Employee representation and flexible working time

Abstract

This paper provides evidence on the effect of employee representation on working-time flexibility in private-sector European establishments. A 2002 European Union directive granted information, consultation and representation rights to employees on a range of key business, employment and work organization issues beyond a certain firm size. We exploit the quasi-experimental variation in employee representation introduced by the implementation of the Directive in four countries (Cyprus, Ireland, Poland and the UK) with no previous legislation on the subject. The empirical analysis is based on repeated cross-section establishment-level data from the last three rounds of the European Company Survey. Difference-in-difference estimates suggest that the Directive had a positive and significant effect on both employee representation and the utilisation of flexible working-time arrangements for eligible establishments. Interestingly, the relaxation of shareholders' property rights and the limits imposed on managerial discretion as a result of the operation of employee representation seem necessary to achieve certain valuable forms of organizational flexibility in market economies.