From the TUC

Collective Bargaining – Some lessons from Europe

02 Sep 2009, by in Economics, International, Labour market

Here in Rome, at the ETUC Collective Bargaining Summer School, trade unionists from across Europe are sharing their experiences of the economic crisis, along with strategies to respond to it.

Our German colleagues, from the DGB, reported this morning that unemployment in Germany is now above 8%, with 3.4 million out of work. Men are most affected, because they are more likely to work in industrial sectors, and Southern Germany, where export-oriented industries are concentrated, is suffering the most. However, the rise in unemployment has been modest, given that industrial production has fallen off a cliff. This is due, mostly, to the success of the short time working scheme.

From June this year, the German short time working allowance has been extended, so that it can now continue for two years. The scheme cost 950m euros up to June 2009. 1.1m workers, in 36,000 companies, have been affected. 20% of companies in the metal industry (what, in the UK, we call engineering-manufacturing) have taken advantage of this scheme and, on average, working time has been reduced by 32% where the scheme has been applied.

Our Polish friends from Solidarnosc have faced a different situation. Poland still enjoys modest economic growth (about 0.6%, but still not in recession) and its decline in industrial production has been insignificant, compared to its neighbours in Germany and Lithuania, and compared to the EU as a whole. Domestic demand has held steady, in no small part because of wage increases in the past two years. However, the drop in overseas demand is having an effect: in the first half of 2009, 50,000 collective redundancies have been predicted by employers, with some export producers expecting reductions of more than 20%.

Poland, like Germany, has seen employment subsidised by public funds. In the case of Poland, employers making use of this assistance are forbidden to make collective redundancies for six months.

It is well known that short-time working schemes allow employers to retain key staff, many of whom have developed high skills, at the company’s cost. No sensible employer would wish to lose such staff.

What is less remarked upon is that short time working allows collective bargaining to continue. Negotiators in Germany have achieved wage rises of between 2.5% and 3% this year. In reality, gross wages will be lower, as a result of reduced hours, yet these pay rises will come into effect in practice when economic growth resumes on a steady basis and the short time working scheme is no longer needed. At that time, the rises will still be enshrined between company and union.

I understand that the prospect of wage rises of 3%, at this time of economic crisis, might fill some UK employers with horror, but the debate is different here. In the UK, any discussion of wage rises is accompanied by scenarios of doom from employers – and sometimes the Government too –  about future inflation. In Europe, it is taken for granted that unions will protect the wages of workers. This is considered to be a legitimate activity, binding workers into the industrial process, achieving social justice and enshrining the valued place of the union as social partner.

Yesterday, a guest speaker from the European Commission reminded us that past recessions caused by bank crises have resulted in a growth in inequality between rich and poor. A priority for the UK – and Europe – must be to ensure that this does not happen in the coming few years.

Collective bargaining must form a major part of any strategy to prevent a future growth in inequality. A speaker from the Italian employers wondered aloud yesterday about the value of collective bargaining and whether it is protected purely for dogmatic reasons. I managed to get into the debate and made the case for such collective bargaining, not from a position of dogma, but simply because it is the single most important way of protecting the living standards of working people. Long may it continue.