What Are the Major Advantages and Disadvantages Regarding the States Involvement in Employment Relations - Coursework Example

Advantages and Disadvantages of Intervention in Employment Relations: Comparison between France and Germany By Foundation Course- Business Professor: [University’ Name] [Department] 9 December 2014 Advantages and Disadvantages of State Intervention in Employment Relations: Comparison between France and Germany 1.0 Introduction The role of the state in the economy and industrial relations in a country cannot be overlooked in most parts of the world today. Most states are the largest employers and they also providing legislation and policies that govern the employment sector of the countries involved. Traditionally, the state has its main role of providing an institutional framework that facilitates bilateral relations between various parties such as employers and their representatives and workers and the trade unions (Lewin 2006). Different countries have varying levels of involvement in the employment sectors with some states heavily involved in the decision-making process while others hardly participating in the same. The degree of involvement by a state in the employment relations largely depends on its nature of ideologies. For example, most capitalist countries allow more freedom and independence to the employers and unions in their decision-making processes. However, all actions decided upon by the parties should lie within the instituted framework provided by the state. Conversely, most communist countries have a more hands-on approach to the affairs of employment, opting to place more control on the affairs between employers and their respective trade unions (Mitchell & Deery 1999). The paper will discuss the advantages and disadvantages of the involvement of state in employment relations. It will base its discussion on Germany and France, periodically providing the major comparisons and contrasts of the characteristics in their employment sectors. The discussion will begin by outlining the common roles of states in employee relations before providing an overview of the state of the relations in both France and Germany. 2.0 Common roles that states play in the employment relations Provision of collective bargaining system- Most states provide general mechanisms through which certain terms of employment are formulated. These mechanisms might take the form of a legal framework that provides the minimum standards of employment conditions. Examples of such standards include standardisation of working hours (daily or weekly), minimum salary, health provisions such as health safety, vacations and holidays, anti-discrimination regulations, protection against dismissal etc.(Singh & Kumar 2011). Provision of an institutional framework- This is probably the main role of any state in employment relations. The state provides the legal framework for all forms of bilateral relationships such as those between employer and their representatives and workers and their trade unions. The principal goal for this is to regulate any form of conflicts and confusion that may arise between management and workforces at all levels in the industrial sector. The state also provides guidelines that create a balance through adjusting of the sector to the legal environment. Reducing conflicts in the employment industry- Most states especially those in the developed world have a right and obligation to intervene during common industrial conflicts such as strikes (both legal and illegal). They do this to protect the citizenry from disastrous consequences that might arise from unimagined harmful circumstances arising from this activities. Some states are also responsible to provide conflict resolutions in matters of both the public and private employment sectors. The states provide external arbitration and mediation processes that can either be voluntary or compulsory (Williams & Adams 2009). Participation in public sector labour relations- due to the state’s dominance in the employment sector (as an employer) in some countries, most public agencies actively engage in public sector labour relations. These bodies of public authority can be quite influential in the overall development of the industrial relations systems. Interpretation of conflict of right and interest- most states in the world are involved in maintaining peace and order in cases of contractual agreement that are supposed to be followed to the end. In cases of breach of such contracts, the state has an obligation to intervene and provide directions on what action should be followed. This can be done through state institutions such as labour courts (Perkins et. al 2006). 3.0 Employment relations in Germany Germany has one of the most coordinated and regulated market economy. In the country’s employment relations system, employees are represented in two systems: at the workplace level and the industry level in the form of a collective bargain. However, due to its growing unpopularity, this dual kind of system is rapidly being phased out of most parts of the employment sector. This, therefore, means that the system is slowly becoming centralised thereby leading to a lesser number of industrial disputes. This has also been brought about by factors such as the growing trust and cooperation in the system as well as preference to alternative mechanisms of disputes settlement. The growing shift to a more liberal market (Anglo-American) economy has seen an increasing interest in the shareholders and more flexible labour practices. The political system in Germany is perceived as stable and continuous, and the country has a federal system of government. The employment relations policy is constant across the states and is coupled with a comprehensive welfare system that focuses on the insurance principle and the occupational status (Lansbury et. al 2004). 3.1 Employers and their associations There are three main categories of interest organisations in Germany: Chambers of commerce Business associations that represents product market interests, general businesses and peak federation. Special employer associations that engage in employment relations, peak federation and social policy. The employment relations in Germany are characterised by high level of jurisdiction: The Works Constitution Act is meant to regulate the interaction between an employer and the work council at the plant level. However, this act does not apply to both public sector employees and very small businesses. Co-Determination Acts regulate all interactions between employer and employee representatives at the company level. Act on collective Agreements is meant to regulate collective bargaining. The constitution ensures that everyone in the sector has the right to freedom of association. The sector also has its independent and specialised system of courts known as labour courts and these courts operate at different levels of the country (local, regional and national). The employment sector sees very little active interference from the state. Issues of wages are solved through wage agreements although framework agreements are observed during specification of wage payment systems. General working conditions such as holiday considerations, working time and overtime are regulated by umbrella agreements. The German system allows for strikes and lockouts although this has to be passed through a ballot vote that is regulated by the union rules. However, such cases of disputes are rare due to the centralisation of the system and the high degree of trust and cooperation (Lansbury et. al 2004). The state is the largest employer in Germany and thus employment relations in the public employment sector are characterised by difference in terms that and conditions between civil servants and public employees. There lacks a clear definition of the statutory minimum wage in Germany. This has led to a growing public outcry about need for the introduction of a minimum wage. The future seems bright though since the Government has shown intent of amending the legislation to facilitate a declaration of industry wage agreements as binding to all employers (Lansbury et. al 2004). 4.0 Employment relations in France France is the world’s sixth largest economy in terms of power with an approximate population of 64 million people, out of whom 63% make up the labour market. The country has experienced a growing rise in unemployment since 1980 when the state controlled most of the employment and training schemes. The state plays a solid interventionist role with a multi-faceted system of employee representation within organisations. Since 1980, France has seen a trend inclining towards decentralisation of employment relations although collective bargaining still takes place in high coverage at both industry and national level. This has led to the reduced number of strikes although some still occur in the public sector albeit for short durations (Lansbury et. al 2004). State interventions is considered important in the employment relations in France. This reflects the traditional reluctance expressed by the unions and employers towards use of voluntary collective agreements instead opting to push for legislation during a need. Industrial laws are often influenced by the outcomes of collective bargaining. The state also has a lot of influence, being a major employer itself with about 5 million public servants. The state, therefore, is highly influential in the pay rates in the industry including those of the private sector. The state has also provided legislation on the national minimum wage and even went ahead (1997) to introduce the 35-hour week law (also referred to as Aubry Law) in a bid to facilitate creation of more jobs (Lansbury et. al 2004). Representative bodies at the enterprise levels are established by the state and include: Work council- Handles workplace consultations Workplace delegates- Deals with individual worker’s complaints. Union branches- Represent their unions and also participate in the collective bargain at the workplace. France, through its constitution, provides the right to strike although a 5-day notice should be provided before the strike can take place. However, strikes that touch on issues of industry and lockouts are generally illegal. Despite minimal legislation available for governing strikes, there are elaborate procedures in place for disputes settlements and this includes mediation, arbitration and conciliation. In conclusion, it is evident that the state still has a prominent role in the employment relations in France. This was especially made clear in 2008 when the state re-introduced the 35-hour legal working week through the 2008 Act on social democracy and working time. Through the act, the state also allowed some enterprise level to negotiate this provision (Lansbury et. al 2004). Having discussed the two countries and their levels of involvement in their respective employment relations, it is evident that the two are contrasting in their stands on the topic. Germany is least involved while France has a more hands-on approach to the employment relations. The paper will, therefore, discuss on the strengths and weaknesses of each approach. 5.0 Advantages of state involvement in employee relations There are various advantages of state involvement in employment relations as seen in both France and Germany. Some of these benefits include: 5.1 State as an employer Using the example of France, the state is one of the major employers and employs about 5 million workers today. In Germany, the state also is the largest employer. By being the dominant employer, the state, therefore, helps to set precedence on how employees should be treated by acting as responsible employers. For example, the influence of the state in France in the public wages and other pay rates is seen in the improved pay rates offered by the private sector (Blanpain & Baker 2007). 5.2 The state helps to make rules and legislation As seen in France, the state is highly involved in making legislation that governs the employment relation and the sector in general. In most cases, this is achieved through direct promulgation of legislation. The legislation formulated by the states serves three major functions: Restrictive function- This involves the state outlawing certain practices such as racial discrimination and child labour among others. Auxiliary function- The state outlines various sanctions that towards parties that disregard the rules and regulations on employment relations. This, therefore, encourages good employment relations in the industry. Regulative function- The state formulates laws that help to outline the minimum standards for all the employees and citizens in general. This includes the minimum wages and legal working week. A good example is France’s Aubry Law that regulates the legal working week at a maximum of 35 hours a week and has also set a minimum wage and salary scale for all the citizens (Barrow 2002). 5.3 The state also manages the economy thereby improving the working environment The state is responsible for establishing macro-economic policies that deals with the money supply, fiscal regulations and the aggregate demand. These are factors that largely affect the operations in the labour market and utilisation of employees. For example, the state can help to facilitate employment by linking between employers and job seekers. It can also provide motivations such as return-to-work incentives. This role of the state encourages labour mobility while facilitating labour de-commodification. The state may provide training as a way to address shortage of skills in the labour market. This is seen in France where the state established employment schemes since 1980. The state may also enable some form of independence among its citizens by funding welfare protection that ensure employees are not entirely dependent on their employers for survival especially in difficult economic times such as during recessions or cases of loss of employment (Lewin 2006). 5.4 The state also helps to regulate income In its quest to control inflation, the government involvement in labour and employment relations ends in the regulation of prices and consequently pushes for an increased wage. This is done through formulation of policies and regulations especially in consultation with employers and respective unions. In some cases, the state controls the prices and wages in more subtle ways such as controlling public expenditure, manipulation of interest rates and regulation of money supply. In Germanys case for example, the state has established legislation that allows any declaration by the industry about the wages to be binding to all employers in that industry despite not stating the minimum wage (Barrow 2002). 6.0 Disadvantages of state intervention in employee relations By examining the case of France and Germany, the paper will discuss why state intervention may not be the solution to problems in the employment relations of a country. There are various reasons to support this: One difference between France and Germany is in the frequency of workers’ strikes and lockouts. Whereas the system in Germany is calm and with rarity in the frequency of employees’ unrest cases, France has relatively higher cases of strikes. This is partly attributed to the high-handedness that the French government has on the employment relations. This leads to increased collisions between the parties involved due to numerous centres of authority. The French state has great influence on most decision-making processes in the sector due to its dominance as one of the chief employer. On the other hand, Germany imposes little pressure on the activities of the employment sector, only appearing technically in cases such as the provision of the required framework and arbitration assistance (Lansbury et. al 2006). Another disadvantage of the state intervention in the employment relations lies in the probable biases and double-standards by the state. This is especially due to cases where the state seems to favour the private sector largely because of their contribution to the economic growth. It is common knowledge that the state earns through the revenues from the companies’ profits and also through their workers’ taxes. This can lead to protection of the private investors at the expense of promoting the interests of the employees. Inappropriate legislation by the state might lead to reduced economic growth- looking at France for example, the state has introduced the 35-hour week law that seeks to greatly limit the legal working week in the country. This legislation has received widespread criticism because of its extremism especially in a country that has seen sustained drop in the growth of the economy for some time now. The working week is an indication of the weaknesses of the intervention of the state in the employment relations. The effects of such legislation are felt by the economy although their initial course are for the good of the country. 7.0 Conclusion It is certain that the intervention of the state is necessary and for the good of the employment sector as a whole. The state plays as the main regulating body for the smooth flow of the sector and consequently steer the country’s development. However, the degree of intervention by a state should also be minimised to allow some freedom and room for the self-regulation by the other industry shareholders (William & William 2014). This leads to increased harmony and cooperation in the employment sector which ultimately leads to increased growth and development of a country. Bibliography Barrow, C. 2002. Industrial relations law, Cavendish Pub, London.  Blanpain, R., & Baker, J., 2007. Comparative labour law and industrial relations in industrialized market economies, Wolters Kluwer Law & Business, Austin, Tex. Hinrichs, K., & Jessoula, M. 2012. Labour market flexibility and pension reforms flexible today, secure tomorrow?  Palgrave Macmillan, Houndmills, Basingstoke, Hampshire. Lansbury, R. D., Bamber, G., & Wails, N. 2004. International and comparative employment relations: globalisation and the developed market economies, Sage Publications, London. 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