Labour Markets and Industrial Relations in the Member States

with a declining rate of labour productivity growth because the new jobs were created in areas of lower productivity.

Based on the above, it can be seen clearly that from the point of view of employment and the performance of labour markets, labour market fl ex-ibility, industrial relations, and employment policy are decisively infl uen-tial factors and, therefore, are justifi ed as the basis for the formation of clusters. At the same time, it has been found that, compared to the other subsystems discussed in this study so far, each author’s choice of values and general outlook is more conspicuous, and the results attained more contradictory.

3.4.2 Labour Markets and Industrial Relations

and degree of coordination of wage bargaining is stronger in the two Mediterranean countries. Th e level of employment is below average.

In the second cluster, the two Scandinavian states, Denmark and Sweden, appear alongside Belgium. Th e labour market shows fl exibility similar to the Anglo-Saxon model, but the state spends generously on both active and passive labour market policy measures. Th is is accom-panied by a comparatively high level of trade union density and a wide- ranging system of wage bargaining. Th e level of employment is high. In the case of Belgium, however, data for employment and joblessness are considerably less favourable than in the other two countries.

Th e third cluster contains the Netherlands alone and is similar to the preceding cluster. In this case, however, the proportion of those in fi xed- term and particularly part-time employment is even higher than in the second cluster, while there is a lower amount of public expenditures on active labour market policy and greater spending on passive measures.

Th ough trade unions are not highly organised, wage bargaining is wide-spread and coordinated. Th e labour market is fl exible, and the level of employment is high.

Th e fourth cluster comprises the continental and Mediterranean coun-tries (Austria, Finland, France, Luxembourg, Germany, Portugal, and Spain), as well as one former socialist country, Slovenia. In these coun-tries, the labour market is more rigid compared not only to the Anglo- Saxon model but also to the second and third clusters. Th e proportion of those employed on fi xed-term contracts is high, and that of part-time workers is moderate, but indices measuring the rigidity of employment show high values, while non-wage labour costs are similarly elevated.

Spending on active labour market policy is moderate, and it is high on passive measures, but it still falls short of that of either the second or third clusters. Trade unions are only moderately organised, but the system of wage bargaining is widespread and coordinated. Both employment and joblessness are around the EU average.

Th e UK and Ireland show the textbook characteristics we expect from the Anglo-Saxon model. Th e proportion of those working on fi xed-term contracts is low, while the number of those employed part-time is very high; overall, the employment indices reveal an extraordinarily fl exible labour market. Labour market policy expenditures are very low, except

those devoted to information services. Although trade unions are mod-erately organised, wage agreements are not widespread. Th e employment level is high (Table 3.5 ).

In Fig. 3.4 , countries form groups based on indicators showing indus-trial relations and public spending on labour market policy measures (vertical axis) on the one hand and on the other hand the fl exibility of the labour market (horizontal axis) (S-stress: 0.066).

Measurements made using various indicators have failed to refl ect an insti-tutional peculiarity of labour markets in the continental and Mediterranean

Table 3.5 Labour market and industrial relations clusters Clusters

1. Low proportion of workers in fi xed-term or part-time employment

Bulgaria, Czech Republic, Estonia, Greece, Poland, Latvia, Lithuania, Hungary, Italy, Romania, Slovakia Low-level trade union density, with weak

collective wage bargaining, though stronger in two Mediterranean countries

Rigidity of employment and somewhat above-average non-wage labour costs

2. High proportion of workers in fi xed-term or part-time employment

Belgium, Denmark, Sweden

Highly organised trade unions, with widespread collective wage bargaining

Flexible employment regulations, and slightly above-average non-wage labour costs 3. Proportion of workers in fi xed-term and

particularly part-time employment

Netherlands Low-level trade union density, with widespread

collective wage bargaining

Flexible employment regulations, low non-wage labour costs

4. Moderate proportion of workers in fi xed-term and part-time employment

Austria, Finland, France, Luxembourg, Germany, Portugal, Spain, Slovenia Moderately organised trade unions, with

widespread collective wage bargaining Rigid employment regulations and average

non-wage labour costs

5. Moderate proportion of workers in fi xed-term and part-time employment

UK, Ireland Moderately organised trade unions, with weak

collective wage bargaining

Flexible employment regulations, with low non-wage labour costs

countries to which the literature on labour markets ascribes great signifi -cance; namely, the segregated nature of the labour market as evidenced in the varying levels of protection for labour market insiders and outsiders. We will return to this question when discussing the individual models.

Th e grouping of countries obtained above roughly approximates the grouping contained in the report of the European Commission:

Industrial Relations in Europe 2008. Based on the VoC literature, the authors describe the regimes of industrial relations (Table 3.6 ), with the borderline cases featured in parentheses.

Fig. 3.4 Two-dimensional MDS-based representation of labour markets and industrial relations

Industrial relations regimes or arrangements North Centre-west South West Centre-east Coordinated market economy Coordinated market economy Statist market economy Liberal market economy Statist or liberal? Universalistic “Segmented (status- oriented, corporatist)”

“Segmented (status- oriented, corporatist)”

Residual Segmented or residual? Inclusive Dualistic Dualistic Liberal Liberal Organised corporatism Social partnership Polarised/ state-centred Liberal pluralism Fragmented/ state-centred Labour-oriented Balanced Alternating Employer- oriented Employer-oriented Sector Sector Variable/unstable Company Company Integrating Integrating Confl ict-oriented Confl ict- oriented Acquiescent Institutionalised Institutionalised Irregular/politicised Rare/ event- driven Irregular/politicised Limited (mediator) Shadow of hierarchy Frequent intervention Non- intervention Organiser of transition Union-based/high coverage Dual system/high coverage Variable Union-based/ small coverage

Union-based/small coverage Denmark, Finland, Norway, Sweden Belgium, Germany, (Ireland), Luxembourg, Netherlands, Austria, Slovenia, (Finland)

Greece, Spain, France, Italy, (Hungary), Portugal

Ireland, Malta, Cyprus, UK Bulgaria, Czech Rep., Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia : European Commission ( 2009c : 49)

Diff erences between the Commission’s analysis and my own relate mostly to uncertain borderline cases. Moreover, I combine the three dimensions into my cluster analysis, whereas the Commission report addresses industrial relations, only including other labour market projec-tions via the Lisbon Strategy in its qualitative examination.

One borderline case is Ireland (Table 3.6 ). In this analysis, too, it is clear from the MDS diagram that the UK and Ireland, though quite dif-ferent, can still be grouped in the same cluster.

Th e other marginal case is Finland, whose labour market is considerably less fl exible than those of the two Scandinavian nations, and that, for this reason, is omitted from the Nordic cluster, which nevertheless includes Belgium, in this analysis. According to indices of EPL in the World Bank database (“Doing Business”), Belgium’s labour market is exceedingly fl ex-ible; however, employment data do not justify including the country’s institutional system in the cluster of Nordic countries. Looking more closely behind the data, the labour market is extremely segregated at the regional level. At the beginning of the 1980s, unemployment rates were still similar, but the regions have since strongly diverged, with the Flemish region falling below the EU-15 average, close to the Dutch level, while the Walloon and Brussels-Capital regions are considerably higher than the EU-15 average. In addition, mobility among the regions is extremely low (Estevão 2002 ) and did not change in the 2000s. ⁷

According to my analysis, the Netherlands is a “separate case”, clearly isolated from the continental countries and much more similar to the Scandinavians. Th is fi nding coincides with a common approach in the literature, which describes the Dutch solution as the polder ⁸ model, essentially meaning a consensus among social partners with the participa-tion of the state. Following the crisis of the 1970s, this consensus played a major role in helping the Dutch economy embark on dynamic growth from the 1980s onwards. Th is type of corporatism is more limited and random than previously (De Beus 2004 ; Hemerijck and Sleegers 2007 ; Wolinetz 2001 ).

In the description of the Southern countries in the Commission’s report, the categorisation of variable or unstable features several times (Table 3.6 ), signifying a quite heterogeneous group of countries. It is not surprising that in my study, the Mediterranean countries are divided

between the clusters of old continental and new, post-socialist nations (Table 3.5 ). France, however, belongs in this analysis—similar to the fi ndings of Sapir ( 2006 ) and Amable ( 2003 )—to the continental clus-ter (Table 3.5 ) and to the group of countries termed Centre-west in the Commission’s terminology. At the same time, there is no doubt that in the conception of the state’s role and of competition policy, there is an essential diff erence from Germany, for example (Aiginger et al. 2007 ).

Presumably thanks to the unifi ed internal market, these diff erences could not be measured in the product market cluster.

It is interesting that Hungary appears as a borderline case in the Commission report in proximity to the Mediterranean countries. In con-trast, both Berrou and Carrincazeaux ( 2005 ) and Cazes and Nesporova ( 2007 ) regard the Hungarian employment regime as one of the most liberal among the post-socialist nations.

Question marks are attached to the group of post-socialist countries in the Commission report, as the authors believe it cannot yet be known which characteristics will prove enduring. For this reason, it is worth looking at what kind of viewpoint can be shaped based on the literature.

Th e most striking feature of the labour markets of the new, post-socialist member states is what everyone mentions fi rst; namely, the low level of employment and activity. Initially, this low level was regarded as a con-comitant of the transition, but it has remained comparatively low even in countries that subsequently underwent dynamic economic growth.

Moreover, beginning in 1999, employment grew at a faster pace in the OMS than in the new members (Fialová and Schneider 2008 ). Certain structural peculiarities of both employment and joblessness are also repeatedly mentioned, including the exceptionally high level of unem-ployment among the young and low-qualifi ed and the major disparities in joblessness within each individual country, which even the mobility of the workforce does not reduce (Cazes and Nesporova 2007 ; Rashid et al.

2005 ; Schiff et al. 2006 ).

Opinions diff er regarding the causes of the enduringly low level of employment and its correlation with the institutional regime. Rashid et al. ( 2005 ) believe the root of the problem is that convergence in the CEE countries began with productivity growth, which brought higher wages but did not create jobs. Feldmann ( 2004 ) blames the infl exibility

of labour markets, while Fialová and Schneider ( 2008 ) point to greater fl exibility in EPL in the NMS compared to their older counterparts.

Schiff et al. ( 2006 ) state that the CEE places rank in the middle among industrialised countries in terms of the fl exibility of EPL. In their view, a lower EPL value correlates with a smaller shadow economy, and for this reason, International Monetary Fund (IMF) researchers recommend fur-ther liberalisation of the labour market. However, Cazes and Nesporova ( 2007 ) demonstrate that, in contrast with the OECD countries, in the CEE countries, stricter EPL increases employment. Th eir explanation for this is that stricter legal regulation whitens the economy, which is mani-fested in growth in formal employment. Both IMF and International Labour Organisation researchers agree that cutting taxes on labour and an active employment policy can have a signifi cant impact on employ-ment growth.

In describing industrial relations in the new, post-socialist member states, we encounter an unambiguous situation, as refl ected in the litera-ture. After the change in the political system, with the liquidation of large socialist-era companies and privatisation, the level of trade union density declined substantially and both remaining and new trade unions lent their tacit support to painful reforms that were regarded as unavoidable.

Employers’ organisations, meanwhile, did not exist and had to be created from scratch. Collective bargaining is decentralised, and trade unions refrain from taking action even when problems arise in the enforcement of collective contracts. Dimitrova and Petkov ( 2005 ) observe that values, basic principles, and standards in the area of industrial relations in the NMS are markedly diff erent from the European social model, which may undermine the prospect that the social aspect of expansion will proceed in a European direction. Th e Commission’s 2008 report on industrial relations likewise stresses, if in somewhat more tactful terms, that the EU’s eastward expansion has aggravated diff erences strongly, although it tends to place greater emphasis on convergence arising from common EU regulations. ⁹ In any event, strong trade unions did not stand in the way of market deregulation, which did not help create jobs, as might have been expected based on theoretical correlations.

Taking the examples of Poland and Hungary, Sissenich ( 2007 ) exam-ines how the regulations of EU social policy were transplanted and what

role was played by non-state actors in this process. From this research, it emerges that both employers’ and employees’ organisations not only in these two countries but also in the other post-socialist countries were largely uninvolved or only moderately involved in the process of adapta-tion. Th ese organisations failed to take advantage of the EU’s social dia-logue to at least assert their preferences, even if accession did not occupy them particularly. Th e author explains this fi nding by noting that mem-bership in both trade unions and civil organisations in general is consid-erably smaller in the post-socialist countries than in the OMS, such that mediating organisations are weak and protest action is rare.

Only in Slovenia have industrial relations evolved in a way that permits integration with the models of the OMS. Here, trade unions obtained a powerful role, despite a similarly declining level of trade union density.

Alone among the post-socialist countries, Slovenia is included among the old continental member states both in the Commission’s report (Table 3.6 ) and my analysis (Table 3.5 ). Th is separate path was made possible by two factors: on the one hand, Slovenia did not carry with it signifi -cant foreign indebtedness through the change of system; on the other hand, thanks to the Yugoslav system of workers’ self-management, the workforce began from a much better position—and with much greater experience in advocating their interests—than in the other post-socialist countries (Stanojevic 2005 ).

To summarise, the examination of labour markets reveals that a high level of employment can materialise under very diff erent institutional arrangements. I discuss the signifi cance of these institutional diff erences from the point of view of social models of European capitalism in the next point.