European Integration and Industrial Relations

In recent years, the term ‘European social model’ has acquired widespread currency. Although few have been prepared to spell out what they mean by the term, most would probably agree with Visser and Hemerijck (1997: 13–14), that it is predicated upon upholding fundamental principles in three particular policy domains. These are the right to work, including commitments to full employment and active employment policies; the right to social protection, involving encompassing basic social security cover for the non-working population; and the right to civilized standards in the workplace, covering issues of employment governance or regulation. Kittel (2002: 3), citing Ferrera et al. (2000: 13), adds two further common traits: a relatively egalitarian wage and income distribution, which relates to all three domains, and a high degree of interest organization on the part of employers and workers together with coordinated wage bargaining, which relates to the third. In each case, the above rights exist not just for the benefit of workers — they are the ‘rules of the game, and like all such rules, they constrain in order to enable’ (Marsden, 1999: 5).

The opening chapter made some crucial assumptions about the three key dimensions of the EU — the economic, political and social — as well as taking for granted the wider context. These assumptions need to be substantiated and in the process the context filled in. The first assumption is that ‘Europeanization’ rather than ‘globalization’ is the key reference point — that ‘Europeanization’, in other words, is not just a cipher for ‘globalization’. The second is that it is meaningful to characterize the EU polity as a ‘multi-level system of governance’ with a capability to exercise a significant influence on industrial relations developments. The third is that it is possible to identify the main contours of a ‘European industrial relations model’ as a constituent element of the European social model, even though the EU framework is skeletal and there are many points of difference between the systems of the member countries.

The multi-level system that European integration is prompting involves both formal and informal processes. Significant developments are taking place in these processes, and in the balance between them, which are integral to the system’s dynamics. This chapter seeks to clarify what is involved. The initial focus is on collective bargaining, which, together with legal enactment, represent the two traditional methods of industrial relations regulation. Despite multiple challenges, collective bar-gaining appears to be not only surviving, but also gaining ground (Spyropoulos, 2002: 395). As well as assuming some of the functions traditionally performed by legal enactment, it appears to be taking on fresh roles. These developments are not restricted to the supranational level, but also feature within national systems, irrespective of different legal traditions. In the process a distinct shift from ‘hard’ to ‘soft’ forms of regulation is apparent.

For many commentators, the story of industrial relations at the EU Community and sector levels is one of a failure to develop a vertically integrated system equivalent to those of most national systems. The reasons have been exhaustively analysed (see Falkner, 1998; Hay, 2000; Keller, 2000; Streeck, 1995; 1998). They include the sustained opposition of employers, the preoccupation of trade unions with specific national problems, differences amongst governments about the role of social policy and the immensely practical difficulties of overcoming the collective action problem of multiple sovereign bodies reaching agreement. In addition, they extend to considerations intrinsic to the process of ‘negative’ rather than ‘positive’ integration, whereby obstacles to a single market were removed rather than measures being put in place to control its operation. Crucially, although the EU has developed a far more extensive political dimension than the NAFTA, a ‘highly developed state prota-gonist’ (Traxler, 1996: 289) has not emerged with sufficient authority to sponsor the creation of a vertically integrated system. Indeed, instead of responding with greater EU regulation to the ‘declining domestic governability’ referred to in Chapter 1, the commitment to subsidiarity means that member states have confirmed the sovereignty of national systems.

Developments within national systems have also been integral to the emergence of a multi-level system. Most EU countries are characterized by an inclusive structure of multi-employer bargaining at cross-sector and/or sector level. In the face of growing international competition in general and EMU in particular there are two seemingly contradictory developments. The first, which is the focus of Chapter 6, is a widespread trend towards more decentralized arrangements giving management greater scope to negotiate at company level. In most cases, however, decentralization has seen ‘a controlled and co-ordinated devolution of functions from higher to lower levels of the system’ (Ferner and Hyman, 1998: xvi–xvii). Or in Traxler’s (1995) terms, decentralization in Western Europe has predominantly been ‘organized’ rather than ‘disorganized’; the company bargaining occurs within the framework of higher-level agreements. Only in the UK, reflecting the different form and status of multi-employer agreements referred to in Chapter 2, has decentralization been ‘disorganized’, with sector agreements disintegrating and being displaced by company-level arrangements. Second, ‘organized decentralization’ has also involved a strengthening of the national level in many countries. Governments have sought national-level agreements with the social partners — so-called ‘social pacts’ — on wage moderation, greater labour market flexibility and reform of social protection systems.

Recent years have seen significant changes in national systems of industrial relations which, Chapter 5 emphasized, are contributing to the development of a multi-level system. As well as strengthening of the national level through the negotiation of social pacts, there has also been the rise of company bargaining — examined in this and the following chapter. Seemingly contradictory — the one involving centralization, the other decentralization — they represent complementary responses to the twin problems posed by the ‘regime competition’ that European integration is promoting and the greater adaptability required to handle the widespread restructuring that it has set in train. These twin developments are both a response to the deficiencies, and a challenge to the long-term viability, of the sector multi-employer bargaining that has been the cornerstone of most national systems. The development of social pacts recognizes that national systems are operating within a single market and also that, with the growth of the service economy, sector bargaining no longer has the coverage that it did. The rise of company bargaining reflects the inability of the ‘one-size-fits-all’ regulation associated with sector agreements to deal with the increasingly diverse business circumstances faced by companies within a sector. Seemingly, a combination of national, cross-sectoral and company bargaining questions the need for sector arrangements — the former can set the overall framework and the latter fill in the details.

Chapter 6 established that the sector-level collective bargaining arrangements, which constitute a cornerstone of the industrial relations systems of most west European countries, find themselves under increasing pressure. Of the challenges identified, that posed by the rise of company-level collective bargaining activity is foremost. In the face of growing international competition, there has been a widespread trend towards more decentralized bargaining arrangements giving management greater scope to negotiate working and employment practices appropriate to the circumstances of the company or its constituent units. The process of EMU has served both to unleash extensive restructuring and rationalization and to extend and intensify competition across borders. As Chapter 6 argued, under a context of restructuring pressure for further decentralization is reinforced as the bargaining agenda becomes increasingly oriented towards addressing questions of competitiveness, adaptability and employment. Internationalization of production and market servicing on a pan-European basis makes multi-employer bargaining at national sector level appear increasingly anomalous: in many sectors it can no longer take wages and conditions out of competition within the new spatial boundaries of the relevant product market.

Singling out European-scale multinational companies for particular attention needs little justification in the light of previous chapters. MNCs have been key proponents of economic integration, championing the creation of the single European market and subsequent monetary union (Nollert, 2000). MNCs are also central protagonists driving forward the process of market integration. As Chapter 2 underlined, large companies have responded to EMU by seeking to extend their reach from particular national markets across the entire single market, and to reorganize production and market servicing on a continent-wide basis. In the process the number of companies within the EU which are multinational in scope has grown as has the geographical reach of established MNCs (Edwards, 1999). Chapter 2 went on to establish that the ‘Euro-company’ is a meaningful concept, distinct from the ‘global’ corporation and amounting to more than an umbrella term for a set of nationally differentiated MNCs. Legal accommodation to the scale and significance of these developments has come with the eventual adoption, in 2001, of the European Company Statute.

Our focus in this chapter and the next shifts to the impact of European integration on the outcomes of industrial relations. Singling out wages for special attention needs little justification. The levels of wages, and the wages structures they are embedded in, lie at the heart of the employment relationship and the negotiations that surround its governance. Following Brown and Walsh (1994: 437), being quantifiable, and thus generalizable across all manner of jobs and employees, wages are the common focus and language of policy makers and negotiators alike, albeit their interests may differ. For policy makers, as Chapters 4 and 5 have shown, wages are a key element in the macroeconomic policy mix, with links to employment, social security and taxation; changes in the levels of wages are fundamentally important in maintaining price stability. The wage structure shapes the distribution of employment between skills, employers and regions. For negotiators, the interests of their constituents are paramount. For workers, the level of wages is both the means to livelihood and a measure of self-esteem, explaining the focus on both real wages and relative wage levels or differentials. For employers, the levels of wages (both absolute and relative) are not only a key component of costs, but also instruments of motivation, performance and productivity.

Along with wages, working time is a defining feature of the employment relationship and needs little justification for special attention — ‘Time is at the heart of industrial relations’ suggests the European Commission (2000: 66). As previous chapters have pointed out, the two main dimensions of working time — duration and flexibility — have been significant factors in the development of the EU’s multi-level system of industrial relations. They have been one of the main vehicles of bargaining decentralization within national systems (Traxler et al., 2001: 128–9) — notable examples include the 1984 settlement reducing the working week below 40 hours in German metalworking and the French Aubry legislation of 1998 and 1999 implementing the 35-hour week. They have also constituted a major focus for Community-level activity. Substantively, the duration of working time figures prominently in the 1993 EU Working Time Directive under its provisions for a 48-hour average weekly maximum and four weeks paid holiday entitlement. The flexibility of working time is seen as making a major contribution to the modernization of work organization, being vital to each of the main objectives of the EU’s employment strategy, i.e. full employment; quality of work (better jobs) and productivity or competitiveness; and cohesion and an inclusive labour market providing for greater access (European Commission, 2003b).

Contrary to the hopes of some, European integration has not brought about an industrial relations system that is comparable to national ones. Equally, however, it has not yet brought about the worst nightmare of many — the collapse of multi-employer bargaining and the fragmentation of existing national systems. Indeed, on the surface there has apparently been little change in the formal institutions of national systems. Instead, a complex multi-level system is emerging. Like the EU polity’s multi-level governance system, it reflects a history of informal and gradual development as well as deliberate institution building. National industrial relations systems have always been multi-level in some degree, with national, sector, company and workplace levels interacting with one another. Making the difference is the international dimension that European integration brings. Cross-national (horizontal) influences mix with national (vertical) ones and involve the sector and Euro-company levels as well as the Community level. Moreover, it is not only the formal processes of legal enactment, collective bargaining and coordination that are important. Coping with common constraints is encouraging the informal processes of isomorphism (‘competitive’, ‘coercive’, ‘mimetic’ and ‘normative’). In Teague’s (2001: 23) phrase, ‘Europe is learning from Europe’.

Chapter 11’s elaboration of the complexity, uncertainty and instability surrounding Europe’s multi-level system of industrial relations will no doubt invite some to conclude that it is, in the language of Scharpf’s (1988) ‘joint decision trap’, ‘sub-optimal’. Centralized or decentralized arrangements, they might contend, are surely preferable. Yet, however compelling the reasoning may be, neither centralization nor decentralization represent a realistic, or indeed desirable, way forward. This is all the more true given that industrial relations governance concerns much more than wage determination, with issues such as restructuring now prominent on the agenda.