Labour Market Development in Britain, France, Sweden - Research Paper Example

Labour laws came into existence because of the inhuman conditions that the workers of the old civilizations were subjected to. The predominant work system up to the early 19th century was of slave labour. In Rome and even other civilizations, slaves were valued as property and the proportion of such work force was far greater than the hired workers. Other means of obtaining cheap labour by manufacturers, agriculturists and traders was through self surrender in discharge of a debt which the borrower was unable to pay, capture of prisoners of war and purchase of slaves in open market. The legal systems of Europe are largely based on the Germanic customary law and the Roman law. These have been highly influential in shaping national codes and have given rise to legal frameworks that rely less on case law and 'precedent' than the common law jurisdictions operating in Britain and the USA. Napoleonic Law was the first broad legal code which appeared in France in the 19th century and was the beginning of the legal codification era. Simultaneously, in the same period German Civil Code was formulated in the newly unified state of Germany. Many of the modern day national codes have incorporated the principles contained the BGB. Some of these important principles are Right to individual autonomy The role of the law to redress the vulnerability of a weaker party in a commercial relationship (i.e. the employee) The concept of 'unjustified enrichment' (fedee.com) We will discuss the development of labour market in the various European countries and the factors leading to these markets. We will also compare the various labour market regimes. Labour market development in Britain From the Anglo-Saxon era to the medieval era slavery was the predominant form of labour. There was a fresh impetus to the industry and trade with the Danish and Norman invasions during the medieval era. With them came in Fleming artisans and thus the freemen in the population increased. The villages grew fast, trading towns started form up and communication with the most civilized continental people opened up. With resistance from the Church and formation of cities, the population of slaves reduced considerably but did not die out completely. With these developments in the social and economic structure of Britain there emerged two types of labour. (Biernacki 1995). One type was required for agricultural and husbandry work and the other type of labour was of artisans and craftsmen. The artisan and crafts labour were under the purview of burgh or municipal organization and later organized into craft guilds. As England was emerging as a wool-growing and later as a cloth producing country, laws were made to ensure that the number of husbandry and agricultural labour does not diminish. The 13th century saw the emergence of trading companies for the export of wool and laws were made to absorb alien artisans into the municipal system to ensure sufficient manpower for this industry. (Gospel and Palmer 1993).Thus, we can see that there was some sort of institutionalization of labour market by the 13th century. But even now state would not interfere in labour related matters of the traders or manufacturers as labour matters were a private affair of the businessmen. From the period of Edward I to Edward III there was a gradual transformation from the burgh system to the making of a statute law. (Biernacki 1995). This was the first time that industry and trade became a matter of public interest rather than a prerogative of a few leading men of the local villages. The actual legislation for labour was passed not to protect their interests but to save the towns and villages from devastation after what is called Hundered years’ War and the epidemic called Black Death. (Gospel and Palmer 1993). The first stature for the labourers was formulated to help the community get access to physically well built men who were not engaged in any other activity of craftsmanship etc. to work for hire on a standardized wage rate. This was the first time that the wages were standardized through a public legislation. In the middle ages there was a shortage of labour owing to an epidemic. Legislations were made so as to prevent people from taking advantage of the situation by asking for exorbitant remuneration in return for the labour. Thus, there were penalties not only for those asking for an increase in wages but also for those lords who were ready to pay extra for getting their work done. There were even statues for those workers who moved to other countries in search of better wages and work. The statute allowed the sheriffs to arrest such workers and bring them back to Britain. (Gospel and Palmer 1993). Though there were laws to restrict overpayment by the lords to the workers, there was freedom given to them to bargain with the labourers whenever they felt regarding the gross payouts. This was not allowed the other way round. Thus, we can see that though the requirement of statutes to save the interest of the society and business as a whole was recognized by the Middle Ages, the laws were still not for the betterment of the labour class on the whole. (Biernacki 1995).Even till the 14th century, the workers were forced to work for a particular pre-determined wage rate, irrespective of his or her willingness to work at that rate or place by placing commitments. This notion of commitment is also central. Guest (1987) defines commitment as ‘going one step further’; this is contrasted to compliance which is simply sticking to the rules. They could not work in any other country without prior notification of the intent of movement and the time of return to the king of England. Fugitive labourers and workers were liable to face punishment. The early 15th century saw some more liberalization on working laws and even child labour statutes. Earlier laws required parents to put children in such labour which was the requirement of their estates. But the new statute gave freedom to the parents to decide for their children’s future and allowed them to send their children to school. (Van Ruysseveldt and Visser 1996). There were modifications to the law restricting free movement of labour and also no control of workers over the decision of setting wages for work. Though freedom was given to the lords over decision regarding wages, the workers were still not free to decide what wage they can work for. However, London workmen were able to secure this freedom within the limits of the city. There was also the introduction of working hour restriction in some new statutes one of which was passed in 1514. This fixed the work time from 5 a.m. to 7 or 8 p.m. in summers and winter timings as per the day length. (Gospel and Palmer 1993). It also allowed one and a half hours of breakfast and dinner breaks. Hence, the British labour market was gaining more standardization and freedom by the 15th century. The fast pace of industrialization and other circumstances as discussed above helped in the formation of labour statutes and their improvisations. All through the 15th century cloth production was an important industry in England. All regulations were related to ensuring good quality products for the public rather than the welfare of the labor. There were regulations like restrictions on working on holidays to prohibit unfair advantage to craftsmen on account of working on holidays and restrictions on working in the night to avoid any secrecy in production process. There were strict regulations regarding the quality standards. There was formation of Craft gilds to ensure good quality cloth was available to the public. The cloth manufacture was so prevalent that agriculture had taken a back stage. There was a shift from the traditional masters as employers towards capitalist type employers and people who had huge capital investment potential generally entered this arena. With the dissolution of the Monasteries, 16th to 18th century saw the evolution of the Tudor law which was against vagrancy and also focused on ways of dealing with pauperism. (Van Ruysseveldt and Visser 1996).The craft gilds’ funds were confiscated which also contributed to a change in the view towards vagrancy and pauperism. During the 5th year of Elizabeth I’s reign in England, the Statute of Labourers was passed which was though a replication of the previous statutes regarding the restrictions on labour movement etc., it was a step ahead in providing protection to the poor laborers on insufficient wages. (Gospel and Palmer 1993). There were also provisions regarding contract between master and servant and their rights and obligations. This was a beginning of the era of recognition of the needs of the poor and also laying of similar laws for the artisans as well as the labourers in the husbandry sector. With the advent of industrialization, there was a need to make amendments to the previous laws. The industrial revolution helped in the expansion of trade and resulted in concentration of capital in the hands of the employers. During the 17th and 18th centuries there was a focus on resolving disputes between the employers and employees as against forcing laborers to work against their will at low wages. Slowly by the 19th century the power of the enforcement agency to give corporal punishment to the laborers for refusing to work disappeared and turned into recovery of damages. With the outbreak of fever in 1784 in cotton mills near Manchester, the importance of regulating child labor laws came into limelight. Thus, child labour laws slowly started developing. The importance of sanitation at work also came to light and thus Factory act came into existence. The British system developed on a pluralistic idea of industrial relations. It believed that there is bound to be a conflict between the employers and employees on economic issues and the employees need to collectively bargain to save their interests (Gospel and Palmer 1993). This system of collective bargaining perspective dates back to the Sydney and the Beatrice Webb in the late 19th century and also get support from various academicians of the Oxford University especially in the post Second world war era. This has also got support from the British political class as well as the trade unions and managers. French labor market The development of labor market happened in France in a different scenario as compared to Britain. The institutional frameworks for the formally free exchange of manufacturers and of labor power were created simultaneously in France during the Great Revolution (Biernacki 1995). France also began the transition to a capitalist labor market with the legacy of feudal relations of work in agriculture. However, the guilds in France were completely stripped of their powers and were completely eliminated. The French market started its liberalization process before the revolution of 1789. Though the restrictions on trade and choice of occupation were eliminated, there was still no formal freedom in labor power. Though Louis XV provided freedom from the guilds to the countryside manufacturers, there were a lot of small rulings that required local manufacturers to produce only a particular variety. The French government was more inclined to pursue free and liberal labor laws post the revolution. They got aid from US for economic reconstruction and used greater of the aid for industrial reconstruction when other countries used it for import of food items. The French markets developed more on government controls and the industrial opinions were discredited (Whiteside and Salais 1998). The French retained government control of the firms till the Second World War. The state was neither the manager nor the financier, but played a moral political role, using financial and statutory leverage to guarantee the founding principles of the Republic (Whiteside and Salais 1998). The industrial development in France is also the contribution of centralized training mechanism which is backed by the government. The Grandes Ecoles in Paris was the technical training ground for the French bureaucrats which headed the wide range of technical projects. With the state intervention in vocational training, there was an emergency of technically skilled manpower which had standardized and certified training. The French trained engineers adapted American technology at much lower labor costs as compared to their British counterparts. Though French like British were committed to full employment, unemployment never reached very high significance in French political circles. The major aim of the policy was to make formal employment an attractive proposition with state providing machinery for social justice and industrial peace. The state was responsible for providing this security through collective industrial agreements and official ratifications (Whiteside and Salais 1998). The responsibility of the state was to provide adequate representation of workers by providing for regulations formulated with the participation of the workers and also the implementation of those regulations. The overall nature of employment in France was highly varied. These variations were based on product, market, region and industry branch. Local traditions regulated these various employment practices. The French economy was highly dominated by crafts based products like leather products, clothing, textiles and other consumer products. On one side there was heavy industrialization around Paris and the north-eastern region and on the other side was the rural economy highly dependent on agriculture. Besides the heavy industry, the other manufacturers were mainly of luxury goods and were mostly qualified as small scale manufacturers. The engineering industry was mostly predominated by small to mid-sized organizations. These industries employed highly skilled manpower. “The slow rate of industrial growth in France and relative lag within an industrialising Europe at the formative period of trade unions meant that they consisted of relatively skilled workers employed in comparatively small scale enterprises.” (Bean 1994, p.28). The heavy industries had very strict labor management. The employment laws were mostly applicable to firms that had state contracts and also to sectors that were highly unionized. Jobs in the government sector were also very popular. The rural sector was also a very important segment of the economy. In 1983, 87% of French farms were less than 20 hectares and 86% of the active agricultural population was unwaged peasant owners (Whiteside and Salais 1998). Most of the rural industries were family businesses and women played an important role as earning members of the household. Thus the household was not dependent on a single male member for income. Even those employed in other industries did not leave share in the family business especially land. Because of the impact of seasonal cycles, people were engaged in different occupation at different times of the year. Hence, at a particular time a person might be engaged in family business and at the other he might be employed in an industrial sector. France never witnessed unemployment before the 1930 slump. Because of the participation of the women in work laws were required to equate their working environment to that of men. It was observed that women were mostly given lower-graded jobs and hence it became all the more important to give them equal opportunities. An important development regarding the employment security came very late in France. The facility of compulsory unemployment insurance was introduced only in the year 1958 whereas in Britain this came into existence as early as 1911. This was introduced by national collective agreement which was not a part of the French law on social security (Whiteside and Salais 1998). This shows that there was interference at dual levels by the government. There wasn’t a clear cut legal entity taking care of employment issues. In France, before the First World War collective bargaining existed only in mining and printing, then after the war only it spread to various sectors. (Bean 1994). The French system finally recognized the links between industrial bargaining, working practices and unemployment which the British did not. Even till the 1960’s the state was expected to ratify collective bargaining in industrial relations and not to impose any a priori objectives upon it. The attempts of the state government to have a centralized intervention in matters of collective bargaining were not able to take roots. Due to the diversity of employment, it was very difficult to estimate the amount of redundancy even during the peak of 1930’s. The diversity of employment was so varied not only with respect to the type of employment but also with respect to the impact of seasonality. It was highly difficult to establish the difference between the employer and the employee because of this diversity and hence the unemployment benefits could not effectively reach the right people. This was the main reason for difficulties in imposition of unemployment insurance in France as compared to Britain. Moreover, the state thought it fit to encourage the process of helping the unemployed come back to their feet on their own so they subsidized voluntary local unemployment funds called the Ghent system. In 1945, complex mutual societies were formed to provide some sort of social security system to the workers by means of preserving their “earning capacity”. These societies or trade based or firm-based funds were managed in a democratic way through elections with 75% of the administrators being elected by the workers and the rest by employers. In marked contrast to the deregulated approach in Britain, successive France governments have adopted an interventionist strategy towards unemployment, on the one had to increase labour market flexibility and, on the other, to cushion the social consequences of deregulation and implement active employment creation measures (Ferner and Hyman 1998, p.375) A centralized project of modernization was gradually captured by collective bargaining because the ruling elite were able to allow such bargaining to develop (Whiteside and Salais 1998). The elite underwrote these agreements and helped bring such projects into the process of bargaining. Due to the particular political circumstances of the Liberation, structured employment developed rapidly in the post war period, creating the conditions for economic growth while making room for other forms of modernization (Whiteside and Salais 1998). Thus, we have seen the various circumstances under which the labor market in France developed and the factors that affected its various components. Historical developments in Sweden and their impact on labor market development Sweden has developed as one of the most advanced European nations mainly because of the fact that the country chose to remain away from the two world wars which the other European nations were forced to enter into. Thus, they took advantage of the peaceful scenario at home to concentrate on development of industry as well as take advantage of the gap provided by the other nations on account of their engagement in war. Sweden also did not have to use massive funds in redevelopment of its economic which for the war torn countries was completely devastated. Sweden grew under a mixed economic agenda which was fueled both by private as well as government participation. Another advantage this country had was its high natural resource base. Its main natural resources are – timber, iron ore and hydropower. Before the 19th century, the country was more of an agricultural economy. However, the 19th century saw aggressive industrial development and urbanization in this country. A very favorable characteristic of this economy was the hand in hand co-operation between the government, the trade unions and the private corporations. The country developed fast because of the high level of government spending to fuel development. About 3% of the GNP is spent on the government labor market programs in Sweden as compared to only 2% in Germany (Forslund and Krueger 1994). The Swedish labor market programs have been very deeply thought about and have encompassed a wide proportion of the population. These basically deal with extensive job trainings, recruitment subsidies, youth programs, mobility bonuses and recruitment subsidies. Unionization at work is as high as 80% in Sweden and this holds true for both blue-collared as well as white collared workers. Sweden has one of the highest levels of unionization as compared to other competitor European economies. This high unionization has become a major impediment to actualize decentralization in a even more effective manner. As stated by Locke et. al (1995) as long as Sweden continues to be so highly unionized, there seems to be limits to how far decentralization can be pushed without sacrificing industrial peace The unions are not influenced by any political parties. They are separate entities and work independent of any political groups. The role of unions got optimized because of the plans of the Swedish industries to go for more automation and use of technologies, making the employees expendable. While managers at the British plant pursued a classical Taylorist effort to simplify jobs and divide them into short cycles as much as possible so as to minimize sources of defects....and simultaneously increase production," management and labor in Sweden were engaged in the construction of an experimental workshop in which to try out different organizations of work with the aim of eliminating the most meaningless jobs and replacing them with robots, A major characteristic of Sweden’s labor market was that it was highly structure and supported by welfare state institutions and had a huge public sector (Freeman, Topel and Swedenborg 1997). Because of Sweden’s excessive wage equality policies, there was a low investment in human capital. This also caused a shortage of skilled labor. The development of active labor market policy started in the early 1950s when the blue-collared labor Union started thinking of combining full employment and price stability. So, first a policy of “equal wage for equal work” was devised irrespective of the level of productivity. It later modified to “equal pay for unequal work”. Simultaneously, strict stabilizing fiscal policies were followed with the aim of keeping the inflation low (Forslund and Krueger 1994). This was expected to close down low productivity firms and hence result in lay-offs. Hence, the active labor market policies were made to ensure movement of laid-off workers to other firms which had high productivities. The Swedish employment service has a dual role to play. Besides acting as an employment brokerage it also is responsible for providing the unemployment insurance and selection of labor market programs (Forslund and Krueger 1994). This employment service has legal monopoly and since 1970s it is mandatory requirement to notify any vacancies through this system. Though these programs have been much acclaimed throughout the world, they are now showing the cracks in the wall. It has been observed that the duration of unemployment or employment in a training program has been increasing over the years. It has also been observed that since 1973, the official figures of unemployed persons has been much less than the number of people in the labor market programs. The original growth oriented policy rationale for the policies was to a large extent lost in the early 70s, as Sweden’s growth and international competitiveness declined (Bosworth and Rivlin 1987).Collective bargaining in Sweden happens among three central institutes and the government had a lot of options to follow. Comparison of current labor laws in Britain, France and Sweden Britain France Sweden Industrial relations climate Freedom of association guaranteed by law/constitution Yes – Basic law Yes – in the constitution Yes Collective agreements Yes - almost wholly at plant/company level in private sector. Yes – multilevel agreements covering 90% of the work force. Yes – widespread Proportion of work force in trade unions 26% (17% in private sector). 8% 80% Legal protection from discrimination against union members? Yes Yes Yes Unions have right to strike? Yes if official Yes and this is a very common source of protesting against an issue. Yes – Employers also have the right to clock out State mediation in disputes Yes NA Available through the National Mediation Office Legal Employment Framework Minimum working age 16 in industrial enterprises 16 - but limitations until 18 16 (those under 18 may only work during the day and under close supervision). Statutory minimum wage Yes Yes No, non-union establishments generally follow rates in sectoral agreements. Standard workweek Normally 40 hours - but individuals may opt to work in excess of 48 hours a week. 35 hours - overtime limited to 220 hours per year 40 hours (but fixed by collective agreement). Minimum annual holiday entitlement 20 days + public holidays (entitlement being phased in) 25 days (often extended through collective agreement) + public holidays. 25 days (5 days per year may be banked over 5 years) + public holidays. With the evolution and formation of countries, the political setups also evolved, with countries governed by different political setups including democracy, monarchy, etc. This evolution and establishment of many countries with different political setups have necessitated the formation of an overseeing or conglomerate organization. The role of ‘conglomerate’ organization is manifold as it provides a forum to discuss as well as solve many important issues apart from aiding unison of countries. This way european integration has led to considerable reflection about the trajectory of industrial relations in Europe. In the event, rather than the "two extremes of social union versus a completely deregulated free-for-all", a multi-level system is emerging which is simultaneously prompting both convergent and divergent developments, reflecting the different intensity of pressures for change at sector and company levels. (Marginson and Sisson 2004). Although, analysis of specific National Business Systems (NBS) has certain limitations, it can provide an effective overview. NBS approach serves as a useful approach, although it has limitations in terms of identifying and analysing practices in individual firms, it can provide a good overall perspective (Smith and Thompson, 1998, p.568-70). Thus, from the above analysis, it is clear that each system has certain advantages as well as disadvantages, and similarities as well as dissimilarities. In Britain around 30% of the population is covered under collective bargaining. Under the Employment Relations Act 1999, Unions have an Obligatory stand. The employers and the Unions have full right to come to voluntary agreements. However, the Central Arbitration committee has the power to enforce actions relative to bargaining of hour of work, wages or holidays. These actions have legal implications and a binding on the relative parties. In Sweden on the other hand, both the employer and the labor are represented by a national sectoral organization negotiate framework agreements every two or three years. Here also as in Britain there are a lot of local agreements between the management and the worker unions. “Among employees who see management as unwilling to share power, more than 70 percent say they would vote for a union.” (Casico 2005, p.508). The extent to which firms actively encourage diffusion and co-ordinate it from the centre differs considerably (Femer and Varul, 2000). In France, it is mandatory for businesses to establish works councils if the number of employees it has exceeds 50. These are elected on a regular basis at an interval of 2 years. The institutional role here is very significant. However, the government here like in Britain keeps the viewpoints of the union leader in mind before taking decisions on economic or social issues. Looking at the amount of Unionization, we can see that Sweden has emerged as heavily unionized labor market whereas France has minimum amount of unionization. It is likely to be more fruitful to understand change or continuity in union behavior by starting with unions, rather than by assuming that unions are historical objects created and battered about by exogenous forces. (Lange, Ross and Vannicelli 1982). Ferner and Edwards (1995) came up with the framework, which categorized the varying sources of power within an organization and showed how the distribution of these shaped the negotiations between organizational groups. This various perspective regarding Trade Unionism has given little room for convergence among these countries and this has been the feature from 1990s, when a lot of European integration steps have been taken. The majority of comparative studies of industrial relations in the 1990's have tended to conclude that there are few signs of general convergence are apparent in European industrials, and particularly in terms of trade union response. (Ruysseveldt and Visser 1996). As seen in our previous discussion, Britain has tried to build its labor market on more liberal principles whereas Sweden has given more importance to welfare state type of employment market. In Sweden wages and working conditions have been decided primarily by the negotiations between two main parties – LO (labor organization) and SAF (employers organization (Freeman, Topel and Swedenborg 1997). The issue of how successful has Sweden’s policies been is still under lot of discussion but one it was considered as a role model for other economies. With changing times the employers and the employees abandoned the centralized bargaining and the concepts of wage inequality and skill is today returning back to the labor market there. Effect in bargaining process is usually measured objectively in terms of wage rate differentials. These are seen to reflect differences in the bargainingpower between workgroups, unions or industries (Mishel 1986). In all the three economies however, the freedom of association is guaranteed by law or the constitution. In particular, institutional approaches can be deterministic, in that they see organisations as passive in their interaction with the institutional environment. Thus, they risk ‘reifying the role of institutions in producing political and economic outcomes’ leading to ‘a form of structural determinism’ (Wailes, Ramia and Lansbury 2003). This shows that all of them recognize the rights of individuals to choose their associations. Right to strike is prevalent in all the economies. However, in France this is exercised very frequently. This emerges from the historical development of the emergence of the working class organizations after the French revolution. The French people had to fight for their rights against the aristocracy which had pre-dominated the economy before the French revolution. In Sweden even the employer has the right to clock out. This seems to have been impacted by the fact that Swedish people on the whole did not see the kind of oppression as their British and French counterparts. Thus, there the people have had equal rights. Another difference in the development between British and French labor market was the influence of Marxism on trade union ideology. This philosophy had a far higher impact on the French intellect as compared to the British. 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