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Collective Bargaining
Virginia Doellgast
Cornell University, [email protected]

Chiara Benassi
London School of Economics and Political Science

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Collective Bargaining
Abstract
[Excerpt] In this chapter, we first present an overview of different forms of collective bargaining, looking at
how institutions and models differ across countries. This is the basis for a review of research examining the
integrative or efficiency-enhancing role of collective bargaining - which typically emphasizes strategic choice
and mutual gains, and studies focusing on the distributional consequences of these institutions - which place
more emphasis on the role of power and conflict in shaping bargaining processes and outcomes. We argue that
research focusing on performance outcomes provides a useful but incomplete set of tools to analyze the form
and consequences of collective bargaining institutions. These institutions have historically played a central
role in redistributing political and economic power within workplaces, industries, and societies. Attention to
contemporary changes in labor power can help to explain why and how this distinctive form of employee
voice has been weakened within different national contexts.

Keywords
collective bargaining, power, conflict, bargaining processes, outcomes

Disciplines
Collective Bargaining | International and Comparative Labor Relations

Comments
Required Publisher Statement
© Edward Elgar Publishing. Final version published as: Doellgast, V., & Benassi, C. (2014). Collective
bargaining. In A. Wilkinson, J. Donaghey, T. Dundon, & R. B. Freeman (Eds.), Handbook of research on
employee voice (pp. 227-246). Chelthenham, UK: Edward Elgar Publishing. Reprinted with permission. All
rights reserved.

Suggested Citation
Doellgast, V., & Benassi, C. (2014). Collective bargaining [Electronic version]. Retrieved [insert date], from
Cornell University, ILR School site: https://digitalcommons.ilr.cornell.edu/articles/1243

This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/articles/1243

 Handbook of research on employee
voice 1

Collective bargaining

Virginia Doellgast

Chiara Benassi

London School of Economics and Political Science

 Handbook of research on employee
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Introduction

The term ‘collective bargaining’ was first used in 1891 by Beatrice Webb, an economic

theorist and one of the founders of the industrial relations field in the UK. She and her partner

Sidney Webb described collective bargaining as a process through which workers come

together and send representatives to negotiate over their terms and conditions of

employment. It was seen as a collective alternative to individual bargaining - or ‘one of the

methods used by trade unions to further their basic purpose “of maintaining or improving the

conditions of their [members’] working lives’” (Webb and Webb 1920: 1, cited in Flanders 1968:

1-2).

The Webbs’ definition emphasizes the importance of collective action on the part of

workers in establishing and negotiating formal agreements. Other scholars have defined

collective bargaining more broadly as a process of negotiation, joint decision-making, or joint

regulation between groups who represent both employer and employee interests; and which

implies the ‘negotiation and continuous application of an agreed set of rules to govern the

substantive and procedural terms of the employment relationship’ (Windmuller et al. 1987,

cited in Traxler 1994: 168). It is distinct from consultation or joint problem-solving, in that it

results in formal, bargained agreements or contracts to which both parties are obliged to

adhere during an agreed upon period.

Collective bargaining can be viewed as the most developed form of representative or

collective voice, as it is typically carried out within a framework of rules, procedures, and rights

set out in national and international law. It can involve the different actors discussed in other
 Handbook of research on employee
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chapters in this volume: the state, trade unions, works councils, employers, middle managers,

and employees. However, the role played by each of these actors in the bargaining system

varies considerably across countries, depending on the bargaining structure and rights accorded

to them through law and practice.

Scholarship on collective bargaining has examined its impact on a range of outcomes for

firms, workers, economies, and societies. Collective bargaining can involve partnership and can

be complementary to direct forms of voice, such as individual or team-based worker

involvement. This kind of integrative or ‘mutual gains’ bargaining can reduce shop-floor conflict,

promoting trust, facilitating restructuring, and reducing employee turnover. At the national

level, organized or coordinated collective bargaining models typical of northern and central

Europe have been associated with reduced strike rates, high productivity, and wage

moderation. Collective bargaining also plays an important role in shaping distributional

outcomes within firms and societies. Collective agreements and collective bargaining

institutions affect how productivity gains and risks are allocated between different stakeholder

groups. For this reason, collective bargaining is often characterized by conflict. Employers and

unions engage in ‘zero-sum’ or distributive bargaining on many issues and use strikes, pickets,

and lock-outs as common means to demonstrate or exercise countervailing power.

The distinctiveness of collective bargaining lies in this role as an institution that involves

formal negotiations between two organizations representing employer and worker interests,

and holding different forms of political and economic power. As unions and bargaining

institutions have come under pressure in the last twenty years, a debate has arisen over
 Handbook of research on employee
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whether bargaining remains a viable form of voice - if it is perhaps being replaced by human

resource management, direct participation, and government regulation through individual

employment rights. How researchers interpret the causes of these changes and their

implications for workers and society varies according to the emphasis they place on the

integrative or distributive aspects of the bargaining system.

In this chapter, we first present an overview of different forms of collective bargaining,

looking at how institutions and models differ across countries. This is the basis for a review of

research examining the integrative or efficiency-enhancing role of collective bargaining - which

typically emphasizes strategic choice and mutual gains, and studies focusing on the

distributional consequences of these institutions - which place more emphasis on the role of

power and conflict in shaping bargaining processes and outcomes. We argue that research

focusing on performance outcomes provides a useful but incomplete set of tools to analyze the

form and consequences of collective bargaining institutions. These institutions have historically

played a central role in redistributing political and economic power within workplaces,

industries, and societies. Attention to contemporary changes in labor power can help to explain

why and how this distinctive form of employee voice has been weakened within different

national contexts.

Collective Bargaining Forms and Structures

Collective bargaining institutions vary across countries as a result of differences in the

legal framework, as well as the distinctive traditions and organizational structure of employers
 Handbook of research on employee
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and labor unions. One important institutional difference is whether governments protect

employees’ right to join unions and to engage in industrial action, or instead intervene to

obstruct collective bargaining. Although the right to collective bargaining is a core labor

standard as defined by the International Labor Organization (ILO), workers continue to lack

these basic rights in many countries (ILO 2008).1 The International Trade Union Confederation

(2012) reports that in 2011 at least 76 workers were murdered worldwide as a direct result of

union activities, while repressions of strike action and organizing activities resulted in a

reported 3508 arrests and 15 860 dismissals.

In countries with developed industrial relations institutions, collective bargaining can

take different forms. In ‘single-employer bargaining’, individual employers negotiate

agreements at the company or workplace level with labor unions or other worker

representatives with legal rights, such as works councils. In ‘multi-employer bargaining’, one or

more unions or union confederations negotiate agreements with one or more employers’

associations (Jackson 2005). These agreements can cover the workforce in a particular industry

or occupation; or can cover a range of sectors at the national level - often with the involvement

of government agencies through ‘tripartite’ arrangements.

Countries also differ in the degree of bargaining centralization. ‘Centralized bargaining’

implies that national or industry agreements are the dominant form for regulating terms and

conditions of employment; while ‘decentralized bargaining’ implies that company or

establishment-level agreements predominate.2 Bargaining often takes place at multiple levels.

In many European countries, multi-employer collective bargaining between employers’

 Handbook of research on employee
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associations and labor unions establishes minimum wage levels or overall wage increases at the

industry or national level; but individual employers negotiate supplementary agreements with

unions and/or works councils at the company and establishment levels. For example, in Sweden

wage increases are agreed centrally, but are distributed at the local level based on company-

level negotiations, allowing substantial pay individualization.

Countries with multi-level bargaining systems further differ in the degree of

coordination between levels. Bargaining coordination can be defined as the extent to which

‘minor players’ (such as managers or union representatives at the company level) follow or

adhere to agreements reached by ‘major players’ (such as peak associations) (Soskice 1990; Hall

and Gingerich 2004). There are different ways to achieve coordination in wage bargaining:

through direct means, as an explicit goal of peak business and labor associations or through

state intervention; or through more informal means, such as pattern agreements led by

bargaining agents at large firms or in leading industries. Countries with company or

establishment-level bargaining, such as the USA and Canada, are typically viewed as* having

uncoordinated systems. Informal coordination is common in countries with sectoral bargaining

systems, such as Germany, in which peak associations are weaker and employer associations at

the industry level negotiate agreements with industry-based unions. Coordination in this case

relies on strong and relatively encompassing associations that are able to exert control over

their members. Overt or direct coordination takes different forms. For example, in Belgium

economy-wide agreements are negotiated between the main employer and union

confederations at the national level, which then establish a framework for negotiations at
 Handbook of research on employee
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industry and cross-industry levels. In other countries, such as Spain and Portugal, national

accords between peak associations and the government have been important at different

periods in standardizing wage increases and ensuring member organizations do not deviate

from those agreements. In Japan, the main union confederations set minimum objectives for

the annual spring bargaining round, and unions adjust their company-level demands based on

negotiation outcomes in the biggest companies.

Most countries have experienced change over time in dominant collective bargaining

levels, as well as in the degree of coordination between levels. In general, there has been a

trend toward increased company or establishment-level bargaining, even where sectoral

agreements remain dominant (Katz 1993; OECD 2012: 139-42). Sweden exemplifies this trend:

it had a centralized and coordinated bargaining system, but following an employer offensive in

the 1990s, it moved to sectoral and company bargaining with weaker coordination (Swenson

and Pontusson 2000). At the same time, other countries have experienced a shift toward

increased bargaining centralization and coordination. In Italy, union confederations became

involved in tripartite negotiations in the 1990s through social pacts aimed at controlling wage

inflation (Baccaro 2002).

These patterns are shaped in part by the history, traditions, and strategies of major

actors. However, they are also strongly influenced by the legal framework within which

collective bargaining takes place. Faws establish union recognition procedures, rights to strike,

and rights to engage in secondary boycotts; as well as what actions constitute ‘unfair’ or illegal

practices by employers, such as their rights to lock out striking workers or dismiss workers for
 Handbook of research on employee
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participating in union activities. Even among the OECD and EU member states, 24 percent of

countries are reported to have minor or major restrictions on collective bargaining rights in the

market sector, while 44 percent have restrictions on the right to strike (Visser 2011). Labor laws

and policies can make a substantial difference to union power and strategies. For example,

sympathy strikes or secondary boycotts are typically illegal, but continue to be a viable tool of

industrial action in Nordic countries - which unions have used to maintain bargaining coverage

in industries characterized by a high degree of subcontracting, such as construction (Lillie and

Greer 2007).

Participation rights, which define those areas in which workers have a right to negotiate

collective agreements and participate in management decision-making, also vary across

countries. One difference concerns the bargaining subjects on which employers are legally

required to negotiate or come to agreement with worker representatives. In the USA, if a union

has been certified as a bargaining partner, employers are required to bargain ‘in good faith’

over certain ‘mandatory’ subjects, defined as wages, hours, and other terms and conditions of

employment. However, they are not required to discuss other subjects defined as ‘permissive’,

including reorganization decisions or evaluation criteria. In Germany, works councils hold

strong ‘co-determination rights’, which give them not only the right to negotiate but also

effective veto power over a wider range of decisions concerning, for example, the design of

variable pay or the use of monitoring (See Chapter 15 on works councils). Countries may also

have different forms of board- level participation rights, which require large companies to
 Handbook of research on employee
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include worker representatives in consultation or decision-making bodies, such as supervisory

boards.

Another area in which the legal framework differs across countries concerns the

mandatory extension of collective agreements through public law. This can be important for

ensuring broad application of bargaining agreements to more poorly organized firms or

economic sectors. Table 14.1 lists those OECD countries that have widely available and regularly

applied legal provisions for mandatory extension of agreements; those with provisions that are

available but not widely used; and those where extension provisions are not available.

These legal provisions take different forms. In some countries, such as Germany, legal

Insert Table 14.1 Here

extension of agreements is dependent on the bargaining parties covering a certain percentage

of the workforce in a particular industry or occupation, and typically requires both parties to

request an extension. In other countries, such as France, the government directly intervenes to

declare agreements generally binding to all firms in the relevant sector and/or region. In

Austria, membership in employers’ associations is mandatory, and all members are required to

apply the relevant collective agreement. There are alternatives to legal extension by the state

that can also ensure broad adherence to collective agreements. In Denmark, high union density

and social pressure traditionally have ensured that a majority of firms follow agreements.

Institutions providing for legal extension are strongly influenced by government policy, and can
 Handbook of research on employee
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thus change rapidly. In Australia, a conservative government passed major labor law reform in

2005, eliminating a system of national arbitration that had allowed pay and conditions

negotiated in unionized workplaces to be applied across the workforce. These reforms were

only partially reversed in 2009 under a Labor government.

The different bargaining arrangements and legal frameworks discussed above have an

impact on bargaining coverage (the proportion of the workforce covered by collective

agreements) as well as on union density (the proportion of the workforce who are union

members). Figures 14.1 and 14.2 illustrate the variation in both measures across OECD

countries.

For the OECD as a whole, over 60 percent of the workforce is covered by collective

agreements. Coverage is over 70 percent in most of Western Europe - with over 90 percent

coverage in Austria, Belgium, Sweden, Finland, and France. Union density rates are significantly

lower in most countries, and are not always correlated with bargaining coverage. A comparison

of bargaining coverage and union density shows three patterns. One group of countries has

high bargaining coverage and high union density. Most of these are Nordic (for example,

Finland, Denmark, and Sweden). They typically rely on high union membership rates to secure

high coverage and bargaining power, and have other institutions, such as union involvement in

social insurance provision, that provide additional incentives for membership. A second group

of countries has low union membership density and low bargaining coverage, including the

Anglo-American countries, most of central and eastern Europe, Japan, and Mexico. In these

countries, bargaining is relatively decentralized and there are no or weak legal provisions for
 Handbook of research on employee
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extension of agreements. A third group of countries has high bargaining coverage and low

union membership rates. This group includes, among others, Austria, Spain, and the

Netherlands. France is the most extreme example, with 7.6 percent union density and 90

percent bargaining coverage. This pattern is most common where there are strong legal

provisions for extension of agreements, but weaker or more fragmented union presence at

company and establishment level.

Figures 14.1 and 14.2 also show that both bargaining coverage and trade union density

have declined in most OECD countries over the past two decades. Between 1990 and 2011,

coverage fell most dramatically in countries that experienced major changes to labor laws

affecting recognition and extension procedures, including Australia and New Zealand, and to a

lesser extent the UK and Portugal. However, it is also notable that coverage has remained

stable or increased in many countries, including most of the Nordic countries, Belgium, Austria,

Spain, and the Netherlands. In contrast, union density has decreased - although by varying

degrees - in most OECD countries.

Insert Figure 14.1 Here

Insert Figure 14.2 Here

These comparative statistics demonstrate the continued importance of collective

bargaining institutions in determining wages and working conditions. They also provide further
 Handbook of research on employee
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evidence of the large variation in the structure of and changes in these institutions. In the

following sections, we review the literature on outcomes from these different institutional

configurations, and discuss the implications for the future of collective bargaining.

Economic and Social Effects of Collective Bargaining

Neoclassical economic models are typically the starting point for debates concerning the

economic and social effects of collective bargaining. According to these models, efficient or

‘equilibrium’ wage and employment levels are derived from variation in the supply of and

demand for labor in perfect markets. Collective bargaining institutions are theorized to

introduce inefficiencies into labor markets, as unions create ‘cartels’ and force firms to employ

labor at above market rates. In the long run, firms with these institutions should only be able to

compete when they are themselves in a monopoly position, allowing them to share their

monopoly rents with unions. Alternatively, employers may seek to create their own cartel

arrangements by joining employers’ associations and bargaining at industry level to take wages

out of competition. Where they are not able to exercise monopoly power, firms may seek to

remain competitive through introducing labor-saving technology - although unions often resist

these changes. All of these alternatives are viewed as efficiency-destroying, through driving up

labor costs and restricting employment growth.

According to the insider-outsider framework, unions also exacerbate inequality through

seeking to advance the immediate interests of ‘labor market insiders’ at the expense of

‘outsider’ groups such as women, young people, and immigrants, or workers in more poorly
 Handbook of research on employee
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organized sectors and workplaces. Collective agreements are thus argued to secure a wage

premium and job security for union members, while creating negative externalities in regard to

lower levels of overall employment, unequal wage distribution, and higher job insecurity for

non-members (Lindbeck and Snower 1986; Rueda 2007). Friedrich Hayek famously observed

along these lines that British unions were ‘the biggest obstacle to raising the living standards of

the working class ... The chief cause of the unnecessarily big differences between the best and

worst-paid workers... the prime source of unemployment... and the main reason for the decline

of the British economy in general’ (Hayek 1984: 52).4 Following from these arguments,

neoclassical theorists often conclude that the state has the obligation to curb union power in

order to promote society’s welfare, both in terms of economic growth and equity. Their ideas

influenced the labor market policies and labor law reforms of Ronald Reagan in the USA and

Margaret Thatcher in the UK in the 1980s, and have become dominant in microeconomic

models estimating the impact of collective bargaining institutions on wage and employment

levels.

Neoclassical models of the labor market described above have been criticized on both

theoretical and empirical grounds. Some of the most influential criticism derives from the

institutional economists who founded the industrial relations discipline in the USA and UK,

including Commons (1934) and the Webbs (1920). These scholars argued that labor markets

were both imperfect and different from other factor markets, and thus to understand their

operation it was necessary to analyze the wider legal, political, social, and economic relations in

which they were embedded. On the economic side, unions were shown to have more
 Handbook of research on employee
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ambiguous effects on efficient wage and employment levels. Labor markets were not fully

competitive, due to the monopsony power of large firms, and the difficulty of specifying labor

contracts and overseeing labor effort meant that assumptions of zero transaction costs and

complete contracts could not be applied.

The institutional economists also outlined a broader series of arguments for the positive

social or distributional role of collective bargaining. Underlying this was an ethical concern that

labor should be treated differently from other factor inputs, as it was embodied in human

beings and thus subject to ‘uniquely human concerns and considerations’ (Kaufman 2007: 11).

Commons observes that in neoclassical theory, workers are treated ‘as commodities to be

bought and sold according to demand and supply’ while in the institutional perspective ‘they

are treated as citizens with rights against others on account of their value to the nation as a

whole’ (cited in Kaufman 2007: 19). One substantial obstacle to the exercise of citizenship rights

was employers’ disproportionate power to unilaterally determine terms and conditions of

employment. Legislation and collective bargaining were thus needed to correct not only market

imperfections, but also to remedy the unequal balance of power in the employment

relationship by redistributing and redefining property rights.

These two concerns of the early institutional economists - with labor unions’ role in

enhancing economic performance and improving equity in the distribution of power and

resources in a society - have continued to be central in scholarship on outcomes from

alternative collective bargaining arrangements. We review this literature below.

 Handbook of research on employee
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Collective Bargaining and Economic Performance

One stream of research on outcomes from collective bargaining has focused on its

contribution to efficiency, productivity, and macroeconomic performance.

There are several ways in which firms can benefit from collective bargaining institutions.

At the establishment, company, or industry level, collective bargaining can enhance social

peace, helping to reduce conflict through providing a formal structure for labor-management

cooperation. Strikes have been found to be less frequent in countries with high union density

and a centralized and unified labor movement as unions can more effectively push their

demands with employers and the government in the institutional arenas (Korpi and Shalev

1979; Lehmbruch 1984). Collective agreements can help to correct inefficiencies associated

with information asymmetries, underinvestment in human capital, and arbitrary management.

They can be a means for establishing transparent administrative rules and procedures, such as

internal labor markets, which can encourage firm-specific investments in training and reduce

employee turnover (Doeringer and Piore 1971; Osterman and Burton 2006). Collective

bargaining also provides workers with the opportunity to exercise ‘collective voice’ in decisions

concerning work organization or pay-setting (Freeman and Medoff 1984). This can reduce hiring

and training costs associated with quits (Doellgast 2008) and provide worker input on changes

in production that may stimulate increased efficiency (Addison et al. 2001; Huebler and Jirjahn

2003).

A large body of research has examined the role of collective bargaining institutions in

facilitating productivity-enhancing work reorganization. One group of studies in the USA and UK
 Handbook of research on employee
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has focused on union participation in implementing ‘high involvement’ or ‘high performance’

work systems (see Chapter 6). Case studies of firms such as Saturn (Rubinstein 2000) and Kaiser

Permanente (Kochan, Eaton et al. 2009), as well as reviews of partnership initiatives (for

example, Kochan and Osterman 1994; Appelbaum et al. 2000; Bamber et al. 2009), have shown

that union involvement in work reorganization can help to enhance trust and lead to ‘mutual

gains’ in terms of improved working conditions and increased productivity. However, these

outcomes depend on the organizational strength and strategy of unions. Comparative studies

have found that labor-management cooperation over restructuring is more widespread (Turner

1991) and more often associated with productivity improvements (Addison et al. 2000; Zwick

2004) in countries with high bargaining coverage and strong participation rights. One argument

holds that because unions in these settings enjoy institutional security, they are more willing to

cooperate with measures to introduce new technology or efficiency-enhancing work

reorganization strategies (Katz and Sabel 1985). Managers are also more likely to cooperate

with worker representatives where they have less opportunity and incentive to exit costly

agreements (Doellgast 2012). These institutions thus put ‘productive constraints’ on firms

through encouraging the adoption of measures that improve organizational performance while

ensuring that gains from these improvements are more equitably shared with workers (Dore

1973; Streeck 1996).

Multi-employer bargaining has also been found to benefit firms through improving

predictability and overcoming market failures. Sectoral agreements can take wages out of

competition, reducing incentives for poaching. Studies have found a lower union wage
 Handbook of research on employee
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premium in those countries with more centralized bargaining systems (Blau and Kahn 1999).

Alternatively, a high-wage policy by unions at the national level may be used to encourage firms

to invest in productivity improvements or to trigger a shift of labor to higher productivity firms

and sectors. This was an explicit goal, for example, of the solidaristic wage policies pursued by

Scandinavian unions in the 1980s, following the Rehn-Meidner model (Meidner and Rehn

1953). Industry-level bargaining systems can also encourage collective solutions to problems

such as underinvestment in occupational skills and support inter-firm cooperation in R&D

(Iversen and Soskice 2001; Amable 2003: 87). The resulting higher levels of skills in an economy

and the improved capacity of firms to use these skills are believed to promote industrial

upgrading and innovation.

Centralized or tripartite bargaining arrangements have been widely studied to assess

the distinctive advantages they provide for firms and national economies. Neo- corporatist

theories argued that tripartite bargaining encouraged the division of productivity gains

between the social partners and promoted wage restraint (Schmitter and Lehmbruch 1979).

More recently, the literature on ‘social pacts’ has examined the conditions under which unions

overcome past conflicts to negotiate tripartite agreements aimed at supporting economic

competitiveness and controlling inflation through wage moderation (Regini 2000; Rhodes 2001;

Molina and Rhodes 2002). Research has shown that these pacts tend to emerge in situations of

economic crisis or stress, weak governments, and intermediately centralized unions (Avdagic et

al. 2011).
 Handbook of research on employee
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A comparison of responses to the 2008 financial crisis provides a contemporary example

of how corporatist forms of collective bargaining continue to help employers and economies

adjust to economic shocks (Glassner and Galgoczi 2009). In Germany, short-time working

policies allowed companies to reduce working hours during the economic downturn without

having to lay off employees - thus assuring retention of skilled labor. These policies were

supported by unions and backed by direct subsidies at the national level, but were also

negotiated as part of concessionary packages by unions and works councils at the sector and

workplace levels (Dribbusch 2009). Another example is the success of the Danish economy in

the 2000s, which has been attributed to a strong tradition of labor cooperation and to

‘flexicurity’ policies that combined reduced employment protections with a high level of

unemployment insurance and government investment in retraining (Madsen 2002).

A number of quantitative studies have analyzed the relationship between bargaining

structure and macroeconomic performance. Some scholars have examined the degree of

bargaining centralization, testing the neo-corporatist thesis that more centralized systems are

better able to control inflation and weather economic shocks. Calmfors and Driffill (1988)

showed that macroeconomic performance was strongest in countries with either highly

centralized systems characterized by national bargaining, such as the Nordic countries, where

encompassing unions were more likely to support wage moderation, or highly decentralized

systems, such as the USA, where unions had little power over wage structures. Others argued

that the degree of bargaining coordination was a better measure for predicting wage

moderation, as it accounts for the ability of central actors to control local pay-setting (Soskice
 Handbook of research on employee
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1990; Kenworthy 2003). Recent studies demonstrate that the performance of different

bargaining structures is dependent on a range of factors, including monetary policy and central

bank independence (Cukierman and Lippi 1999; Coricelli et al. 2006), productivity differentials

between exposed and sheltered sectors (Traxler and Brandi 2011), the extent of economic

stability or change (Aidt and Tzannatos 2008), and internal governance processes in trade union

confederations (Baccaro and Simoni 2010).

This large body of theory and research has demonstrated that collective bargaining can

contribute to improving the productivity of individual firms or workplaces, and encourage

economic competitiveness at the industry or national level. However, these studies also

necessarily highlight the inefficiencies associated with collective bargaining institutions that lack

certain structural or strategic characteristics. While in some countries these institutions

promote wage moderation, in others they contribute to wage inflation. While unions may form

‘productivity coalitions’ with management and contribute to joint problem solving, they can

also obstruct restructuring measures aimed at reducing labor costs and generate additional

costs associated with industrial action.

In addition, while there is a large body of evidence establishing the positive macro-

economic effects of certain configurations of collective bargaining institutions, studies seeking

to establish the impact of collective bargaining on organizational performance report mixed

findings. For example, a recent series of cross-national studies looking at multiple industries

and multinational firms found significant national differences in the labor practices of

establishments, but report only modest productivity effects of those differences (Freeman and
 Handbook of research on employee
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Shaw 2009). This suggests that while collective bargaining can play a productivity-enhancing or

market-correcting role, a focus on these outcomes provides only a partial explanation for the

form that these institutions take and justification for policies supporting labor’s organizing and

bargaining rights.

Collective Bargaining, Power, and Inequality

Collective bargaining institutions have also been widely studied for their distributional

effects. These include the distribution of economic gains from productivity improvements, the

distribution of risks resulting from fluctuations in the business cycle, and the broader

distribution of economic and political power within workplaces or in society. Researchers

focusing on distributional outcomes typically start from the premise that collective bargaining

involves correcting a basic power imbalance in the employment relationship through legal

intervention and collective action, with the goal of improving workers’ access to enhanced

industrial or workplace democracy.

Of central concern in this literature are the ways in which institutions channel or subvert

conflict within organizations and societies. One source of conflict concerns the degree of

worker control over pay and working conditions. Labor market segmentation theorists argue

that the structure of internal labor markets is the result of a struggle between employers and

unions over the control of work - for example, over technologies and skill demarcations (Rubery

1978; Grimshaw and Rubery 1998), and often serves as a successful strategy by employers to

control or marginalize union control on the shop-floor (Stone 1974). Thus, while performance
 Handbook of research on employee
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may be improved under cooperative workplace initiatives, this is argued to be at the expense of

worker power, associated with reduced job security, work intensification, and increased

‘capture’ of gains from productivity improvements by management and owners (Parker and

Slaughter 1988; Kelly 2004).

Comparative research suggests that unions’ success in advancing worker interests in

improved pay and working conditions depends on bargaining rights and structures. In most

liberal or Anglo-American countries, collective bargaining is associated with a union wage

premium and stronger job security for union members (Shaw et al. 1998; Cully et al. 1999) but

has been found to have little effect on practices that affect direct worker control over working

pace and methods, such as teamwork, discretion, and monitoring (Wood 1996; Doellgast et al.

2009).

Worker representatives have been found to have more influence over pay structures

and work design in countries with stronger participation rights and more encompassing

bargaining institutions. In northern and central Europe, where these institutions are strongest,

unions have most successfully promoted models of work organization that incorporate high

levels of worker control and discretion. The ‘quality of working life’ movements in the 1970s

and 1980s are the best-known examples of these initiatives (Gustavsen et al. 1996).

Comparative studies have found that Nordic countries have particularly high levels of worker

control, with better opportunities for participation (Gallie, 2003), higher influence over work

tasks (Gallie, 2009), higher worker autonomy (Esser and Olsen, 2012), more ‘learning-oriented’

forms of work organization (Gustavsen, 2007), and a stronger use of negotiated or cooperative
 Handbook of research on employee
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approaches to restructuring (Brandt et al., 2008) compared to other European countries. This

has been attributed in part to union strength at the workplace and industry levels (Sorensen

and Weinkopf 2009).

Collective bargaining institutions may also influence which groups of workers have

access to jobs with good pay and working conditions - including patterns of wage or income

inequality, and availability of permanent and secure (non-contingent) employment. Research

has shown that centralized bargaining institutions with broad coverage (Traxler and Brandi

2011), high union density (Rueda and Pontusson 2000), and high minimum wage levels

(Koeniger et al. 2006) are the factors most strongly associated with lower levels of pay

dispersion. These institutions have also been found to positively affect the gender wage gap

(Arulampalam et al. 2007), to reduce labor market segmentation or ‘dualization’, and to

encourage the adoption of welfare policies serving the interests of marginal workforce groups

(Thelen 2009; Bosch et al. 2010).

Again, the Nordic countries most clearly typify this ideal of coordinated and inclusive

bargaining. They also share a tradition of ‘solidaristic bargaining’, which relied on groups with

stronger labor market power accepting reductions in wage demands, encouraging

redistribution from more strongly organized segments of the economy or workforce to weaker

segments (Erixon 2008: 51). This has resulted in relatively homogeneous wages and working

conditions between standard and contingent workers, high replacement ratios (Aiginger 2008;

Thelen 2009), and a high ‘labor share’, measured as the share of labor compensation, in terms

of wages and benefits, in the national income (ILO 2010: 26). These institutions provide unions
 Handbook of research on employee
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with a framework that allows them to bargain and enforce agreements for a broad workforce

domain, making it more difficult for employers to exit agreements or to employ workers on

sub-standard terms through, for example, subcontracting and non-standard work arrangement

(Doellgast et al. 2009; Bosch et al. 2010).

The findings of these studies suggest that collective or representative voice through

collective bargaining can improve worker outcomes across different dimensions: pay, job

security, and control or discretion, as well as patterns of pay inequality and the distribution of

risk. However, these relationships differ across countries and can change over time. In the next

section, we examine how different research traditions have interpreted recent changes in

bargaining institutions and outcomes associated with these changes.

Explaining Changes in Collective Bargaining and its Effects

As discussed above, union density and collective bargaining coverage have declined in

most countries. Collective bargaining has become increasingly decentralized, with more

bargaining taking place at the workplace and firm levels, and is increasingly ‘disorganized’, with

less coordination between labor and employer representatives at different levels. These trends

have been accompanied by a growth in inequality, expansion of low wage and insecure

employment, and declining labor share within many advanced economies - particularly in

continental or ‘social’ Europe. In OECD countries, the median labor share dropped from 66.1

percent at the beginning of the 1990s to 61.7 percent in the late 2000s, while the income of the

top 1 percent of earners increased by 20 percent over the same period (OECD 2012: 110).
 Handbook of research on employee
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Moreover, the concentration of capital income increased by 9 percent between 1995 and 2005.

Those workforce groups who are in a weaker position in the labor market have been the most

affected by these trends, such as low-skilled, women, migrant, and atypical workers

(Appelbaum et al. 2010; Kalina and Weinkopf 2012).

Theorists focusing on the role of collective bargaining institutions in enhancing

productivity and efficiency have broadly interpreted the shrinking coverage of these institutions

as the consequence of their declining economic returns - at least in certain segments of

national economies. According to the ‘varieties of capitalism’ framework, firms in countries

characterized by non-market forms of coordination between business, labor, and the state

derived distinctive ‘comparative institutional advantages’ in global markets - allowing them to

successfully compete in industries and market segments requiring high skill levels and long-

term investment strategies (Hall and Soskice 2001; Hancke et al. 2007).5 The coordinated

economies of continental Europe thus experienced the (relative) resilience of strong unions and

multi-employer arrangements in the 1980s and 1990s because these institutions

complemented the business strategies of leading firms, while unions declined in ‘liberal market

economies’ because collective bargaining conflicted with employer interests in labor market

flexibility (Thelen 2001).

Recent literature in this area has argued that strong collective bargaining institutions

continue to support economic competitiveness in coordinated market economies, but their

value is increasingly limited to core economic sectors, where a cross-class coalition between

management and labor supports them. Meanwhile, deregulation has been allowed to occur in
 Handbook of research on employee
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more peripheral sectors and workplaces, where employers stand to benefit more from low

costs and labor market flexibility (Hopner 2007; Palier and Thelen 2010).

An alternative approach to explaining national differences in collective bargaining

institutions is derived from power resource theory. These theorists argue that structures and

outcomes of labor market institutions are explained by variation in the power of labor relative

to employers, mediated through the state (Korpi 1983; Esping-Andersen and Korpi 1984).

Differences in unions’ access to ‘power resources’ - including their organizational strength, level

of coordination, and participation rights - influence their ability to promote worker interests in

redistribution and control over their work.

This suggests that coordinated forms of collective bargaining are not primarily

established and maintained by employers seeking to resolve their own coordination problems,

but instead are the product of the conflict between societal attempts to regulate the market

through collective institutions and employer attempts to pursue individual economic advantage

through undermining or escaping those institutions (Streeck 2009: 4). Market

internationalization and liberalization have allowed employers to exit collective agreements,

while the increased threat of exit has made it more difficult for unions to negotiate strong

agreements or resist concessions (Bosch et al. 2010). Cross-country differences in patterns of

inequality and dualism are the result of the resilience of institutions like collective bargaining,

which redistribute risk and bargaining power in some national contexts, as well as the strategies

of civil society actors, unions, and policymakers to establish and maintain these institutions in

the face of business pressure (Emmenegger et al. 2012). This suggests that unions are not
 Handbook of research on employee
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necessarily complicit in the growth of peripheral jobs: they may also seek to represent new

groups of workers, developing and using different ‘power resources’ as their traditional sources

of bargaining power decline.

The difference between these two approaches can be illustrated by comparing

alternative explanations for recent changes in German industrial relations. Germany has

experienced a large decline in bargaining coverage, dropping from 72 percent in 1990 to 59

percent in 2011. The proportion of workers in low-wage work also grew over the same period,

from 14.4 percent in 1995 to 23.1 percent in 2010 - levels close to thoseTn the USA and UK (see

Bosch et al. 2010: 36). This expanding group is made up of a disproportionate number of

women and non-standard workers (Kalina and Weinkopf 2012).

Scholars adopting the varieties of capitalism perspective have argued that these trendy

are the result of a growing gap between the interests of different employer groups.

Coordinated bargaining continues to support the competitive strategies of large manufacturing

firms in Germany, and so has been relatively stable in these companies. According to this view,

employer exit from collective agreements and wage concessions is occurring primarily in small

firms and service sector industries - and the expansion of these kinds of activities helps to

explain declining bargaining coverage and growing inequality (Palier and Thelen 2010; Hassel

2011).

In contrast, scholars adopting a power resources perspective have argued that a

substantial, structural shift in bargaining power provides a more compelling explanation for the

magnitude of recent changes in bargaining structures and outcomes in Germany. Research

 Handbook of research on employee
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evidence suggests that large German employers have not on the whole cooperated with

unions, but instead have demanded concessions from their own workforce while directly

pursuing strategies that have increased inequality across their production chain. These

strategies include shifting work to lower-cost, non-union subcontractors and hiring temporary

workers at lower wages (Greer 2008a; Holst et al. 2009). They have been able to do this

because unions’ traditional sources of institutionalized bargaining power have progressively

weakened. Changing government policies have allowed companies to pay temporary workers

lower wages, and employers’ associations and lead employers within those associations have

been unable or unwilling to extend agreements to smaller firms. German unions have organized

campaigns aimed at mobilizing members in poorly organized industries and workplaces, but

have had limited success in reversing these trends (Doellgast and Greer 2007; Greer 2008b;

Turner 2009).

The above comparison further illustrates the limitations of analyses that seek to explain

the existence of and contemporary changes in collective bargaining institutions based on their

performance effects. Recent trends of ‘institutional erosion’ have been strongly shaped by a

power shift in favor of management as a result of market internationalization and government-

led deregulation. Declining bargaining power, in turn, reduces unions’ capacity to pursue

distributive goals within national economies. This suggests that policies aimed at reducing

economic and social inequality require governments, unions, and civil society to develop

innovative strategies that seek to redress the growing imbalance in bargaining power.
 Handbook of research on employee
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Conclusions and Further Research

This chapter has reviewed the different forms that collective bargaining takes, national

differences in these institutions, and their effects on organizational, economic, and societal

outcomes. A key area of disagreement in the literature was shown to be how scholars

conceptualize cross-national variation in collective bargaining and outcomes associated with

these institutions. Researchers focusing on the performance effects of collective bargaining

emphasize the advantages to firms and economies of cooperation between management and

labor, and seek to explain the conditions under which cooperation is supported or enhanced.

Those focusing on the distributional consequences of collective bargaining place more

emphasis on diverging interests and on the role of power in the employment relationship. They

view the bargaining power of labor unions as a key factor explaining differences in these

institutions across countries, as well as their labor market effects.

Research on the economic consequences of collective bargaining has shown that strong

unions, high bargaining coverage, and organized or ‘coordinated’ bargaining institutions are

often resources for employers and their associations, rather than simply obstacles to

implementing efficient or rational strategic choices. More generally, collective bargaining can

help to resolve class conflict or channel it in more socially efficient and productive ways.

However, analyses sensitive to distributional outcomes have provided distinctive insights into

contemporary changes in collective bargaining institutions and their labor market effects. These

scholars have shown that the declining power of labor relative to business interests has

contributed to the erosion of coordinated collective bargaining in many countries and reduced
 Handbook of research on employee
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the capacity of unions to pursue distributional goals. They also suggest that these trends are

not inevitable, but influenced by policy and politics: governments, unions, and other groups in

civil society can develop new strategies aimed at redressing power imbalances and extending

these institutions to poorly represented industry segments and employee groups.

Future research on structures of and outcomes from collective bargaining should seek

to integrate these perspectives. One broad research question concerns how collective voice

institutions can be maintained or strengthened under conditions in which companies are able

to restructure production across national borders and make wide use of subcontractors and

atypical contracts. Studies should combine comparisons of legal and institutional bargaining

structures with analyses of strategies that allow workers to negotiate and enforce agreements.

As production structures and workforce composition change, the form and the content of

workers’ collective responses are transforming as well. Actors are developing new policies and

strategies aimed at rebuilding bargaining power in production networks within and across

national borders. These measures involve standard-setting and policymaking by international

organizations and governments, but also consumer boycotts and worker mobilization through

unions and other civil society actors. These innovative strategies often operate outside

traditional collective bargaining institutions. More research is required to understand their

impact on the balance of power within organizations and societies.

Handbook of research on employee
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Handbook of research on employee
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 Handbook of research on employee
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NOTES

1. According to the ILO, Belarus, Cambodia, Colombia, Eritrea, Myanmar, and the Philippines

have among the worst records of regular government obstruction of collective bargaining (ILO

2008).

2. According to Visser (2011), only three OECD countries, Belgium, Germany, and Ireland, were

characterized by national or central bargaining in 2010, complemented by sectoral and local or

company bargaining. Other continental European countries, together with Australia and Israel,

had predominantly sectoral bargaining; while local or company bargaining was dominant in the

Anglo-American countries, several central and eastern European countries (Slovakia, Poland,

and Estonia), and the Asian and Latin American countries, Japan, Korea, Mexico, and Chile.

However, these broad categories show considerable diversity: for example, ‘centralized’

bargaining in Ireland was based on tripartite social partnership agreements, which collapsed in

2010.

3. Among OECD countries, Austria, Denmark, Germany, Norway, and Sweden have the

strongest legal rights to board-level representation; while the Anglo-American countries, Japan,

South Korea, and Switzerland have no rights (Jackson 2005).

4. Friedman (1962: 123-A) observed along more general lines that ‘Unions have . . . not only

harmed the public at large and workers as a whole by distorting the use of labor; they have also

made the incomes of the working class more unequal by reducing the opportunities available to

the most disadvantaged workers.’

 Handbook of research on employee
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5. There have been a range of other typologies describing ‘national models’ of capitalism,

including, for example, the national business systems approach (Whitley 1999), the theory of

employment systems (Marsden 1999), and the social systems of production literature

(Hollingsworth and Boyer 1997).

 Handbook of research on employee
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