fragmentation, especially its disarticulating effect on unionism. Secondly, based on data analysis and micro-simulation techniques (MSM), the paper shows an increasing decoupling between real wages and labour productivity between 1992 and 2008 immediately prior to the international economic turmoil of this period. Additionally, it shows that afterwards, despite a small narrowing in the gap, income inequality is still very high when the market-income ratio of top and bottom ventiles (or vigintiles) is performed using MSM.

All in all, the Chilean experience provides an empirical base to understand the challenges of a case of extreme fragmentation and decentralisation in the collective bargaining system. Specifically, this study foregrounds the claim that collective labour institutions in Chile have not made a substantial contribution to promoting an equitable society, and as the trade unions have repeatedly called for, it is necessary to move towards a more appropriate institutional framework.

Dhuha Mujadedi, Michael Smurt Graduate Business School, University College Dublin
Colm McLaughlin, University College Dublin

This paper reports on the findings of PhD research into the impacts of private equity (PE) funds on employment relations (ER) in Ireland. The spread of PE investments is part of the financialization culture that puts greater emphasis on shareholder value, debt financing, short-termism, liquidity and flexibility. PE funds target large mature businesses: they take them private with a typical financial structure of 70% debt to 30% equity, manage them with a focus on increasing efficiency and reducing costs, and sell the companies within a 10-year period. The existing financial literature on PE investments highlights a financial model that provides investors with high and relatively fast return of investment (Kaplan, 1989; Marais et al., 1989; Smith, 1990). The nascent literature on the impacts of PE funds on ER outcomes, however, is somewhat divided.  In a more pessimistic stream of literature, Batt and Appelbaum (2013, 2014), Clarke (2009, 2013), Gospel and Pendleton (2014) and Georgen et al. (2012), find that PE investments shifts risk from investors to employees, through redundancies, outsourcing, the creation of precarious employment, work intensification, and liquidation of assets. In contrast, Hoque et al. (2018), Wilson et al. (2012), Davis et al. (2014) and Wright et al. (2009), find that cost cutting strategies by PE houses result in improved financial results in the targeted companies with concomitant job growth in the longer term.

This paper contributes to this debate and suggests that the strategies of PE equity towards ER are less homogenous than has often been portrayed in the literature. It draws on interviews with management, unions and employees in four large companies in Ireland that were bought by PE funds. The companies are in TMT, pharmaceuticals, services and retail. In addition, interviews were conducted with investment houses, financial advisors, and investment associations. Over 50 interviews have been conducted. The analysis of the interviews is in its early stages, but initial results suggest that although the mainstream focus in PE buyouts is primarily on the bottom line and on using cost cutting strategies, the impacts of PE buyouts on ER varies across different types of PE houses. Irish-based PE funds, or funds invested in by the government, tend to be more concerned with the targeted company's longer term performance and tend to have closer ties with the management than international PE funds. The geographic convergence between the PE investment company and the targeted company allows for greater communication and understanding of the local context. National PE houses are cognizant of reputational issues, and focus on expanding the targeted business, which leads to job growth and maintaining and improving employment terms and conditions in order to attract skilled employees. Additionally, some international PE houses have moved from an aggressive short-term focus, to a more ‘impact-oriented’ focus, including social and environmental outcomes. The findings also show that unions can play a major role in maintaining employment standards in the face of proposed redundancies and cuts to terms and conditions.

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