Bargaining Centralization Research Articles

Social partnership, company-level collective bargaining and union revitalization in Ireland

This article explores recent trade union efforts in Ireland to re-engage activists and members and promote revitalization following the termination of a 22-year period of tripartite social partnership. It analyses four case studies of major unions’ strategies to involve activists and members in a workplace-anchored model of firm-level collective bargaining. The findings indicate that decentralized bargaining has become the preferred model of pay determination for Irish unions, and they express little interest in returning to national-level centralized bargaining. Union leaders are enthusiastic about company-level bargaining primarily for three reasons. First, it revitalizes unions by sustaining and expanding union membership at the workplace. Second, it supports local bargaining arrangements that produce tangible benefits for workers, showcasing the effectiveness of unions in advocating for their members. Third, workplace arrangements enhance union influence over management decision-making, both directly through firm-level collective bargaining and indirectly by fostering incentives for continuous dialogue and information exchange.

Right of association and new business entry: country-level evidence from the market sector.

Labor market institutions (LMIs) could enable new firm entry by lowering burdens to attracting and retaining human capital or restrict new firm entry by increasing concerns of additional demands on ventures facing liabilities of newness and smallness. In this study, we focus on the LMI of the right of association, and whether its relationship with new business entry depends on the vertical ordering of bargaining (represented in the centralization of collective bargaining) or the horizontal synchronization of wage-setting (represented in the coordination of wage-setting). In a panel of 44 countries covering the period 2005-2019, we find that the right of association in the market sector is positively associated with new business entry; however, with increasing centralization of collective bargaining, the association becomes negative. Coordination of wage-setting does not significantly affect the relationship between the right of association and new business entry. The results are robust to accounting for both serial correlation and cross-sectional correlation in the panel regressions and carry implications for policymakers regarding the effects of LMIs on new business creation.

Revisiting Industrial Unionism in Korea in the Wake of the 1997 Financial Crisis: Neoliberal Rhetoric, Bargaining (De)centralization and the State

This paper revisits the rise of industrial unionism in Korea in the wake of the 1997 financial crisis at the turn of the twenty-first century. By closely investigating the reorganization of labour unionism in the context of neoliberalization, it challenges the alleged converging impact of neoliberal rhetoric or hegemony on industrial relations. To this end, this paper raises following substantive questions: How far did Korea’s industrial unionism advance under the new economic circumstances and how stable was it? More importantly, what were the fundamental factors behind such re-formation of labour unions? This paper finds that the transformation of labour unions in Korea is a mixture of the rise of industrial unionism and the persistence of enterprise unionism, that is to say a precarious progress of industrial unionism. It argues that behind the unstable development of industrial unionism in Korea were state-fostered legacy of power imbalance within labour in favour of enterprise unions, especially at chaebols, and continuing state intervention in the re-formation of labour unions in the neoliberal era. Finally, it argues that the seemingly sweeping neoliberal rhetoric or hegemony does not override the long-standing political-economic institutions of industrial relations and the leverage of the state, but it is filtered and reified by them.

Shocks and Labour Cost Adjustment: Evidence from a Survey of European Firms

We use firm-level survey data from 25 EU countries to analyse how firms adjust their labour costs (employment, wages and hours) in response to shocks. We develop a theoretical model to understand how firms choose between different ways to adjust their labour costs. The basic intuition is that firms choose the cheapest way to adjust labour costs. Our empirical findings are in line with the theoretical model and show that the pattern of adjustment is not much affected by the type of the shock (demand shock, access-to-finance shock, ‘availability of supplies’ shock), but differs according to the direction of the shock (positive or negative), its size and persistence. In 2010-13, firms responding to negative shocks were most likely to reduce employment, then hourly wages and then hours worked, regardless of the source of the shock. Results for the 2008-09 period indicate that the ranking might change during deep recession as the likelihood of wage cuts increases. In response to positive shocks in 2010-13, firms were more likely to increase wages, followed by increases in employment and then hours worked suggesting an asymmetric reaction to positive and negative shocks. Finally, we show that strict employment protection legislation and high centralisation or coordination of wage bargaining make it less likely that firms reduce wages when facing negative shocks. JEL Classification: D21, D22, D24

Shocks and Labour Cost Adjustment: Evidence from a Survey of European Firms

We use firm-level survey data from 25 EU countries to analyse how firms adjust their labour costs (employment, wages and hours) in response to shocks. We develop a theoretical model to understand how firms choose between different ways to adjust their labour costs. The basic intuition is that firms choose the cheapest way to adjust labour costs. Our empirical findings are in line with the theoretical model and show that the pattern of adjustment is not much affected by the type of the shock (demand shock, access-to-finance shock, ‘availability of supplies’ shock), but differs according to the direction of the shock (positive or negative), its size and persistence. In 2010-13, firms responding to negative shocks were most likely to reduce employment, then hourly wages and then hours worked, regardless of the source of the shock. Results for the 2008-09 period indicate that the ranking might change during deep recession as the likelihood of wage cuts increases. In response to positive shocks in 2010-13, firms were more likely to increase wages, followed by increases in employment and then hours worked suggesting an asymmetric reaction to positive and negative shocks. Finally, we show that strict employment protection legislation and high centralisation or coordination of wage bargaining make it less likely that firms reduce wages when facing negative shocks.

LABOR UNIONS AND CORPORATE CASH HOLDINGS: EVIDENCE FROM INTERNATIONAL DATA

AbstractFirms in countries with higher union membership have less corporate cash holdings. This negative relation is stronger for firms in countries with weak employment protection legislation, firms in countries with a high degree of labor bargaining centralization, and financially constrained firms. Moreover, the market value of corporate cash holdings is lower for firms in countries with high union membership. The number of strikes and lockouts is higher in countries with more corporate cash holdings. We conclude that firms strategically choose corporate cash holdings to gain a bargaining position with labor in an international setting.

Trade Unions and Employment Relations in Italy during the Economic Crisis

Many of the usual assumptions about the impact of the economic crisis on trade unions and employment relations only partially fit the Italian case. Trade unions during the crisis showed resilience both organisationally and as important actors in economic and political life. Also, the national industry level reaffirmed itself as the key level in industrial relations. Explanations of these unexpected outcomes have to do with some features of all three actors of Italian employment relations. Trade unions have become over time a relevant actor not just in the industrial relations arena but in several other spheres of Italian society and politics. As to employers, small and medium enterprises (SMEs) have tended to prefer national sectoral-level agreements and set rather low wage standards, while employers’ associations have shown an organisational interest in preserving centralised bargaining where they play a role. Finally, governments have been too weak and short-lived to follow a consistent strategy of unilateral decision-making.

Drug Policy in Bulgaria

Bulgaria has a mixed public-private health care financing system. Health care is financed mainly from compulsory health insurance contributions and out-of-pocket payments. Out-of-pocket payments constitute a large share of the total health care expenditure (44.14% in 2014). The share of drugs expenditure for outpatient treatment was 42.3% of the total health care expenditure in 2014, covered mainly by private payments (78.6% of the total pharmaceutical expenditure). The drug policy is run by the Ministry of Health (MoH), the National Council on Prices and Reimbursement of Medicinal Products, and the Health Technology Assessment Commission. The MoH defines diseases for which the National Health Insurance Fund (NHIF) pays for medicines. The National Council on Prices and Reimbursement of Medicinal Products maintains a positive drug list (PDL) and sets drug prices. Health technology assessment was introduced in 2015 for medicinal products belonging to a new international nonproprietary name group. The PDL defines prescription medicines that are paid for by the NHIF, the MoH, and the health care establishments; exact patient co-payments and reimbursement levels; as well as the ceiling prices for drugs not covered by the NHIF, including over-the-counter medicines. The reimbursement level can be 100%, 75%, or up to 50%. The PDL is revised monthly in all cases except for price increase. Physicians are not assigned with pharmaceutical budgets, there is a brand prescribing practice, and the substitution of prescribed medicines by pharmacists is prohibited. Policies toward cost containment and effectiveness increase include introduction of a reference pricing system, obligation to the NHIF to conduct mandatory centralized bargaining of discounts for medicinal products included in the PDL, public tendering for medicines for hospital treatment, reduction of markup margins of wholesalers and retailers, patient co-payment, and the introduction of health technology assessment. Although most of the policies have been introduced since 2011, there is still weak evidence for improvement regarding cost containment and effectiveness.

Explaining postwar wage compression

One of the main problems confronting labor unions during wage bargaining is how to deal with the conflicting demands of different groups of workers over the division of labor market earnings. This article explains how their internal organizational blueprint determines how they deal with this and criticizes the scholarly preoccupation with union density and wage bargaining centralization as explanatory variables for cross-national and temporal variation in wage inequality. It does so based on a critical analysis of collective bargaining in the Netherlands and the United Kingdom during the first four decades of the postwar period.

New technology and old institutions: An empirical analysis of the skill-biased demand for older workers in Europe

Using panel data from nine European countries over the period 1970 to 2007, we examine the impact of information and communication technology (ICT) on the demand for older workers (aged 50 and over). We find evidence of a decrease in demand for older workers in the 1970s and 1980s. It can be argued that the impact of ICT on demand for older workers is skill-biased. However, the skill-biased demand for older workers is mainly reflected in the skill-biased changes in employment shares rather than relative wages. There is some evidence of a gradual deskilling of older workers. We find that labour market institutions such as the national minimum wage, social pacts on wage issues and union density mostly benefit skilled older workers, while coordination of wage setting, extension of collective agreements, social pacts on pensions and centralisation of wage bargaining can alleviate the adverse effects of skill-biased technological change.

The Role of Mediation Institutions in Sweden and Denmark after Centralized Bargaining

AbstractThis article compares coordinated collective bargaining in Sweden and Denmark after centralized bargaining. Existing theories — power resource and cross‐class alliance theory — seem capable of explaining the transition from centralized bargaining to pattern bargaining system. However, they do not explain the internal stability of bargaining coordination once established. This analysis stresses the role of mediation institutions of both countries for solving collective action problems in pattern bargaining by pegging other settlements to the manufacturing labour cost norm. Mediation capabilities, however, differ, which is reflected in more frequent defections in Sweden than in Denmark and thus a more unstable bargaining coordination. These differences have substantive consequences for bargaining outcomes in the two countries.

Lohnzurückhaltung und Lohnmilitanz: Belgien, Deutschland und die Niederlande, 1950–2010

This contribution questions the influential interpretation that strong unions and centralized wage bargaining facilitate wage restraint and that during the postwar period wage restraint was an important cause of strong economic growth performance. This view is contrasted with a power-oriented perspective that sees strong unions as conducive to redistribution from capital to labour, rather than wage restraint. The paper uses data on wages and productivity from 1950 to 2010 for Belgium, Germany and the Netherlands, and shows that there has been more wage restraint after 1980 than before, and not more with more bargaining centralization. The results support the power-oriented understanding of wage bargaining institutions and suggest that the causes of wage restraint, its effects on investments and inequality should be reconsidered. (Less)

Inequality and Institutions: The Case of Economic Coordination

The understanding of observable associations between institutions and inequality today requires a better grasp of the process driving the selection of economic institutions, in particular wage bargaining centralization agreements, as the outcome of a distributive conflict in which inequality itself plays a prominent role. Low levels of inequality facilitated the adoption of encompassing wage centralization agreements during the early twentieth century in Europe, thereby creating a long-term association between low inequality and high centralization that, for a large subset of cases, remained stable throughout the century. We develop a theoretical argument as to why inequality should lead to lower levels of coordination and test it against competing hypotheses on the basis of a database on 11 OECD nations between the 1910s and the 1950s.

Institutional determinants of public–private sector wages’ linkages

We estimate the probability of public sector wage leadership – defined as Granger causality from public to private sector wages – in a pool of 15 Organization for Economic Cooperation and Development (OECD) countries as a function of countries’ institutional features, and notably wage-setting institutions. Government's involvement in collective bargaining and collective bargaining centralization are positively correlated with the probability of finding public wage leadership. Among the factors that reduce its probability, we can underline the impact of globalization and the degree of unionization of the economy.

The labour geographies of education: The centralization of governance and collective bargaining in Ontario, Canada

Labour geography has yet to pay full attention to the experiences of public sector workers and their employer (the state). This article addresses this lacuna and provides some insight into the labour geographies of public sector workers through an empirical analysis of the centralization of governance, employment relations, and collective bargaining in Ontario, Canada’s publicly-funded elementary and secondary schools. This case demonstrates how one particular group of public sector workers – teachers – and their unions located and exercised agency in the arenas of politics and collective bargaining through a rescaling of their activities from the local to the provincial level. The paper also argues that the rescaling of politics and collective bargaining is problematic. Questions remain regarding whether or not Ontario’s teachers were able to increase their aggregate bargaining power through centralization or merely transferred agency and authority from one scale to another. Moreover, the paper engages with the fast-developing geographies of education literature, and is consistent with an outward-looking approach that links education to wider political and economic processes. In so doing, it extends the scope of the geographies of education to the employees of publicly-funded schools and their administrative bodies, and suggests value a theoretically- and empirically-informed dialogue between geographers interested in education and those interested in labour.

The Rise of Private Authority and the Decline of Embedded Liberalism Across the OECD, 1982-2008

Does corporate authority complement or substitute for public regulation and institutionalized social solidarity? While there has been considerable interest in the use of private regulation in developing countries and weak governance zones, private regulation in developed countries has been understudied. A small but growing literature addresses the institutional determinants of private governance and corporate self-regulation in these countries. This literature has debated whether the self-regulation of firms functions as a complement or a substitute for the welfare state, trade unions, market correcting regulation and other institutions of what Ruggie called ‘embedded liberalism.’This paper examines the relationship between private and public regulation in thirty capitalist democracies from the early 1980s until the late 2000s. It uses business-led Corporate Responsibility organizations to measure the state of private regulation at the country level. Their establishment dates and membership levels serve as proxies for the timing and quantity of private regulation. Independent variables include wage bargaining centralization, labor market regulation and employment protection, and industry regulation. The results suggest that corporate self-regulation is associated with declining regulatory density – deregulation – for a variety of different variables. This confirms qualitative historical evidence that the emergence of business activity promoting self-regulation was deeply bound together with the rise of neo-liberal economic policies since the 1980s. During this period of deregulation and privatization, business leaders put out a distinct call for business to taken on new social responsibilities. The notion of responsible business and of business self-regulation played an important role in legitimating the institutional transformation of OECD economies toward neo-liberalism, as the institutions of the post-war compromise were breaking down. A recurring theme propagated by business leaders is the unmistakable idea of corporate responsibility as being a domain of voluntary activity, which must be free of state regulation. The paper suggests that in OECD countries, private authority may be as much the source of our contemporary problems as part of their solution.

Hybridisation of employment relations in the era of globalisation? A comparative case study of the automotive and banking industries in South Korea

Employment relations in the Korean auto and banking industries have undergone significant transformation since the 1997 economic crisis. Both sectors experienced massive downsizing and intense labour–management confrontations during the crisis, as well as the major expansion of non-regular labour and the adoption of technology-driven workplace innovations. Both industries also experienced the organisational transformation from enterprise-based unions into industrial unionism in an effort to build a centralised bargaining structure. However, there are some important differences between the two sectors with respect to changing employment relations, including the reorganisation of work, the extent of changes in compensation and skills development and inter-firm variations in industrial relations. This comparative industry-level case study addresses some implications for the globalisation literature and the Varieties of Capitalism debate. Globalisation is not only a mega-trend which fosters market integration and the mobility of both capital and labour, it also involves an intense contest between management and labour unions. Within the context of globalisation, employment relations have become hierarchically segmented, both at the industry and firm levels. Employment relations in Korea appear to have been reshaped into a hybrid pattern. This paper argues that the dual typology of liberal and coordinated market economies is too simplistic and suggests that a ‘variegated’ form of capitalism more accurately describes the situation in Korea.

Unions-the Bigger, the Worse? Centralization and the Scope of Bargaining

This paper studies welfare effects of union bargaining (de-) centralization in a two-sector economy. We present a model with union membership dynamics where the wage in the first sector is the result of either decentralized bargaining at the firm level or centralized bargaining at the sector level. The workers’ outside option is employment in the second sector, where wages adjust to clear the labor market. We show that the scope of bargaining has a decisive role in the discussion on the impact of bargaining decentralization on social welfare. Our results imply that decentralization increases welfare if unions and firms bargain over both wage and employment. Contrary, if only the wage is bargained over, centralization is welfare-increasing. Comparative static examinations complement our analysis.

Short-time work benefits revisited: some lessons from the Great Recession

The Great Recession triggered a resurgence of short-time work (STW) throughout the OECD. Several countries introduced STW from scratch or significantly expanded the scope of the programmes already in place. In some countries like Italy, Japan and Germany between 2.5% and 5% of the workforce participated in STW schemes at the trough of the recession. In this paper we analyse the rationale for STW benefits and their effects on labour adjustment from both a cross-country and a time-series perspective. We find that STW actually contributed to reduce job losses during the Great Recession. However, the number of jobs saved, according to our macroeconomic and microeconomic estimates, is smaller than the number of participants in these schemes and the full-time equivalent jobs involved, pointing in some countries to sizeable deadweight costs. Other institutions, like plant-level bargaining over hours, wages and employment levels, may be more effective than STW in encouraging adjustment along the intensive margins in the presence of temporary shocks. Our results also suggest that STW cannot be readily extended to countries having much different institutional configurations as the demand for STW is very much affected by other institutions such as employment protection legislation and the degree of centralization of collective bargaining. Furthermore, STW must be temporary as during upturns may actually negatively affect employment. We also find that specific design features of STW – such as experience-rating and disincentives to 100% reductions in working hours – are important in improving the cyclical properties of STW. — Tito Boeri and Herbert Bruecker

Doctors’ political powers unfairly diluted – new HPCSA President

Teaching hospitals are national assets that must urgently be taken out of the hands of provincial governments and doctors must exit the central bargaining chamber where their negotiating power is reduced to that of ‘laborers and sweepers’. These are among the views of the newly appointed President of the Health Professions Council of South Africa, (HPCSA), Professor Sam Mokgokong, a groundbreaking local neurosurgeon and distinguished academic. Interviewed by Izindaba last month, Mokgokong, was unusually outspoken for an HPCSA President, displaying an independence rarely seen in his predecessor, Professor Nikky Padayachee, now the national Deputy Director General of Health. Mokgokong, best known internationally as a specialist and lead surgeon in separating craniopagus Siamese twins, was pressed on a number of issues that have historically angered doctors and distanced them from the HPCSA