Comparative Industrial Relations - the UK, France, Germany, Sweden, Hungary - Essay Example

Introduction Historically, trade unions played a crucial role for workers at both national and enterprise level. Presence and activity of trade unions in any country emphasizes the human aspect of the labor commodity and fosters democratic culture and values (Turner & D’Art 2012, 33). In Europe, trade unions played a key role in shaping social policy and social model (Turner & D’Art 2012). However, during the last decades there is observed obvious shift from this concept, whereas trade unions in Europe tend to be less powerful model of employee representation. This paper presents a comparative analysis of the role and structure of trade unions, collective bargaining and its decline in five European countries, including: France, Germany, the United Kingdom, Sweden and Hungary. In addition to this, the further research provides an overview of to what extent are the national trade union movements in these five countries reliant on the policies of employers. Trade union movement in each country is analyzed from the perspective of legal support, support of the state, social perception, and other factors that have either formal or informal impact on the TUs activity and employer’s strength. Collective bargaining All trade unions in general pursue the same goal of improving the conditions of members. However, despite the common roles, trade unions vary by structure, collective bargaining and trade union membership. Below is provided a comparative analysis of the key differences in the processes of collective bargaining in the Britain, France, Germany, Hungary and Sweden. Collective bargaining is a process of decision making between parties that represent employers and employees. Due to the various factors and historical background, the coverage of collective bargaining varies from country to country. Thus, for example, collective bargaining coverage in the UK is about 30% with a dominant proportion in the public sector (Worker-participation.eu, 2014). In Hungary the situation is similar to the UK, where collective bargaining coverage is only 33% (Worker-participation.eu, 2014). Collective bargaining coverage in Germany is around 62%, which is higher than in the UK and Hungary, but lower than in Sweden in France, 88% and 98%, respectively (Worker-participation.eu, 2014). Part of the reason for the coverage diversity is due to existence of different agreements within each country. In the UK the key bargaining level in the private sector is the workplace or the company, but in the public sector industry level bargaining plays more significant role (Worker-participation.eu, 2014). However, there are also some public sector employers, bargaining at the level of a single organization (Worker-participation.eu, 2014). In Hungary, as in the UK, the share of collective bargaining at industry level is relatively low, comparing with France, Germany and Sweden. Even despite the efforts that were made by both government and unions to promote industry level bargaining, company or organizational level remains dominant in Hungary (Worker-participation.eu, 2014). Distinct feature of the collective bargaining in the UK is so called “gentlemen’s agreement”, which implies that existing industry level agreements are not legally binding on the parties who sign it (Worker-participation.eu, 2014). Moreover, the employer in the UK is not legally bound to negotiate with the union if only the unions should be legally “recognized” for bargaining (Worker-participation.eu, 2014). In the contrast of “absence of law” in Britain, Germany has a very extensive legal underpinning for the collective bargaining agreements. Unlike Britain, in Germany sectoral-level bargaining and firm-level bargaining are mutually exclusive concepts (Addison et al., 2011). Appliance of the collective bargaining agreements in Germany is enforced by strong legal provisions, especially those related to the regional collective bargaining. Nowadays, IG Metall is considered to be one of the dominant trade unions in Germany, setting trends in the national level collective bargaining (Lecture notes). Company and sectoral bargaining in France the same as in Germany has been strengthened due to the legal enforcement, namely, the Auroux laws of the early1980s (OECD, n.d). High coverage rate of collective bargaining in France is also a result of revitalization of national framework agreements (Collective Bargaining: Levels and coverage, n.d.). In France, collective bargaining takes place at all three levels, while the industry level for collective bargaining is the most important in terms of numbers of employees covered (Worker-participation.eu, 2014). In addition to variance of levels of bargaining, and legal enforcement, there are some significant differences in negotiation of pay and conditions for employees. While in the UK the pay and conditions are not negotiated, in France, at the company level, the employer is required to negotiate on pay and other working issues annually, and in case of non-compliance is backed up by penalties (Worker-participation.eu, 2014). In Germany, pay and conditions are set at the collective bargaining at industry level between employers and individual trade unions, and the size of pay increase is the same across all regions (Worker-participation.eu, 2014). In Sweden, the situation with pay and conditions is less definite than in Germany and France. Even though the industry level is the key level for collective bargaining in Sweden as it is in Germany and France, the cases vary from those when there is no nationally specified amount of pay increase to those cases when there is a common pay increase for all employees (Worker-participation.eu, 2014). In Hungary the situation with pay negotiation is even worse than in Sweden as collective agreements cannot cover pay issues (Worker-participation.eu, 2014). Structure As it has been reviewed briefly in the previous section about collective bargaining, the structures vary by each country. In the Great Britain after the World War II occurred a shift from industry to company level bargaining (Lansbury et al., 2011). In case of the Great Britain this shift was driven by the employers, who no longer trusted industry level bargaining (Lecture notes). Since 1990 there has been significant increase of a “single-table” bargaining, where all unions negotiated together (Lansbury et al., 2011). In France also has occurred a shift away from industry bargaining towards the company bargaining (Lecture note). The driving force to decentralization was not the unilateral employer action as it was in case of Britain but it was the state initiative (Lecture notes). There were adopted some regulations that contributed significantly to the main trend of collective bargaining decentralization. One of such regulations was introduction of the possibility of company-level agreements departing from sector-level agreements (with the exceptions set out in the law) (Eurofound.europa.eu, 2013). Collective bargaining decentralization in Germany is different to both the UK and France cases, as the industry bargaining in Germany still remains largely in place however there are opportunities for “opening clauses” at company level (Lecture notes). Bargaining decentralization of Germany has absolutely different procedures to those applied in the UK and France, as for opening a clause it is necessary to have an agreement of the work council, employer associations, trade union concerned and company concerned (Lecture note). Thus, Germany represents a mixed system of determining employment conditions, whereby about 40% of public employees are excluded from collective bargaining (Collective Bargaining: Levels and coverage, n.d.). The bargaining system in Sweden also has undergone serious decentralization process over the last decade (Collective Bargaining: Levels and coverage, n.d., 176). This decentralization was a result of movement from national level settlements to industrial level settlements (Lecture notes). Today, the power to negotiate wages and working time is increasingly delegated to the company level of bargaining (Eurofound.europa.eu, 2013). Thus, for example, some collective agreements are left without any fixed payment rates for local partners to negotiate for setting of wage rates (Eurofound.europa.eu, 2013). In Hungary, there are recognized two levels of collective agreements and collective bargaining: sectoral agreements and trade unions (Eurofound.europa.eu, 2013). Another distinctive feature of the Hungarian bargaining system is establishment of the sectoral social dialogue committees in about 29 sectors (Eurofound.europa.eu, 2013). In addition to the differences in bargaining decentralization processes among the 5 countries researched, there are some differences in the board structures as well (Table 1). Today, the principal level of collective bargaining in the UK and Hungary is the company level. In the UK collective bargaining system there are no Board-level representatives, the company board structure is monistic, and workplace interests are represented by union or other structures (Worker-participation.eu, 2014). Unlike in the UK, in Hungary workplace representation is possible through both union and works council. The principal level of collective bargaining in Germany is industry level, while in France and Sweden both industry and company level negotiations. Germany’s workplace is represented by works councils, Swedish – by unions, and French workplace – by both union and works council or employee delegates. Country Principal Level of Collective Bargaining Workplace Representation Board-level Representation Company Board Structure UK Company Union (but other structures are possible and since 2005 these can be triggered by employees) No Monistic France Industry and Company Union and works council/employee delegates (but union normally dominates if present) State-owned and private companies Monistic or dualistic (choice) Sweden Industry (but much left to company negotiations) Union State-owned and private companies Monistic Germany Industry Works council State-owned and private companies Dualistic Hungary Company Union and works council State-owned and private companies Dualistic or monistic (only public limited companies can choose a monistic) Table 1. Comparative analysis of Collective bargaining structure of the UK, France, Sweden, Germany, and Hungary (Source: www.workerparticipation.eu). Trade Union Membership Declining Nowadays, trade unions in Europe represent a much a smaller proportion of the employed labor force than at any other time since 1950 (Turner & D’Art 2012, 34). While in the 1950s union membership was concentrated among male, manual, and manufacturing workers (the so called “3M”), nowadays, unions face different organizing conditions in different parts of the economy, as a result of: differences between the private and public sector, differences in unionization between women and men, different sizes of firms in private sector, and part-time/full-time employment (Visser 2002, 405). Until 1980, trade union membership in most European countries (except France) tended to rise (Turner & D’Art, 2012). Thus, for example, in Sweden, union density has been more than doubled from 1905 to 1907, and the density of the British unions increased by almost 10% during the period 1910-1918 and achieved 43,1% by 1919 (Bean and Holden 1992, 53). However, during the recent 30 years trade union membership illustrates reverse tendency in many countries (Machin and Wood, 2005; Heery et al 2012; Bean and Holden 1992). Thus, for example, in Britain, union membership decline has been especially strong over the past two decades. Having reached its peak in 1979 (over 13 million trade union members, 58% of whom were workers), unionization began to decline steadily. There are two factors that have generated such a decline: the large number of recently established workplaces where unions have failed to secure recognition, and overall derecognition of unions by employers (Waddington & Whitston, 1994). There is evidence that the dramatic drop in employment and the rise in unemployment in the UK during 1979-1982 coincided with the decline in union membership of two million over the same period (Blanchflower 2007, 23). Based on this information it is possible to assume that considerable number of the union workers in the early 1980s stayed unemployed for long period of time (Blanchflower 2007, 23). By 2004 the number of members of trade unions was lowered up to 30% of workers – members of a trade union (Machin and Wood 2005, 203). While in 2002 the density of trade union membership in the UK was about 30,4%, it was still higher than in Germany, Hungary, and France 23,2 %, 19,9%, and 9,8% respectively (Waddington, 2005). Even though there was a considerable peak in trade union membership in Germany when the reunification occurred, the workers were slowly made redundant because of intensive global market competition (Lecture notes). Even though shot-term, the declination is considerable – 18%. In Hungary, trade union density is differentiated by trade union membership at company level (11%) and at multi-employer level (2%) (Eurofound.europa.eu 2013). Hungary demonstrated a very steep decline during a very short period of time as pre 1990s the trade union density was 80%, and by 1995 the decline reached 50%. France is considered to be an outlier among all other countries, as only active members join its trade unions. Such a selection of “payers and doers” results in an extremely low trade union membership – 7%. However, despite the substantial membership decline and considerable loss of influence during the 1980s and 1990s, trade unionism in France demonstrates the signs of recovery (Phelan 2007). Sweden shows the highest rates of trade union membership compared with the other countries. Thus, for example, in 2011, the trade union membership density was: 70% in total economy, 83% in public sector, and 65% in private sector (Eurofound.europa.eu, 2013). In Sweden was implemented GHENT system, where unemployment benefits responsibility was taken taken by the trade unions (Phelan 2007). According to this system, workers joined unemployment insurance scheme and the same time joined the union (Phelan 2007). One of the reasons of decline in Sweden is believed to be legislation that made the UE insurance contributions for union members much higher (Phelan 2007). Towers (1997) believes that such a significant reduction in the influence and power of trade unions in the eyes of both employers and public disables stable and effective systems of industrial relations. Reliance of Trade Unions on Employers As it has been already mentioned above trade unions in the UK as well as in other countries faced declining memberships. In more liberal market economies such as the UK where there is lack of legal foundations for collective employment relations (Brown & Oxenbridge2004), trade unions are usually heavily reliant on employers. Thus, together with the membership declination, trade unions in the UK face uncertain relationships with employers (Phelan 2007). Partially this tendency is a result of historical derecognition of unions by employers, especially in shipping and provincial newspapers industries and among management and professional grades (Waddington & Whitston, 1994). As it has been already discussed the legal support for collective bargaining in Britain was relatively weak and it automatically implied high reliance of trade unions on the employer. Thus, individual employer could choose whether he wanted to deal with unions or not, having a relatively high level of choice of freedom over that. Nowadays, the TUC and major unions in the UK continue to follow a twin strategy of organizing and partnership. This strategy implies “working with ‘good’ employers while cajoling the ‘bad’ into recognition agreements” (Phelan 2007, 151). One of the partnership agreements with sympathetic employers is considered to be a core part of the civil service modernizing strategy, which was promoted by the New Labour Government (Phelan 2007, 151). The same as in the UK, trade unions in France also seem to be more reliable on employers, even though there are clear differences in the industrial relations systems of these countries. In contrast to the UK, unions in France have influence due to an entrenched statutory role (The Economist Intelligence Unit, 2006). Work councils have particular weight in France, as according to the law all companies with more than 50 people employed are legally required to have works councils with which management should consult on many significant decisions, even those not related to working conditions (The Economist Intelligence Unit, 2006). French unions continue to be a key negotiating partner for both public authorities and employers (Phelan 2007). Recent transformations of the French unionism over the last two decades have resulted in significant achievements, namely: increased institutional legitimacy; extended recruitment ambitions to the whole population earning wages; and force dispersion in case of splits and formation of new organizations (Phelan 2007, 160). Nowadays, in the French union movement consists of five national confederations, several less influential confederations and many independent organizations, influence of which vary by profession/segment (Phelan 2007). Some of the largest strongholds represent the interests of energy and metallurgical, civil, medical, trade and social sectors (Phelan 2007). Even though the role of trade unions is significant, it is believed that it is not strong enough “to obtain improvements in working conditions for the object of their claims” (Anne-Marie Grozelier 2006, cited by Phelan 2007, 169). One of the reasons is considered to be excessive fragmentation of the unions (The Economist Intelligence Unit, 2006). Nowadays, employers initiate bargaining, and claim to some revisions to working conditions (for example, increase of working hours, the spread of night work, wage cuts, revision of the 35-hour week law, etc) (Phelan 2007). Among small and medium-sized companies/organizations union representation is especially weak. Despite the monopoly in the collective bargaining, French trade unionism has limited rights, and doesn’t have real influence over the demands’ formation or resolution (Phelan 2007, The Economist Intelligence Unit, 2006). Even though according to the French law trade unions are obliged to bargain over a number of issues related to industrial relations, they are not authorized to reach an agreement (Phelan 2007). Thus, the absence of obligation to reach an agreement allows employers to make unilateral decisions, making trade unions more reliant on employers. Workers’ collective mobilization could endow unions with more substantial rights; however it would be a very problematic initiative because of increasing threat of unemployment, pauperization of large category of workers, individualization, and dispersion of organizations (Phelan 2007). German Union Movement is different from all of the TU movements in the UK, France, Sweden or Hungary. One of the most important distinctive features of the German Union Movement is a strong and cohesive labour movement that acts as a one principal labour federation in the country (Phelan 2007). Moreover, employers’ associations are well-organized and take active part in managing a regionalized collective bargaining together with industrial unions. On the other hand, German state ensures the strengths of German Union movement by providing legal framework and comprehensive protection in case of disability, sickness, unemployment and retirement (Phelan 2007). In addition to the state input, legally independent works council defend the interests of all employees in a firm. Under the constitution, unions and employers are autonomous and thus, courts resolve disputes between the parties (The economist, 2007).  In general, the German system is perceived by employers as too much regulated and inflexible in the face of today’s globalization of markets. Based on this information, it is possible to assume that German Union movement is much less reliant on employers than TUs in UK, France, or Hungary. However, the situation might change fairly soon as a result of significant pressures for decentralization of the German system of the industry wide collective bargaining (Phelan 2007). Organized decentralization enables unions and employers’ associations to negotiate company specific adjustments. While this change might be critical in the modern global conditions, many work councils report that management at their plant forces them to agree to violations of the industry-wide agreement (Phelan 2007). Union confederations in Hungary are also extremely fragmented as trade unions in France. Another feature similar to France is active role of work councils in Hungary. Thus, the Hungarian TUs consist of professional and industrial union confederations; profession union federations consist of enterprise unions which have their own legal identity (Frege & Toth, 1999). However, in contrast to Germany, works council in Hungary do not have real co-determination rights (Frege & Toth, 1999, 122). On the other hand, national union confederations in Hungary are not authorized to control the bargaining policy of the main agents (enterprise unions) of wage bargaining in the decentralized Hungarian system (Phelan 2007, 401). The National Interests Reconciliation Council (OÉT) established in 1998 has limited authority to impact on wage development, which for one’s turn, allows companies to withdraw from wage negotiations and to individualize wage determination in the Hungarian private sector (Phelan 2007). In Hungary, the same as in France are set up works councils; however, activity of Hungarian works council is more limited by a new Labour Code of 1992, as it reduces unions’ rights at workplace level (Frege & Toth, 1999, 121). In contrast to a clearly distinguished, dual structure of industrial unions and works council in East Germany, Hungarian works council are excessively controlled by enterprise unions (Frege & Toth, 1999, 122). The Hungarian trade unions develop a basic framework of working conditions, enabling employers to turn to its own advantage. Such a framework allows employers to bargain informally with individuals and groups outside trade unions as well as make unilateral decisions based on performance of individual employees (Phelan 2007). Collective agreements in Hungary are based on the provisions “with the consent of employee”, which automatically offers some deviation to the employer through the individual bargaining. Contrary to Swedish experience, decentralized bargaining in Hungary does not have the same effect because unions do not have strong presence at the workplace. Legal regulation is another obstacle for Hungarian trade unions, which sets difficulties for union to enter workplaces where they do not have members (Phelan 2007, 412). Hungary’s 1997 Casual Employment Act widely used nowadays by private individual employers also greatly increased worker vulnerability (Tésits & Szenoradszki, 2010). Undoubtedly, all this makes Hungarian TUs more reliant on the employers than any other country discussed above. Comparing all of the above researched countries, Sweden has the highest union density. Such a “popularity” of the Swedish unions is explained by four major features, including: the existence of union unemployment funds, combination of centralized and decentralized industrial relations, existence of separate confederations and white-collar unions, and preference of regulation by the labor market parties themselves than by state (Phelan 2007, 261). In order to improve bargaining strengths of the unions and solve the issues of declining membership, some of the Swedish unions have merged into the largest national unions and formed a cross-collar alliance comprised of unions-giants (Phelan 2007). Also, the largest Swedish trade unions have formed a so-called Bargaining Council in order to resist the employer’s plan to completely decentralize collective bargaining (Phelan 2007). In contrast to the Germany’s case, combination of centralization and decentralization also is considered to be one of the main drivers of high union density in Sweden. Existence of union workplace organization is very popular among workers, and plays a very important role on the decentralized level of the bargaining system in Sweden (Phelan 2007). Comparing Swedish decentralization to the British it is possible to state that one-sided decentralization with almost no industry-wide support, as it is in Britain, is weakening union workplace organizations (Phelan 2007). All of the above listed arguments enable to conclude that Swedish trade union movements are less reliant on the employers than trade unions in France, the UK, or Hungary. Conclusion This paper presents a comparative analysis of the collective bargaining, its decline and structure of trade unions in five European countries, including: France, Germany, the United Kingdom, Sweden and Hungary. In terms of collective bargaining coverage, France and Sweden are dominating among other countries, while Hungary and the UK demonstrate the lowest rates. In addition to collective bargaining coverage, there are some obvious differences in legislation and social perception of the trade unions. In addition to variance of levels of bargaining, and legal enforcement, there were researched some significant differences in negotiation of pay and conditions for employees. Also there were briefly reviewed the trade unions’ structures and key differences. The principal level of collective bargaining in the UK and Hungary is the company level, while in Germany the principal level of collective bargaining is industry level, and in both France and Sweden - industry and company level. Unlike in the UK, in Hungary workplace representation is possible through both union and works council. Germany’s workplace is represented by works councils, Swedish – by unions, and French workplace – by both union and works council or employee delegates. Despite the difference in structures, legislation and power, the trade unions in all five countries illustrate continuous decline of the union membership density tendency during the last decades. Decreasing popularity of trade unions among the five countries researched also is correlated with the extent to which trade unions can defend and fight for the employees’ rights and interests. Reliance of national trade movements on the policies of employers is especially high in the UK mainly because of lack of legal foundations for collective employment relations combined with the historical derecognition of unions by employers. The same as in the UK, trade unions in France also seem to be more reliable on employers, even though trade unions in France have legal influence due to its entrenched statutory role. However, excessive fragmentation of the unions and lack of authority to reach a collective agreement make French trade unions more reliant on employers. German Union Movement is different from all of the TU movements in the UK, France, Sweden or Hungary. Germany is characterized by a strong and cohesive labour movement that acts as a one principal labour federation in the country. In contrast to the UK’s loose legislation, German state ensures the strengths of German Union movement by providing legal framework and comprehensive protection in case of disability, sickness, unemployment and retirement. In addition to the state input, legally independent works council defend the interests of all employees in a firm. All this makes German Union movement much less reliant on employers than TUs in UK, France, or Hungary. Union confederations in Hungary are also extremely fragmented as trade unions in France. Another feature similar to France is active role of work councils in Hungary. However, in contrast to Germany, works council in Hungary do not have real co-determination rights. Moreover, the Hungarian trade unions framework of working conditions allows employers to turn to its own advantage. Contrary to Swedish experience, decentralized bargaining in Hungary does not have the same effect because unions do not have strong presence at the workplace. Comparing all of the above researched countries, Sweden has the highest union density as a result of the existence of union unemployment funds, and separate confederations and white-collar unions. In contrast to the Germany’s case, combination of centralization and decentralization also is considered to be one of the main drivers of high union density in Sweden. All this makes Swedish trade union movements be less reliant on the employers than trade unions in France, the UK, or Hungary. 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