Comparative Labor Relations

The previous chapters present the U.S. labor relations system in detail, but labor relations in other countries can be very different. The scope of bargaining, the extent of legal protection, and the nature of labor unions vary from country to country. Studying labor relations in other countries provides a richer understanding of the subject, can present ideas for reforming the U.S. system, and is also important for working professionals in a global economy.

The goal of this chapter is comparing the U.S. labor relations system to other systems. The basic elements of labor relations systems around the world, including a brief history and current status report, are described for major industrialized democratic countries around the worlds, as well as for the emerging economies of Eastern Europe and Asia.

After presenting these country vignettes, the discussion of globalization from Chapter 12 is revisited with particular emphasis on how globalization is causing converging divergences of labor relations practices across countries through pressures for decentralization and flexibility. A consideration of the extent to which the labor relations experiences of other countries can provide ideas and lessons for reforming the U.S. labor relations system concludes the chapter.

Understanding how labor relations works in other countries is critical for managers and union leaders who have professional activities involving other countries. Describing the broad outlines of the traditional workings of labor relations systems of a number of representative developing countries is therefore the primary objective of this chapter.

Learning Objectives

By the end of the chapter, students should be able to:

1. Compare the basic features of labor relations systems in the major industrialized, democratic countries around the world.

2. Identify the basic features of labor relations systems in the transition and less developed economies of Eastern Europe and Asia.

3. Understand various options in labor relations systems for reacting to the pressures of globalization, decentralization, and flexibility while trying to balance efficiency, equity, and voice.

4. Determine the extent to which the labor relations experiences of other countries can provide ideas and lessons for reforming the U.S. labor relations system.

Lecture Outline

I. Introduction

A. Consideration of labor relations in multiple countries provides a rich way for thinking broadly about the underlying problem of balancing efficiency, equity, and voice.

B. Comparative analyses of labor relations can provide ideas for reforming the U.S. system.

C. Support for unionization, a socialist movement, legal rights for unions, and low employer resistance to unions are widely present in industrialized, democratic countries except the United States.

II. Canada

A. .Canada and the United States have similar economic, institutional, and legal features, comparable demographic, occupational, and industrial structures, interdependent product markets, and similar corporations.

B. Canadian labor law is not centralized as it is in the U.S.

C. Canadian labor law makes it easier to establish and maintain a union and also makes it more difficult for employers to break an existing union.

D. Canadian labor relations lacks right-to-work laws.

E. Canadian labor relations processes are similar to the U.S.

F. Canadian unions are moving toward a social unionism philosophy in which labor has more of a militant, social activist role.

III. Mexico

A. Labor relations in Mexico is broadly representative of labor relations in developing countries.

B. On paper, Mexican law provides very strong protections for workers and unions, but the extent of enforcement is questionable.

C. Labor negotiations and unions have traditionally been controlled by the government.

1. To have legal rights, unions must register with the government.

IV. Great Britain

A. The labor relations system in Great Britain illustrates the concept of voluntarism.

1. Union recognition occurs primarily on a voluntary basis (that is, because of economic rather than legal power)

2. Adherence to contracts is largely voluntary (again, because of economic rather than legal power)

B. Many unionized workplaces have multiple unions.

C. The British labor movement has a close association with the Labour Party.

D. The number one issue in British labor relations is probably declining union density.

E. British labor is starting to look more toward the European Union as a method for leveraging labor standards and public policy in favor of workers and their representatives.

V. Ireland

A. The core of Irish labor relations is very similar to British labor relations.

B. The striking contrast with British labor relations is the Irish inclusion of social partnership on top of its voluntaristic labor relations system.

C. Due to a growing economic crisis in the 1980s, the Programme for National Recovery was negotiated in 1987 to create a fiscal and monetary climate that was conducive to economic growth and a reduction in government debt.

1. Social partnership agreements such as this reflect a system of centralized bargaining.

2. This type of agreement reflects a social partnership, not a limited economic or workplace focus.

3. For unions, a social partnership arrangement provides greater social relevance as the voice for all workers, and perhaps consumers and taxpayers as well.

VI. France

A. Labor relations in France consists of an interesting mixture of:

1. Militant, often politically oriented unions but weak collective bargaining.

2. Very low union density but very high coverage by industry-level agreements.

3. Several mechanisms for workplace-level representation.

B. Unlike the U.S. emphasis on business unionism, the French union federations often have distinct political or ideological perspectives, thus France is an example of political or ideological unionism.

1. This is a pluralist model of political unionism rather than a corporatist model.

2. The French unions pressure the government to enact policies favorable to the unions’ agendas rather than participating directly in policymaking.

C. Since the 1980s, collective bargaining and workplace representation have increased in importance; however collective bargaining agreements in France are weak by U.S. standards.

D. French law provides for several forms of workplace-level employee representation separate from labor unions.

VII. Germany

A. The labor relations system of Germany is best known for its system of codetermination in conjunction with sector bargaining.

B. There is one dominant union federation that accounts for over 80 percent of German union membership.

C. Collective bargaining is concentrated at a centralized, industry (sector) level complimented in the workplace by codetermination.

D. German codetermination has two components:

1. Works councils.

2. Employee-representation on corporate supervisory boards.

E. German works councils are legally distinct from unions – their existence does not depend on a local union presence.

F. Industry-wide collective bargaining agreements specify minimum standards and other broad parameters for the workplace; work councils work out specific details, especially pertaining to implementation issues, for each workplace.

G. German supervisory boards are less powerful than U.S. boards of directors, but employee representation nevertheless provides workers with a voice when strategic decisions are being considered.

H. In Europe, joining a trade union is as much an act of political commitment as it is a step to support collective bargaining.

VIII. Sweden

A. The major dimensions of labor relations in Sweden, and the other Nordic countries, appear broadly similar to those in Germany.

B. However, while workplace representation in Germany is institutionalized by law in the form of work councils that are technically independent of labor unions, until recently workplace representation in Sweden has been institutionalized by culture and tradition in the form of strong workplace-level unions.

C. New forms of work organization are moving towards a “solidaristic work policy” in which unions are involved in the transformation of work to ensure that workers as well as companies benefit from new forms of work organization.

IX. Eastern Europe

A. After World War II, labor relations in the Soviet Union and the Communist countries of Eastern Europe followed a Stalinist model of industrial relations.

B. Unions were a critical part of the economic and political system, acting as transmission belts for delivering the Communist Party’s agenda to the working class.

C. Unions in a Stalinist system had two roles:

1. To facilitate the state’s production goals.

2. To protect individual workers from abusive managers.

D. Through the efforts of brave workers and union leaders, the Polish union Solidarity was finally made legal.

E. The Solidarity movement has played a huge part in the downfall of Communism; however the affected countries struggle with the transition to new economies and political systems.

X. Australia and New Zealand

A. Before 1980, unions in Australia were traditionally organized mostly on a craft or occupational basis.

B. The Australian labor movement has actively pursued union mergers and amalgamations to transform a relatively large number of small unions into a small number of industry-based or general unions.

1. This strategy attempts to counter the decline in union density.

2. This strategy raises the issue of balancing union strength with responsiveness to the needs of individual workplaces and workers.

C. The central feature of Australian labor relations has traditionally been a centralized system of arbitration awards.

D. Australian labor relations has pushed away from centralized awards toward greater decentralization and enterprise-level bargaining.

E. Labor relations in New Zealand has a similar trend with more radical reforms.

1. New Zealand has pursued decentralization by abolishing its award system.

XI. Japan

A. The primary institutional feature of Japanese labor relations is enterprise unionism.

B. This system is embedded in a broader system of human resource management structured around lifetime employment, seniority and firm-based wages, and broad job classification.

C. A number of companies also have joint labor-management consultation bodies, by some accounts more important than collective bargaining.

D. Enterprise-level consultation and bargaining are complemented by an annual wage negotiation process called Shunto.

E. The cooperative model of Japanese labor relations, with high levels of employee participation and union concern for firm profitability, is often advocated as a model for U.S. labor relations to emulate.

F. In a system of enterprise unionism, existing unions have little incentive to organize new unions at other establishments and overall labor movement solidarity is low.

XII. Asian Developing Countries

A. The history of labor relations in the developing countries of Asia parallels the major concerns in other countries.

B. Within developing countries, the government frequently exercises tighter control over the unions and labor relations than in developed countries.

1. In Singapore, control over workplace-level labor relations is exercised through restrictions on bargaining items, limitations on strikes, and government approval of collective bargaining agreements.

2. The current labor relations system in the Philippines restricts strikes, allows permanent strike replacements, and requires unions to belong to a single government-controlled federation.

3. In Malaysia, the government controls the structure and size of unions by selectively approving or rejecting the required union registration applications.

C. An important underlying thread in developing country models of labor relations is the subservience of labor relations to the country’s industrial development strategy.

D. Significant economic and political transitions are affecting the labor relations systems in many Asian countries.

XIII. Bargaining or Legislating Labor Standards?

A. By studying labor relations systems in different countries, it is apparent that there are numerous possibilities for structuring labor relations.

B. The U.S. emphasis on exclusive representation and majority support is often absent outside of North America.

C. The political activities of the labor movement in many countries outside of the United States are also at least as important a their workplace activities, if not more so.

D. Outside of the U.S., many employment conditions, especially pertaining to fringe benefits, are established by government regulations.

E. The general lack of protections against unjust dismissal in the United States (except for workers covered by union contracts) is in stark contrast to the

widespread protections in much of the rest of the industrialized, democratic world granted by national legislation

F. An important question for the future is whether labor standards should be negotiated or legislated (or neither).

XIV. Globalization Reconsidered

A. Understanding how labor relations works in other countries is critical for managers and union leaders who have professional activities involving other countries.

B. A major feature of the labor relations environment in nearly every country is globalization.

C. The most important effects of globalization on labor relations across many countries are declining union strength and intense corporate pressures for increased workplace flexibility.

D. Globalization is causing converging divergences of labor relations practices across countries through pressures for decentralization and flexibility.

Lecture Tips

Teaching this chapter is straightforward—the major purpose is conveying a basic understanding of the key features of labor relations systems around the world. It is therefore fairly typical among labor relations instructors to spend some time lecturing on each country in turn. An alternative approach is to structure your lecture along some other dimension. For example, you can follow Box 13.1 and start with the most centralized system and progress towards the most decentralized. Because such rankings can be subjective, however, I prefer to lecture on a country-by-country basis.

Several themes can be used to tie the country discussions together. One, I try to get students to think of each country’s system as an alternative approach to achieving the same underlying goal—balancing efficiency, equity, and voice. Two, the country examples provide various options for U.S. unions (e.g., seeking board representation as in Germany, more social and political activism as in France, or more of an enterprise focus as in Japan). Three, the country examples also provide options for U.S. public policy changes (e.g., minor changes as in Canada, mandatory works councils as in Germany, or deregulation as in Australia and New Zealand). And four, many of the countries illustrate how unique the U.S. system is—exclusive representation and legalistic contracts, for example, are largely North American phenomena; in many countries, there is not a close association between union membership and contract coverage (Box 13.2); and the U.S. is almost alone in lacking widespread unjust protections (Box 13.11).

Lastly, it is useful to tie chapter 13 into chapter 12 (globalization). A simple view of globalization is that national systems become irrelevant (the convergence thesis). In contrast, there is increasing divergence but national institutions remain important for shaping union, corporate, and worker behavior. Learning about different systems (this chapter) is therefore still important, and it is still meaningful to talk about policy reform (segue into chapter 14).

Active Learning Ideas

1. Have students review the different aspects of labor relations for each country presented in the chapter and make a list of, in their opinion, the three worst elements and the three best elements. Discuss in class.

2. Have students debate the extent to which aspects of labor relations in other countries should be adopted in the United States. For example, should the United States adopt mandatory works councils?

Key Terms

Students will be introduced to the following key terms:

Voluntarism Under voluntarism, collective bargaining typically only occurs if the parties “voluntarily” agree. “Voluntary” refers to the absence of legal force – labor and management use their economic power, not legal rights, to get the other side to do something, especially to bargain or abide by a contract. Great Britain is one country that practices voluntarism.

Social partnership A relationship among peak-level representatives of labor, business, and the government that results in a national-level agreement on social and economic issues. Social partnerships are found in Ireland and other small European countries.

Ideological unionism A union emphasis on political mobilization and political strikes motivated by each union’s ideological focus. Such as activities are often more important than collective bargaining. France is an example of political or ideological unionism. Other countries such as Italy and Spain are similar in this regard.

Sector bargaining Industry-wide bargaining that produces a contract for the entire sector.

Codetermination An institutionalized system of employee voice in which employees are entitled to participate in workplace decisions making. Common in Germany in which codetermination includes works councils and employee representation on corporate supervisory boards.

Works council A workplace level committee of employees elected to represent all of the workers (except senior executives) in dealing with management. This includes skilled and unskilled, blue collar and white collar, union members and nonunion members. Common in Germany where works councils don’t have the right to strike, but can sue over violations.

Stalinist model In centrally planned Stalinist economies, managers of state-owned enterprises and unions were both controlled by the government (the Communist Party). Unions were a critical part of the economic and political system, primarily as a transmission belt for delivering the Communist Party’s agenda to the working class. Unions in a Stalinist system had dual roles: to facilitate the state’s production goals (such a through maintaining discipline) and to protect individual workers from abusive managers (such as by refusing to approve employee dismissals.

Awards system In this system, a federal or state arbitration commission (or tribunal) issues an award that specifies the minimum standards for pay and working conditions, often for an occupation. Common in Australia, though this system has been drastically weakened in recent years.

Enterprise union This type of union only represents workers in a single company (enterprise). There are close ties between management and the union leadership. Supervisors are generally part of the enterprise union and union leaders are often career-type employees who continue their promotions within the enterprise up through the management ranks after being a union leader. Common in Japan.

Convergence thesis Theory that predicts that labor relations practices and policies across countries will converge to a common set of practices and policies, and national differences will disappear. The evidence does not support the convergence thesis.

Reflection Questions

1. In moments of frustration, some U.S. labor leaders have claimed that U.S. unions would be better off with a deregulation of labor law and a return to the “law of the jungle.” How would a return to voluntarism affect U.S. unions? Workers? Employers?

Student answers will vary. Example:

A return to voluntarism would definitely reduce the amount of bargaining power unions have. There are not many industries left where workers are indispensable. If a company refuses to bargain and workers are left with striking as their largest bargaining chip, employers are very likely to just replace them and go on with business. It is also reasonable to question whether this type of adversarial approach is really what workers want. Voluntarism might help employers by giving them the upper hand, but it can also be detrimental if it makes employee relations more conflictual.

2. What are the pros and cons of adopting the German system of mandatory works councils in the United States?

Student answers will vary. Example:

Pros: provides employee voice without needing to go through the struggle of the NLRB representation election process; reduced scope for managerial opposition to the creation of a vehicle for employee voice; can make positive contributions to employee relations; can demonstrate the benefits of voice to workers and cause them to consider forming a union. Cons: power is limited (can’t strike for example); can make decision-making more cumbersome; can force the wishes of a minority on a majority if only a few workers want a works council; can possibly be used to keep unions out.

3. Are Japanese-style enterprise unions effective vehicles of voice that align worker interests with firm interests, or are they weak, company-dominated sham unions?

Student answers will vary. It is useful, however, to tie their answers into competing schools of thought on the employment relationship. Adherents to the HR management school, for example, are more likely to see enterprise unions as meaningful whereas pluralist and especially critical IR adherents are more skeptical of the legitimacy of the enterprise unions.

4. Labor unions can be important players in three different political systems: pluralism, corporatism, and Leninism. Give examples of each and describe the key roles of unions. What are the pros and cons of pluralism and corporatism for both organized labor and employers? Should U.S. unions play a stronger role in U.S. politics?

Student answers will vary. Example:

Pluralism: The United States political system is an example. The key role of unions is pressuring and lobbying lawmakers for a voice in the political decision-making process.

Corporatism: The Irish social partnership is an example. Unions work with business and the government resulting in a series of peak-level agreements on social and economic issues. In contrast with pluralism, labor and business groups are direct participants in shaping agreements.

Leninism: Unions primarily being used as a transmission belt for delivering the Communist Party’s agenda to the working class can be called Leninism, used in the Soviet Union and Communist countries of Eastern Europe.

Pros and cons: Pros of corporatism: strong voice in social and economic issue decision making. Cons: Union density does not reflect a majority of the population. Accompanied by business, their dual influence could potentially sway government decisions in areas that would not represent the wishes of the general population. Pros of pluralism: Interest groups such as the labor movement and employers’ associations compete for influence by pressuring and lobbying lawmakers. Cons of pluralism: Interest groups such as labor unions and employer associations are not formally incorporated into the political decision-making process.

Should U.S. unions play a stronger role in U.S. politics? Most would probably agree that from the perspective of the labor movement, finding ways to get increased political power and therefore favorable policy changes should be an important strategic goal of labor leaders. Views will vary, however, as to whether this is socially beneficial.—likely based on the extent to which students see unions as a narrow special interest group or as a broader representative of workers generally.