A new report from the International Labour Organisation (ILO) says that weakening or decentralising collective bargaining arrangements – as some countries have done during the economic crisis and others did beforehand – is likely to lead to more wage inequalities and social instability.
Trade unions in the UK have long argued the case for sectoral and national agreements as a force for good and to avoid the race to the bottom. As austerity bites and pay inequalities widen, politicians need to voice support for industry-wide collective agreements as an important weapon in the fight for a re-balanced economy.
“Letting companies negotiate in the absence of strong national and sectoral agreements, puts downward pressure on wages and working conditions”, said Susan Hayter, ILO’s senior industrial and employment relations specialist. Singling out the USA and UK she says that the sharp rise in wage inequality in the US and the UK in recent years can be directly linked to the decline in union membership and the associated decline in coverage by collective bargaining agreements. Greece has seen collective bargaining effectively ended by the austerity measures forced on the country by the troika.
However she points out that “when there is significant policy support for collective bargaining mechanisms, such as in Denmark, Finland, France, the Netherlands and Sweden, the gap between the highest and lowest wage earners is significantly lower”.
During the crisis, many employers, governments and trade unions recognised that collective bargaining was an effective tool to adjust to economic conditions and stay in business. National and sectoral agreements provided a framework within which firms could tailor their response, thus reducing costs while at the same time preventing layoffs and protecting earnings. Examples include European countries like Austria, Belgium and Germany as well as further afield in Argentine, Brazil and South Africa.
The ILO confirms collective bargaining agreements actually reduced wage inequality and contributed to productivity and competitiveness. And it is no longer just pay and working hours that are the focus of collective bargaining. Increasingly the process is being used to address the specific concerns related to the global economic crisis.
Pay is being linked to productivity, and flexible working time arrangements are based on work-life balance. Collective bargaining agendas now also include skills, training and lifelong learning which protect jobs and promote skills.
It’s time for collective bargaining in the UK to come in from the cold.
This blog was first published on the TUCs Stronger Unions on September 17th