The Erosion of the German System of Industrial Relations

The paper assesses current trajectories of change in the German system of industrial relations by analysing the co-determination and collective bargaining systems. It argues that two parallel developments undermine the institutional stability of the German model. First, the institutional base of the German industrial relations system, which has served as the pre-condition of its past success, has been shrinking during the last two decades. This is due to a decline in coverage by the two major industrial relations institutions: the works council system and wage agreements. Today fewer than 15 per cent of German plants are covered by both a valid collective agreement and a works council. Second, increasing decentralization pressures within collective bargaining tend to undermine the division of labour between co-determination and collective bargaining. The dynamics of an institutional erosion of the German industrial relations institutions and the decentralization of collective bargaining disturbs the fine-tuning of the mediating process between macroeconomic steering capacity and co-operative workplace industrial relations. This tendency has been aggravated by the effects of German unification. The current institutional developments of the German industrial relations system leave serious doubts about the future of a successful model of co-operative modernization.     

Decentralized Wage Formation in Sweden

Recent Swedish collective bargaining agreements have incorporated provisions for local pay review talks and opportunities for individuals to negotiate their own wages. Using trade union data, we show that members who participate in local pay review talks and members who negotiate their own wages have significantly higher monthly wages than those who do not. Pay decentralization either improves an individual's bargaining position or attracts more productive trade union members. Either way, trade union wage policies to increase individual‐level wage variance are achieving their intended effects.     

The Flip Side of Organized Decentralization: Company‐Level Bargaining in Denmark

The Danish collective bargaining system is often considered a good example of organized decentralization. It has been characterized as a centralized decentralization suggesting a reproduction of sector‐level bargaining relations at company level. A recent survey on company‐level bargaining in the Danish industrial sector confirms this hypothesis with regard to the experiences of local managers and shop stewards. However, part of the survey also questions whether the reproduction will continue in the future. Small‐ and medium‐sized enterprises and their employees tend to miss out on the mutual benefits obtained through company‐level agreements. Furthermore, shop stewards often find it difficult to gain employee support during negotiations, which jeopardizes their bargaining relations with management.     

Co‐ordinated Bargaining: A Process for Our Times?

This article draws on past as well as present to offer a systematic overview of co-ordinated bargaining, which many commentators see as a likely vehicle for the 'Europeanization' of industrial relations. It argues that co-ordinated bargaining is indeed likely to play a major role within the EU, reflecting not only trade union pressures but also management's use of benchmarking to promote organizational change and competitiveness. The pace with which co-ordinated bargaining develops is likely to vary considerably both within and between sectors, however, leading to multi-speed 'Europeanization' and further decentralization of collective bargaining within national systems.     

Unions and Collective Bargaining in the Wake of the Great Recession: Evidence from Portugal

Against the backdrop of its industrial relations architecture, characteristic of the ‘southern European group’ and intimately linked to the recommendations of the Troika, this paper examines four key aspects of Portuguese collective bargaining. First, it provides definitive estimates of private sector union density for that nation. Second, it models the determinants of union density at firm level. Third, it yields estimates of the union wage gap for different ranges of union density. The final issue examined is contract coverage. The received notion that the pronounced reduction in the number of industry‐wide agreements and extension ordinances of late is to be equated with a fall in coverage is shown to be a chimera, the number of workers covered by new and existing agreements remaining largely unaffected by the economic crisis. The reduced frequency of new agreements and extensions is instead attributed to downward nominal wage rigidity in low‐inflation regimes.     

Decentralization in the NHS: Prospects for Workplace Unionism

The substantial changes that are taking place in the organization of the UK public sector are transforming traditional patterns of industrial relations based on centralized and institutionalized collective bargaining. Whether the trade unions can successfully respond to this process will be of prime importance for the future development of industrial relations in the public sector. The paper considers recent evidence of the impact of decentralization on union organization in four hospital units. The research findings suggest that there is a growth in union activity as a result of the process of decentralization, but that the effectiveness of unions is likely to vary considerably between hospitals.     

Industrial Relations, Social Pacts and Welfare Expenditures: A Cross-national Comparison

Industrial relations and welfare state are interrelated. On the basis of time‐series data for 20 OECD countries, this paper discusses and tests the impact of industrial relations on social expenditures, including ‘social pacts’ as a means of combining wage moderation and welfare state reforms. The findings suggest that industrial relations have an impact mainly through the differential effects of distinct bargaining systems: a minor impact results from their externalities. The major impact ensues from their differing degrees of politicization, leading to higher expenditures in the case of peak‐level arrangements, as compared to more decentralized systems. Hence, the widely assumed potential of social pacts for welfare state reforms has been exaggerated.     

Decentralization of Collective Agreements and Rising Wage Inequality in Israel

This paper presents a systematic analysis of the decentralization of the Israeli system of collective bargaining and its contribution to the rise in earnings inequality. We quantitatively analyze all collective agreements that were signed between 1957 and 2003, and present the scale, scope, and timing of five dimensions of decentralization. The findings suggest that decentralization started in the mid‐1970s when national agreements were less likely to be extended to nonunion employees; it was intensified in 1975–1980 when nationwide industrial agreements were supplanted by occupational and local agreements. Decentralization became fully consolidated by 1987 when peak‐level agreements covering the entire private sector were no longer signed. We then present evidence (including time‐series analyses that control for union density and macroeconomic indicators) that the process of decentralization, especially the decline in the use of extension orders and the proliferation of local agreements, explains a significant part of the sharp rise in earnings inequality in Israel during 1970–2003.     

Between Fragmentation and Centralization: South Korean Industrial Relations in Transition

This study investigates profound changes in South Korean industrial relations after the Asian financial crisis of 1997. Korea's neoliberal labour reforms have produced a large number of non‐standard workers, deepening the union representation gap. Realizing that the fragmented enterprise unions could not adequately protect workers from this degradation of labour, trade union leaders began a major organizational drive at the industry level and tried to institutionalize sectoral bargaining. A political space for union centralization was partially opened because the state needed labour's co‐operation to implement neoliberal reform packages. However, disorganized centralization in Korea, where important decisions on wages and working conditions have been negotiated mainly at the company level, has faced limitations in achieving meaningful changes in the dualistic structure of the labour market. This study concludes with a review of changes in Korea's labour law in 2010 and a discussion on the effects of the law on bargaining rights of non‐standard workers and the incipient industry‐level bargaining. This trend towards union centralization may continue, but the notable gap between the formal bargaining structure and actual practice is expected to widen.     

The Union Wage Effect in Japan

Previous studies point to Japanese labor unions’ lack of bargaining power that results from their organization at an enterprise level. However, a detailed examination of the institutional setting backed by the Labor Standard Law and Trade Union Law reveals that unions have strong bargaining power against deteriorating work conditions. This paper examines the effect of unions on wages using the Japanese General Social Surveys 2000–2003, which cover a period of economic stagnation. We find a robust union wage premium for both males and females. A Cotton–Neumark decomposition reveals that about one‐fifth of union workers’ higher wage is explained by the difference in the union and nonunion wage structures. We also can confirm the union wage compression effect using the DiNardo, Fortin, and Lemieux (1996 ) method. Union workers are likely to think that they will not find jobs with similar compensation packages if they leave their current jobs. In summary, unions in Japan contribute to an increase in the average wage and compress the wage distribution among their workers. This result is reconciled with previous findings by considering the uniqueness of the macroeconomic conditions of the sample period.     

Union Involvement in Workplace Change: A Comparative Study of Local Unions in Canada and Mexico

This paper examines the sources of local union power to cope with workplace change. Are workplace unions active participants, merely passengers, outright opponents, or entirely excluded from the change process? Drawing on 18 case studies and a survey conducted in the auto and metalworking industries in Mexico and Canada, the results suggest that greater internal solidarity, stronger articulation with other levels of union and community activity and the pursuit of an autonomous agenda all provide the basis for enhanced local union bargaining power in the context of globalization. This general conclusion applies to Canadian as well as Mexican local unions and suggests analytical paths for understanding the construction and renewal of union power.     

Industrial Relations Systems and US Foreign Direct Investment Abroad

Five readily distinguishable industrial relations systems are identified based on differences in education levels, hourly compensation costs and various government and collective bargaining constraints placed on management's freedom to set the terms and conditions of employment. A model of foreign direct investment (FDI) that incorporates these key industrial relations variables is then specified and tested against US FDI across a sample of nine industries and 33 industrialized and developing countries. The industrial relations system variables significantly influence US FDI abroad. In particular, education is negatively related to FDI across low skill–low wage countries but is positively related to FDI across high skill–high wage countries. Higher hourly compensation costs (apparently capturing higher productivity) are associated with greater FDI. Whereas government restrictions on layoffs, union penetration and centralized negotiation structures are negatively related to US FDI, the ratification of ILO standards and works council policies are positively related to US FDI. Based on these findings, the FDI attractiveness of industrial relations systems are compared and policy implications discussed.     

Global Collective Bargaining on Flag of Convenience Shipping

The most significant case of transnational union bargaining co‐ordination in existence is in the maritime shipping industry. A global union association, the International Transport Workers’ Federation (ITF), and a global employers’ federation, the International Maritime Employers’ Committee (IMEC), now negotiate over pay scales for seafarers on Flag of Convenience (FOC) ships. These negotiations set the pattern for pay and working conditions for a signifi‐cant portion of the global seafaring work‐force. The ITF brought about global wage bargaining by building and enforcing a global inter‐union consensus between developed and developing countries around a uniform wage rate.     

Unions and Wages in Australia: Does Employer Size Matter?

Industrial relations reforms starting in the late 1980s decentralized wage determination in Australia. Using data from the Australian Bureau of Statistics’ Survey of Education and Training gathered in 1993, before the full effects of decentralization had been realized, and in 2001, after which the impacts of structural changes had become manifested, the study shows the emergence of an inverse relationship between the employer size–wage effect and union/nonunion wage differential among male workers. The relationship is similar to those found in the United States and the UK, other economies with decentralized wage‐setting regimes.     

Wage Cyclicality Under Different Regimes of Industrial Relations

We analyze the effect of collective wage agreements and of works councils on the cyclicality of real wages. Using employer–employee data for western Germany (1995–2004), we find that wage adjustments to positive and negative shocks are generally not symmetric. Wage growth increases in all industrial relations regimes when unemployment is falling, but this inverse relationship is weaker when unemployment is rising. Moreover, in plants with individual‐level bargaining, wages do not adjust at all to rising unemployment. Works councils increase wage growth only in firms covered by sectoral agreements, but they do not affect the cyclicality of wages.     

An Individual‐Level Study of Contract Ratification Support

This study uses constructs developed from theoretical models of both unit‐level ratification studies and individual‐level studies of strike support to predict individual employee ratification voting behavior and contract satisfaction. Surveys were given to union members before and after ratification voting. The results suggest that constructs assessing economic factors, employment relations, union relations, and the importance of contract information from the union all influence ratification support. While the bargaining issues are important in explaining ratification support, factors beyond the bargaining issues, such as employer and union loyalty and providing information about the contract, are related to ratification support.     

We Want Them All Covered! Collective Bargaining and Firm Heterogeneity: Theory and Evidence from Germany

This article establishes a link between the degree of productivity dispersion within an industry and collective bargaining coverage of the firms in the industry. In a stylized unionized oligopoly model, we show that differences in productivity levels can affect the design of collective wage contracts a sector‐union offers to heterogeneous firms. Using German linked employer–employee data, we test a range of our theoretical hypotheses and find empirical support for them. The dispersion of sector‐level labour productivity decreases the likelihood of firms being covered by a collective bargaining agreement on the industry level, but increases the likelihood of firms being covered by firm‐level agreements. The results hold for different subsamples and (panel) estimation techniques.     

Indicative and Updated Estimates of the Collective Bargaining Premium in Germany

This study provides updated evidence on the union contract differential in Germany using establishment‐wide wage data and two estimation strategies. It provides pairwise estimates of the union differential based on separate samples of collective bargaining leavers and joiners vis‐à‐vis the corresponding counterfactual groups. We report that average wages increase by 3 to 3.5 percent after entering into a collective agreement and decrease by 3 to 4 percent after abandoning a collective agreement. Excluding establishments that experience mass layoffs does not significantly influence these net findings, although such establishments record wage losses—statistically insignificant for joiners but up to 10 percent in the case of leavers, as compared with the counterfactuals. The backdrop to these new indicative estimates, which are properly conditioned on establishment size and industry affiliation, inter alia, is one of wage stagnation and continuing union decline.     

Estimating the Wage Premium of Collective Wage Contracts: Evidence from Longitudinal Linked Employer–Employee Data

Using a large‐scale linked employer–employee dataset from western Germany, this paper presents new evidence on the wage premium of collective bargaining contracts. In contrast to previous studies, we seek to assess the extent to which differences in wages between workers in covered and uncovered firms arise from the nonrandom selection of workers and firms into collective bargaining coverage. By measuring the relative wage changes of workers employed in firms that change contract status, we obtain estimates that depart considerably from previous results relying on cross‐sectional data. Results from analyzing separate transitions show that leaving industry‐level contracts is associated with subsequent wage losses. However, the results from a trend‐adjusted difference‐in‐difference approach indicate that particularly the transitions to no coverage appear to be associated with negative shocks. Overall, our findings provide no evidence of a “true” wage effect of leaving wage bargaining, once we account for differences in pretransition wage growth.     

Integration and Dealignment in Public Enterprise Industrial Relations: A Study of British Rail

This paper considers whether a process of dealignment of workplace organizations from the national union and industrial relations system has occurred in British Rail. As a starting point, it is noted that workplace representatives have traditionally been closely integrated with other actors in the system. Integration has been based on the supply of bargaining resources by the national union and other bargaining institutions. If new management industrial relations policies have cut back the supply of these, it is possible that workplace organizations will dealign themselves from the national union. This hypothesis is considered using data obtained from a survey of train drivers' representatives. It is found that there is no evidence for dealignment and that in a significant minority of cases closer rather than weaker links are being forged.