The impact of the internal market on pay and collective bargaining

Directorate-General For Employment Social Affairs And Inclusion European Commission

Description

Employment policy
Social policy

Informations

• Publié par: DIRECTORATE-GENERAL-FOR-EMPLOYMENT_SOCIAL-AFFAIRS-AND-INCLUSION-EUROPEAN-COMMISS
• Nombre de lectures: 11
• Langue: English
• Poids de l'ouvrage: 3 Mo

Extrait

The impact of the internal market
on pay and collective bargaining
Employment & social affairs
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European Commission The impact of the internal market
on pay and collective bargaining
IDS Incomes Data Services Ltd
Employment Sc social affairs t and labour market
European Commission
Directorate-General for Employment, Industrial Relations
and Social Affairs
Unit V/A.2
Manuscript completed in August 1996 This report was prepared by David Shonfield in collaboration with Pete Burgess, Ken
Mulkearn, Tony Morgan, Kevin Doogan, School for Policy Studies, University of
Bristol.
This report was financed by and prepared for the use of the European Commission,
Directorate-General for Employment, Industrial Relations and Social Affairs. It does
not necessarily represent the Commission's official position.
A great deal of additional information on the European Union is available on the Internet.
It can be accessed through the Europa server (http://europa.eu.int).
Cataloguing data can be found at the end of this publication.
Luxembourg: Office for Official Publications of the European Communities, 1997
ISBN 92-828-1802-0
© European Communities, 1997
Reproduction is authorised provided the source is acknowledged.
Printed in Belgium Contents
1. Introduction 1
2. Methodological approach 4
3. Summary of the main findings 8
4. Company views: the IMP and corporate personnel policies 11
5. Survey of employers' organisations and trade unions5
6. The impact of the IMP: an inter-sectoral analysis of pay statistics 20
7. Indexation, inflation and pay: the impact of the ERM 33
8. The IMP and pressures for decentralisation7
9. 'Marketisation' and the growth of variable pay 55
10. The impact of foreign direct investment 6
11. The impact of the IMP on small and medium enterprises 7
Appendix I: Location 8
Appendix II: The impact of liberalisation in air transport and 99
telecommunications
References and additional sources 101. Introduction
This report examines the development of nominal wages and the collective bargaining process in
the EU Member States. It is based on a review of changes in pay and bargaining over the ten-year
period 1985 to 1995 and an assessment of the extent to which these changes have been influenced
by the Internal Market Programme (IMP).
There is, by definition, no direct impact from the IMP on pay and bargaining. Specific IMP
measures have had a substantialt on individual sectors, two of which - air transport and
telecommunications - are the subject of case studies appended to this report. But in general this
report is about the indirect impacts of the IMP as a whole on pay and bargaining developments.
From an early stage it has been clear that analysis of quantitative data would produce only limited
results. This report therefore relies to a large extent on a qualitative analysis of change in
bargaining, supported by our own and other surveys of companies and representatives of
employers' organisations and trade unions.
Structure of this report
We begin with a review of the main literature which has helped in identifying the themes of this
report. We then outline a number of hypotheses about the possible impacts of economic integration
on pay and collective bargaining and set out the four key hypotheses we have used to test for the
impact of the IMP. We follow this with a summary of our conclusions, before going on to review
our findings in detail.
The impact of economic integration
The starting point for our research is the work carried out by two study groups set up by the
Commission in 1989 and 1991. These exercises reached a number of conclusions about the possible
impact of economic integration on European labour markets. We have drawn on these to arrive at a
series of hypotheses from which we have selected four main theses to be tested.
This earlier research (Marsden et al 1992, 1992a) concluded that pressures on labour markets from
increasing integration came from four main directions: the easing of trade restrictions; increased
possibilities for labour mobility; greater capital integration; and progress towards monetary union.
Five main sets of problems of pay adaptation were identified: the imbalances in direct labour costs
and social charges; inflationary expectations and their embodiment in bargaining practices; wage
structure pressures of economic integration; rigidities in public sector pay; and pressures caused by
the introduction of new systems of management and work organisation.
The findings suggested that a number of developments were necessary for the successful transition
to the Single Market.
1. There was a need to change the 'speed of adaptation of wage expectations', specifically to move
away from indexation and quasi-indexation towards pay increases based on productivity.
2. There was a need to change the pay 'linkage' between sectors, to avoid the damaging effects of
comparability - particularly in the low-wage economies.
3. Greater decentralisation of the bargaining process would both aid in weakening existing sectoral
and occupational linkages and encourage pay arrangements linked to performance. 4. The development of different types of performance pay would blur the edges of distributional
conflicts, giving the parties involved a greater number of registers on which compromise could be
negotiated.
5. In the public sector, systems building automaticity into the evolution of pay - such as implied
indexation and increments related to age or seniority - would require revision.
Some of these developments were already partly in place, some were anticipated and others
required policy changes from governments, employers and trade unions. In general, the conclusion
was that 'the scope that governments ands have to buy change from employees' was
being constrained by the move to the Single Market - particularly the economic and financial
convergence criteria agreed at Maastricht. However, the effect was at least partially offset by the
reduced bargaining power of employees and hence the lower price employers have to pay for
changes in working practices (Marsden 1992a).
There was thus some optimism that the increased competitive pressures from the move to the
Single Market could be contained without a severe rupture in industrial relations.
Other themes
The literature on the possible impacts of economic integration is copious on the question of
monetary convergence and union, but virtually silent on the question of the IMP. The other themes
of relevance to this report are outlined below.
Pay and inflation
As far as monetary union is concerned, the issue examined in this report is whether the disciplines
of the ERM (and subsequently the EMU convergence criteria) have changed the attitudes of pay
bargainers to inflation. The hypothesis (Giavazzi et al 1988; Barreli 1990) is that the previous lack
of credibility of government policies on exchange rates and inflation was replaced by an ERM-
induced credibility, and that this in turn caused a change in inflationary expectations. We examine
this issue in Section 7.
The impact of EMU
Boyer (1993) argues that the move from 'National Labour Standards' to a 'European Monetary
Standard' means that pay-setting will become a key variable in determining the competitiveness of
different regions. He postulates a number of alternative wage-setting systems which might be
compatible with EMU, ranging from the complete decentralisation of pay negotiations to sectoral
agreements at European level. However, despite some evidence of convergence of nominal wages
in the 1980s, under the discipline of the ERM, there is no evidence of general transition to pay
regimes suitable for full monetary union. Reviewing the literature on pay and the possible effects of
economic integration, Boyer's realistic, if somewhat downbeat, conclusion is that 'The acceleration
of European integration ... shows starkly that economists do not yet have theories and models at
their disposal which allow them to be sufficiently clear about the stakes involved in changing an
economic and financial regime.'
Flexibility and decentralisation
A more flexible and decentralised regime of pay determination at company level (Weitzman 1984)
is seen by Boyer as one possible development. And this is a key element in the evolution of a
'European Model' of wage bargain outlined by Vaughan-Whitehead (1990). On this view there is a
broad convergence of pay structures on systems characterised by four main components: a basic wage fixed at sectoral level; an element to reward individual performance; a share in company
profits; other benefits accentuating the diversification of benefits. We look in more detail at these
issues in Sections 8 and 9.
Social dumping
One persistent theme of discussions on the impact of economic integration is the variation in labour
costs and labour regulation in Member States and the spectre of'social dumping'. Social dumping
has been used to describe a variety of phenomena. As defined by Buigues et al (1990) social
dumping is 'the recourse to working conditions and social standards which are below the levels
w