Abstract
Abstract Collective bargaining has come under renewed scrutiny, especially in Southern European countries, which rely predominantly on sectoral bargaining supported by administrative extensions of collective agreements. Following the global financial crisis, some of these countries have implemented substantial reforms in the context of adjustment programmes, seen by some as a ‘frontal assault’ on collective bargaining. This paper compares the recent top-down reforms in Portugal with the more gradual evolution of the system in the Netherlands. While the Dutch bargaining system shares many of the key features that characterise the Portuguese system, it has shown a much greater ability to adjust to new challenges through concerted social dialogue. This paper shows that the recent reforms in Portugal have brought the system more in line with Dutch practices, including in relation to the degree of flexibility in sectoral collective agreements at the worker and firm levels, the criteria for administrative extensions, and the application of retro- and ultra-activity. However, it remains to be seen to what extent the top-down approach taken in Portugal will change bargaining practices, and importantly, the quality of industrial relations.
Highlights
Collective bargaining is an important feature of labour markets, especially in Continental Europe where collective agreements (CAs) typically cover more than three quarters of the workforce
These systems were thought to be associated with weaker labour market performance than either centralised systems, which provide flexibility at the aggregate level by inducing unions and employer associations to internalise the macro-economic effects of wage claims on economy-wide employment, or decentralised systems, which provide wage flexibility at the firm level
Our analysis suggests that the recent reforms in Portugal have brought the institutional set-up more in line with that in Netherlands, but questions remain about the implications of these changes for actual bargaining practices and the ability of the system to contribute to better outcomes for workers and firms
Summary
Collective bargaining is an important feature of labour markets, especially in Continental Europe where collective agreements (CAs) typically cover more than three quarters of the workforce. Downward nominal wage rigidity in particular can be an issue for countries without their own monetary policy that are confronted with an adverse demand shock in a low inflation environment. An influential view originally proposed by Calmfors and Driffill (1988) held that systems with predominantly sector-level bargaining lead to excessive wage claims relative to productivity. As a result, these systems were thought to be associated with weaker labour market performance than either centralised systems, which provide flexibility at the aggregate level by inducing unions and employer associations to internalise the macro-economic effects of wage claims on economy-wide employment, or decentralised systems, which provide wage flexibility at the firm level. The impact of bargaining systems does depend on the degree of collective bargaining coverage and the level of negotiation, and on the specific rules and institutional practices that characterise each system with respect to for example the degree of flexibility for firms and the degree of co-ordination across sectors or firms (OECD, 2017).
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