C 13 1 COMPARATIVE LABOR RELATIONS Note the

C 13 -1 COMPARATIVE LABOR RELATIONS • Note the sometimes great differences with the U. S. system: • But also similarities around: • Universal contemporary pressures such as globalization. • Objectives of efficiency, equity, and voice. • Importance of balancing labor rights and property rights. • Labor relations outcomes determined by environment and individual decision-making. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -2 MAJOR DIMENSIONS OF INDUSTRIALIZED LABOR RELATIONS SYSTEMS AROUND THE GLOBE • Social Partnership—peak-level discussions of broad economic and social issues • Sector Bargaining—centralized industry-level collective bargaining • Centralized Awards—occupation-level arbitration awards • Enterprise Unionism—Company-specific unions • Exclusive Representation/ Majority Rule—Bargaining only when union represents majority of employees • Codetermination—workplace-level shared decision-making • Voluntarism—representation and bargaining based on economic power Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -3 Box 13. 2: UNION MEMBERSHIP DOES NOT ALWAYS EQUAL CONTRACT COVERAGE OECD data, 1997 Bargaining Coverage Union Density 18 % 16 % Japan 21 24 United Kingdom 47 34 Spain 78 19 Australia 80 35 Sweden 89 91 Germany 92 29 France 95 9 United States Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -4 U. S. AND CANADIAN LABOR LAW: SMALL DIFFERENCES THAT MATTER? In Canada. . . • Some provinces allow card-check certification or instant elections. • Some provinces provide for first contract arbitration. • Most provinces ban use of permanent replacements. Two provinces ban all replacements. • No province has a right-to-work law. Unions are guaranteed at least an agency shop in many provinces. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -5 MEXICO • Workers’ rights are guaranteed by Constitution, but extent of enforcement is questionable. • Unions must register with government. • Union(s) does(do) not have to represent majority of employees to engage in collective bargaining, but does in order to strike. • Once approved by government, contracts are legally enforceable. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -6 MEXICO: APPEARANCE V. REALITY • Labor negotiations and unions have traditionally been controlled by government as part of larger economic development strategy. • Dominant union federation has traditionally been very closely connected to ruling party. • Legitimacy of Mexican labor unions is questionable, especially in Maquiladora sector where there is need to attract foreign investment (note Box 12. 3). • As in many other developing countries, sharp clashes between government and independent labor unions occur. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -7 GREAT BRITAIN • British labor relations system based on voluntarism. • Labor and management use their economic power, not legal rights, to get other side to do something, especially to bargain or abide by contract. • • • Labor movement has close association with Labour Party Contacts are not legally enforceable. Labor and management abide by contract as long as costs of following contract are smaller than costs of breaking it. Number one issue is probably declining union density – Union representation fell to 29% in 2004, down from 54% in 1979 (WSJ, 12/11/07) • • Under Thatcher’s conservative government, laws passed in 1980 s restrict unions’ ability to conduct secondary boycotts, outlaw closed shop, and require democratic procedures for elections and determining strike support. British labor starting to look more toward EU as method for leveraging labor standards and public policy in favor of workers Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -8 IRELAND • On top of voluntaristic system, Irish labor relations also includes peak-level social partnership • Peak-level discussions that result in national agreements on social and economic issues. • Social partnership agreements include centralized bargaining over wages, but also agreements on broader social issues. • Can promote aggregate stability and predictability. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -9 FRANCE • • • Mix of often militant and politically oriented unions but weak collective bargaining; also, very low union density but very high coverage rates. France is example of political or ideological unionism. • Six major union federations which often have distinct political or ideological perspectives. French unions pressure (as “outsiders”) government to enact policies favorable to union’s agenda, rather than participating directly in policymaking (as “insiders” in social partnership). – Industry-level agreements can be extended to all employers • Collective bargaining agreements are weak by U. S. standards, but this is offset by national laws that favor workers. • French law provides for several forms of workplace-level employee representation separate from labor unions Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -10 GERMANY • Two key features— sector bargaining and codetermination. • Sector bargaining—centralized, industry-wide bargaining that produces contract for entire industry (sector). • Each industry has dominant union and employer association. • Sector bargaining establishes minimum, industry-wide standards. • Standards can be extended to all employers in industry irrespective of union status. • Sector bargaining complemented by codetermination—workplace system of employee voice in decision-making. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -11 GERMAN CODETERMINATION • Employee representation on corporate supervisory boards • German supervisory boards are less powerful than U. S. boards of directors, but employee representation nevertheless provides workers with voice when strategic decisions are being considered. • Works councils • Workplace-level committees which represent nearly all workers in dealings with management. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -12 RIGHTS OF GERMAN WORKS COUNCILS • Codetermination • To jointly determine issues pertaining to work rules and discipline, daily working hours, leave schedules, performancebased pay and bonuses, overtime, safety and health, training, and employee selection methods. • Consultation • To be consulted before employer changes nature of work. • Information • To be given financial information regarding firm’s balance sheet, investment and marketing plans, and other corporate intentions. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

“VW’s Woes Mount Amid Claims of Sex Junkets for Union Chiefs” Dozens of Lustriesen (pleasure trips) to exotic locations were taken by VW worker representatives and paid for by Co from mid-90 s until recently – Former HR mngr says he was given blanket instructions by his boss to use trips to win worker reps’ support for Co mngt – Underscores close relations btwn mngt and labor that have been hallmark of German economic model • For much of postwar period, this close relationship helped explain Germany’s success, allowing for avoidance of labor strife that has hurt other economies • Now, however, it is seen by some as part of problem, encouraging backroom deals and forcing mngt and labor to take half-measures that fail to solve underlying problems – In September 2005, VW labor reps said they would accept lower wages and longer hours for some workers at German plant, after Co threatened to shift production of new SUV to Portugal • Co has also warned that it has several thousand more ees than it needs in Germany » Source: Wall Street Journal, 11/17/05 Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -14 SWEDEN • Similarities with German labor relations. • High contract coverage rate. • Dual representation structure with centralized industry-wide collective bargaining and strong workplace representation. • As in other countries, economic pressures are causing greater decentralization in bargaining. • Union density is high, so workplace representation is widespread. • Would U. S. unions be less resistant to change if they were institutionally secure as in Germany and Sweden? Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -15 STALINIST INDUSTRIAL RELATIONS • In centrally-planned Stalinist economies, managers of state-owned enterprises and unions were both controlled by Communist party. • Unions were a critical part of this economic and political system, acting as “transmission belt” for party by delivering its agenda to working class. • Unions also administered government’s various social benefits such as housing and recreational programs and therefore membership rates were very high. • Strikes and independent unions were illegal. Collective bargaining didn’t occur because wages and other items were determined by central planners. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -16 FALL OF COMMUNISM • Polish workers won right to form independent unions and Solidarity union was born. – Martial law was imposed in 1981 and Solidarity outlawed. • Polish strikes in 1988 again pressured government to legalize Solidarity and it was allowed to participate in free elections in 1989. • Fall of Berlin Wall in 1989 marked end of communist East Germany and by end of year, communism was collapsing throughout Eastern Europe. • Events triggered by Solidarity movement underscore power of collective action and need for independent labor movements. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -17 EASTERN EUROPE TODAY • Collective bargaining, economic strikes, and independent unions have been legalized in Eastern Europe. • But stable systems of labor relations have yet to emerge and unions have struggled to find their most effective roles in new transition economies. • Stalinist model left legacy of weak unions at enterprise and workplace levels who have no experience in collective bargaining and little rank and file involvement. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -18 AUSTRALIA AND NEW ZEALAND • Central feature has traditionally been centralized arbitration awards system. • Federal or state arbitration commission issues award that specifies minimum standards for pay and working conditions for an occupation. • Workplace conditions and over-award pay was established through adversarial collective bargaining, but arbitration was cornerstone. • Macroeconomic concerns and employer attempts to improve labormanagement cooperation, flexibility and responsiveness to firmspecific conditions have weakened centralized awards systems. – Australian labor movement has actively pursued union mergers to transform large number of small unions into smaller number of industrybased or general unions (balance union strength and responsiveness? ) • Unionization rate was 20% in 2006, down from 46% in 1986 (WSJ, 12/11/07) – New Zealand labor relations is now voluntaristic. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -19 JAPAN • Because of strong enterprise identification, enterprise unions very concerned with company’s performance and tailor demands and agreements accordingly. • Japanese labor relations often characterized as cooperative or consensual. – Complemented by annual wage negotiation process: Shunto • Some companies also have joint labor-management consultation bodies and consultation sometimes more important than bargaining. • Is this a more cooperative and productive model of unionism than adversarial U. S. model? • Or are enterprise unions really just management-dominated sham unions? Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -20 ASIAN DEVELOPING COUNTRIES • As with developed countries, Asian developing countries have taken different approaches: • High-level tripartite or corporatist model (Singapore) • Pluralist model with varying combinations of political representation and collective bargaining (Philippines and India) • Government-controlled model (Malaysia and Indonesia) • Systems that are in flux (China and South Korea) Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -21 ASIAN DEVELOPING COUNTRIES • Within these developing countries, government frequently exercises tighter control over unions and labor relations than in developed countries • Important underlying thread in all of these developing countries is subservience of labor relations to country’s industrial development strategy Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -22 CHINA • Before 1980 s, similar to Eastern Europe (unions as transmission belts). • Economic system now moving from Socialism to mixed economy, but little loosening of Communist party’s control over political system. • Union leaders still closely interlinked with Communist party • Strikes still restricted. • One legal union federation: All-China Federation of Trade Unions (ACFTU). Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

“In China, Workers Turn Tough” • Assembly-line wages have not risen in recent years nearly as fast as cost-of-living • Image-conscious U. S. retailers have demanded better treatment and human rights for Chinese workers • Broader general freedoms in China have reduced traditional fear of authority – Protests by factory workers, farmers, others, many violent, have broken out w/ increasing frequency in recent months • ACFTU recently issued reminder that law requires foreign as well as Chinese companies to accept federation branches wherever workers demand it – In practice, however, near-total lack of representation for millions of workers, most of them 18 - to 22 -year-old women who work on assembly lines 60+ hrs/wk for wages =~$120/mo • Most live at factories in Er-provided dormitories and eat in Er cafeterias (and then hand back 1/3 of pay for food and lodging) » Source: Washington Post, 11/27/04 Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

“Wal-Mart Says It Would Allow Unions in Its Chinese Operations” • Wal-Mart said it would allow trade unions in its Chinese operations, an apparent response to pressure from Chinese authorities – Wal-Mart has 42 outlets in China, ~20, 000 ees • Wal-Marts in Germany aren’t unionized per se, although they have works councils • Labor officials hope development will put pressure on other MNCs to follow suit – In March 2004, national legislature began investigation of compliance w/ country’s labor law – Finding: some leading MNCs were resisting efforts to set up unions within operations » Source: Wall Street Journal, 11/24/04 Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -25 BARGAINING OR LEGISLATING LABOR STANDARDS? • Political activities of labor movement in many countries outside U. S. are as important as their workplace activities. • Political strength can result in labor standards that are legislated for all workers rather than confined to workers covered by collective bargaining. • Outside of U. S. , many employment conditions, especially pertaining to benefits and dismissals, established by government regulations. • Political aspect of comparative labor relations should not be overlooked, and important question for future is whether labor standards should be negotiated or legislated, or neither. Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

C 13 -26 Box 13. 11: EMPLOYEES COVERED BY UNJUST DISMISSAL PROTECTIONS INSERT BOX 13. 11 Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Globalization Reconsidered • Most important effects of globalization on labor relations across many countries are declining union strength and intense corporate pressure for increased workplace flexibility – Pressures for decentralization Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Implications • To what extent should aspects of labor relations in other countries be adopted in U. S. ? – E. g. , should the U. S. adopt mandatory works councils? – Review Box 13. 11: What are the pros and cons of the lack of widespread unjust dismissal protections in the U. S. ? Is policy reform needed? Mc. Graw-Hill/Irwin © 2005 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.