A9011115

Academy on Social Dialogue and Industrial Relations

Professor Gerhard Bosch, Institute for Work, Skills and Training, University of Duisburg-Essen, Germany (gerhard.bosch@uni-due.de)

”Outcomes of Collective Bargaining”

Turin, Italy • 26 November 2018 – 07 December 2018

www.itcilo.org 2

High differences in coverage by collective agreements (CA’s) in the world

Coverage depends on the level of agreements: is higher with multi-employer collective bargaining and lower with firm- or plant level bargaining, in between in mixed systems and zero where unions are forbidden

Coverage is high and stable in countries:• With high trade union density (Sweden, Denmark)• With high employer density (mandatory membership in chamber of

commerce (Austria)• With regular extension of agreements (France, Belgium and Greece in

the past) • With wage councils with arbitration (Uruquay)

www.itcilo.org 3

High coverage by CA’s through multi-employer bargaining

Source: Hayter/Visser 2018 Collective Agreements: Extending Labour Protection, ILO Geneva

www.itcilo.org 4

Low coverage by CA’s through single-employer bargaining

Source: Hayter/Visser 2018 Collective Agreements: Extending Labour Protection, ILO Geneva

www.itcilo.org 5

Dynamics of the predominant level of collective bargaining (CB)

www.itcilo.org 6

Controversial debate on the outcome of collective agreements among economists (I)

Neo-liberal view – focus only on labour costs• a barrier to micro and macro-flexibility• no other economic functions (like regulation of training, working time

time, internal flexibility, co-determination ….)• no societal effects like balancing power relations in society, giving

workers a voice in politics Dominant view of IMF, World Bank, EU Commission after 2009, World

Economic Forum …….

Main recommendations: abolition of centralized or industry wide CB, ofextension of agreements, of favorability principle, of after-effects as in Portugal, Spain, Roumania, Greece after 2009 or on Chile after 1973

Outcome is an empirical question

www.itcilo.org 7

World Economic Forum does not like industry wide CB in Germany and Sweden (ranking of 138 countries)

Source: World Economic Forum, The Global Competitiveness Report 2016–2017, own presentation

www.itcilo.org 8

Controversial debate on the outcome of collective agreements among economists (II)

Institutionalist view on centralized or industry-wide CB• Most important instrument to reduce inequality of market incomes

up to the middle income classes• Important built-in-stabilizer in economic crisis (avoids breaking down

of domestic demand)• Source of internal flexibility – beneficial substitute for unhealthy high

levels of hiring and firing• Reduction of bureaucracy and transaction costs – self-regulation

instead of state intervention• Levelled playing field for companies - Fair competition increases

incentives to invest in skills• Positive wider societal effects: Trust and democracy

www.itcilo.org 9

CA’s reduce inequality: Rate of coverage by CA’s and share of low-wage work in the EU (2014)

Source: Visser 2015, Eurostat, own calculations

Diagramm1

22.48

11.94

15.08

14.76

2.64

5.28

8.81

3.79

24.4

21.26

17.75

22.76

23.56

8.61

23.96

25.46

18.52

19.21

12.03

9.44

18.69

21.56

18.47

14.59

18.19

19.33

adjcov: Adjusted bargaining (or union) coverage rate

share of low wage earners in %

Coverage by collective agreements in %

Correlation: - 0,82

DE

LU

MT

AT

SE

FI

FR

BE

RO

UK

HU

EE

PL

DK

LT

LV

NL

SK

PT

IT

CZ

IE

SI

ES

BG

CY

57.6

59

62.79

98

89

93

98

96

35

11.92

23

23

14.67

84

9.89

15

84.84

24.9

67

80

47.29

40.49

65

77.58

29

45.19

Data

Niedriglohnempfänger als Prozentsatz der gesamten Angestellten (ohne Auszubildenden) nach Geschlecht [earn_ses_pub1s]

Letzte Aktualisierung07.12.16

Exportierte Daten19.02.17

Quelle der DatenEurostat

UNITProzent

SEXInsgesamt

SIZECLAS10 Arbeitnehmer und mehr

GEO/TIME200620102014Niedriglohnempfänger als Prozentsatz der gesamten Angestellten (ohne Auszubildenden) nach Geschlechtadjcov: Adjusted bargaining (or union) coverage rateKorr

Europäische Union (28 Länder):16.9617.15DE22.4857.6-0.82

Europäische Union (27 Länder)16.6916.9317.15LU11.9459

Euroraum (19 Länder)::15.88MT15.0862.79

Euroraum (17 Länder)14.2714.7815.7AT14.7698

Belgien6,82+B34B16:B406.373.79SE2.6489

Bulgarien18.922.0118.19FI5.2893

Tschechische Republik17.0518.1918.69FR8.8198

Dänemark8.318.178.61BE3.7996

Deutschland (bis 1990 früheres Gebiet der BRD)20.322.2422.48RO24.435

Estland23.1923.7622.76UK21.2611.92

Irland21.4120.6621.56HU17.7523

Griechenland15.7312.82:EE22.7623

Spanien13.3714.6614.59PL23.5614.67

Frankreich7.136.088.81DK8.6184

Kroatien:21.35:LT23.969.89

Italien10.2712.369.44LV25.4615

Zypern22.6522.6219.33NL18.5284.84

Lettland30.927.8125.46SK19.2124.9

Litauen29.1227.2423.96PT12.0367

Luxemburg13.1813.0611.94IT9.4480

Ungarn21.8719.5117.75CZ18.6947.29

Malta14.4317.6115.08IE21.5640.49

Niederlande17.7417.4618.52SI18.4765

Österreich14.1915.0214.76ES14.5977.58

Polen24.7224.1623.56BG18.1929

Portugal20.7216.0812.03CY19.3345.19

Rumänien26.8525.8224.4

Slowenien19.2417.1418.47

Slowakei18.319.0319.21

Finnland4.755.855.28

Schweden1.772.512.64

Vereinigtes Königreich21.7722.0621.26

Island11.248.997.54

Norwegen6.487.278.29

Schweiz:11.039.37

Montenegro::27.25

Die ehemalige jugoslawische Republik Mazedonien:28.2525.13

Serbien::22.91

Türkei0.240.40.46

Sonderzeichen:

:nicht verfügbar

Data

adjcov: Adjusted bargaining (or union) coverage rate

Share of low wage earners

Coverage by collective agreements

Korrelation: - 0,82

DE

LU

MT

AT

SE

FI

FR

BE

RO

UK

HU

EE

PL

DK

LT

LV

NL

SK

PT

IT

CZ

IE

SI

ES

BG

CY

www.itcilo.org 10

CA’s create middle income groups through differentiated wage grids and effective minimum wages by industry

:

Source: Bosch, G (2017) “Intersection between minimum wages and collective bargaining to increase pay equity”

MW

EMPL

OYE

ES (%

)

WAGE WAGEMW | CA

www.itcilo.org 11

Wages curves in Chile (no or decentralized CA’s) and Germany (industry-wide CA’s)

www.itcilo.org 12

Breakdown of internal demand after the abolition of industry-wide CB as built-in-stabilizer in Greece: Collapse of internal demand

-10

-8

-6

-4

-2

0

2

4

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Spring 2008

Fall 2008

Spring 2009

Fall 2009

Spring 2010

Fall 2010

Spring 2011

Fall 2011

Spring 2012

Fall 2012

Spring 2013

Fall 2013

Spring 2014

Fall 2014

Spring 2015

Fall 2015

Spring 2016

Fall 2016

Spring 2017

Spring 2008Fall 2008

Spring 2009Fall 2009

Spring 2010

Spring 2011

Spring 2012

Fall 2012

Spring

Spring 2014

Fall 2014Spring 2015

Fall 2015

Fall 2016

Spring 2017 Fall 2017

Source: EU Commission, own compilation

www.itcilo.org 13

Main results of most recent empirical studies on CA’s (I) Reduction of inequality: “… the erosion of labour market institutions

in the advanced economies is associated with an increase of income inequality” (Jaumotte/ Buitron 2015: 27, World Bank).

Positive effects on employment: “Co-ordinated systems are linked with higher employment and lower unemployment, also for young people, women and low-skilled workers than fully decentralisedsystems" (OECD 2018)

www.itcilo.org 14

Main results of most recent empirical studies on CA’s (II)

The articulation between different levels of CB of the whole system is more important than a single institution for sustainability, flexibility and performance: uncontrolled decentralisation has negative effects – articulation between company and industry-wide CB positive effects (OECD 2018)

Extension of scope and time horizon through co-ordinatedCB: negotiations on internal flexibility (skills, working-time)

“In some countries, trade unions and employer organisations engage in sector-level initiatives that aim to enhance labour market adaptability by facilitating job transitions and providing workers with the skills needed in a changing world of work” (OECD 2018)

Negotiations on internal flexibility not automatic outcome of co-ordinated CB – depends on actors, on workplace participation and an innovation friendly environment

www.itcilo.org 15

Best practice of CB: Innovative agreements (I)

Norway: Industry Agreement 2016-18 y – Chapter on Competence: Annual discussion with shop stewards on competence gaps in relation to needs, creation of opportunities for unskilled to get a trade certificate, updating the qualification of skilled workers.

Outcome: High productivity and employment rates of older and unskilled workers

Germany: Many CA’s on the recruitment of apprentices on national, regional and company level.

Outcome: lowest youth employment rate in the EU, recruitment of 540 000 apprentices even in the great recession 2009

www.itcilo.org 16

Best practice of CB: Innovative agreements (II)

Germany: Many CA’s on working flexibility: • adaption of hours to business cycle (compromises between

employers and employees interests) • temporary reduction of working hours in an economic crisis to avoid

dismissals (“Dismissing hours not employees”)• improving health and safety (new more ergonomic shift systems) • Increasing calculability of hours (minimum duration of notice for

variations of working hours)• Increasing working time options of employees: Recent CA’s of

German Railways and in metal industry give employees options between money and 8 free days: more than 50% voted for free days / even 80% of shift workers

www.itcilo.org 17

Percentage of fall in total labour input due to fall in working hours per employee, Germany, 2008–2009

0

10

20

30

40

50

60

70

80

90

100

Source: EUROSTAT .

Diagramm1

US

EU27

DE

AT

BE

NL

SE

IT

FI

DK

FR

UK

PL

EL

BG

ES

IE

RO

PT

CY

MT

CZ

EE

HU

LV

LT

SK

SL

East

30

33

97

49

38

38

37

35

33

32

31

30

24

18

10

8

8

6

4

0

0

0

0

0

0

0

0

0

Sheet1

USEU27DEATBENLSEITFIDKFRUKPLELBGESIEROPTCYMTCZEEHULVLTSKSL

East3033974938383735333231302418108864000000000

www.itcilo.org 18

Political Impact: Decreasing participation in elections low wage earners in Germany

Source: Bundesregierung, Armuts- und Reichtumsbericht 2017.

IncomeClassSkills

low middle high

www.itcilo.org 19

Conclusions

Recommendations to deregulate co-ordinated CB not based on facts

Research shows positive outcome of co-ordinated CB on employment

CA‘s powerful instrument to reduce inequality of market incomes: No need to choose between employment and equality

CA‘s help developing internal flexibility – many innovative agreements

Important: articulation between levels

Creative actors needed: learning from good examples

Foliennummer 1High differences in coverage by collective agreements (CA’s) in the worldHigh coverage by CA’s through multi-employer bargainingLow coverage by CA’s through single-employer bargainingDynamics of the predominant level of collective bargaining (CB)Controversial debate on the outcome of collective agreements among economists (I)World Economic Forum does not like industry wide CB in Germany and Sweden (ranking of 138 countries)Controversial debate on the outcome of collective agreements among economists (II)CA’s reduce inequality: Rate of coverage by CA’s and share of low-wage work in the EU (2014)CA’s create middle income groups through differentiated wage grids and effective minimum wages by industryWages curves in Chile (no or decentralized CA’s) and Germany (industry-wide CA’s)Breakdown of internal demand after the abolition of industry-wide CB as built-in-stabilizer in Greece: Collapse of internal demandMain results of most recent empirical studies on CA’s (I)Main results of most recent empirical studies on CA’s (II)Best practice of CB: Innovative agreements (I)Best practice of CB: Innovative agreements (II)Percentage of fall in total labour input due to fall in working hours per employee, Germany, 2008–2009 �Political Impact: Decreasing participation in elections low wage earners in GermanyConclusions