TURI-seminar IRES, Paris 28 September 2015. Output of CAWIE II Project Collectively Agreed Wages in Europe 28.09.2015Guy Van Gyes & Thorsten Schulten

TURI-seminar IRES, Paris

28 September 2015

Output of CAWIE II ProjectCollectively Agreed Wages in Europe

28.09.2015Guy Van Gyes & Thorsten Schulten

Grant: European Commission (DG Employment)

Coordination KULeuven-HIVA (Belgium) and WSI (Germany)

Research group:14 Institutes from the TURI-Network

AIAS (Netherlands) FAFO (Norway)AK (Austria) FAOS (Denmark)Associazione Bruno Trentin (Italy) IRES (France) Fundacion 1 de Mayo (Spain ESRITU (Hungary)Instituto Ruben Rolo (Portugal) ETUI (EU)Labour Institute for LRD (UK)Economic Research (Finland)

Main argument built-up in the book

1. Critique of the dominating view on wages and its policy implications

2. Negative implications of this dominating view

3. Building an alternative strategy: coordinating inclusive growth


Wages in the crisis – Dominating European policy view

■ Crisis is essentially seen as a

crisis of cost competitiveness

■ Imbalances are the result of

divergent unit labour costs development

■ Asymmetric view: Wage developments in the deficit countries

were “too high” so that they lost competitiveness

■ Symmetric view: Wage developments in the surplus countries

were “too low” (wage-dumping hypothesis)28.09.2015Guy Van Gyes & Thorsten Schulten

Wages and the crisis – Empirical critique of the dominating view

■ TURI database of 10 countries with statistics on collectively-agreed wages

■ Dominant story based on evolutions of nominal unit labour costs

■ (Real) wage trends different (certainly when making abstraction of

Germany)

■ Wages (agreed and actual) grew in line with price increases

■ Prior to the crisis: almost all countries modest wage growth since the early

2000s when also taking productivity increases into account

■ Thus: Forgetting the demand-side: diminishing labour share in national

income

■ Plus: Need to take better into account the composition effect of a crisis

period (cf. Spanish wage development in the first crisis period => rise in

unemployment is not evenly distributed over the wage curve)


Noélie Delahaie, Sem Vandekerckhove and Catherine VincentChapter 2 Wages and collective bargaining systems in Europe during the crisis

Wages and the crisis – Conceptual critique of the dominating viewTorsten Müller, Thorsten Schulten and Sepp ZuckerstätterChapter 7 Wages and economic performance in Europe

Narrow concept of competitiveness:

• exclusive focus on labour costs

• regardless of the structure of real economy

• regardless of non-price factors

• loose relation between wages and export performance

Narrow treatment of wages as cost factor:

• Ignorance of the role of wages for domestic demand – wage-led demand growth model = Eurozone

Overestimation of the export sector for the overall economic development


Policy implications of dominating view on wages

New European Interventionism:Economic Governance:• European Semester/European

Imbalances procedure– Half of the EU Member States got already recommendations

since 2011• Troika /Memorandum of Understanding

Policy measures:• Direct intervention into wage developments by cutting and

freezing public sector and minimum wages• Structural reforms of wage setting institutions

to increase downward flexibility of wages28.09.2015Guy Van Gyes & Thorsten Schulten






Implications of current wage policy

Radical decentralisation and deconstruction of collective bargaining:• Many countries of Southern

and Eastern Europe

Decrease of real wages in a majority of European countries:• Internal devaluation in the South• German shadow in the North• (Social) Cost(ly) strategy in the East


Changes in collective bargaining systems in EU countries under EU, ECB and/or IMF surveillanceAbolition/termination of national collective agreements

Ireland, Romania

Facilitating derogation of firm-level agreements from sectoral agreements or legislative (minimum) provisions

Greece, Portugal, Hungary, Italy, Spain

General priority of company agreements/ abolition of the favourability principle

Greece, Spain

More restrictive criteria for extension of collective agreements

Greece, Portugal, Romania

Reduction of the ‘after-effect’ of expired collective agreements

Greece, Spain

Possibilities to conclude company agreements by non-union employees

Greece, Hungary, Portugal, Romania, Spain


Deconstruction/decentralisation

Portugal Spain

2008 2013 2008 2013

Agreements 295 94 5987 3161

Of which company

95 48 4539 2274

Extension 137 9

Workers covered

1,8 million 242 thousand 12 million 8.5 million


Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo LeonardiChapter 3 Impact of the euro crisis on wages and collective bargaining in southern Europe – a comparison of Italy, Portugal and Spain

Real compensation in the EU 2010-2014


Low-cost strategy in the East – Non-developing wage bargaining

• Low-wage countries• Wage and social harmonisation with rest of Europe

fading• Income policy = government prerogative

• Taxes, minimum wage, social transfer• Tripartite dialogue but political domination of agenda• Mainly decentralised collective bargaining

• Decreasing organisational strength unions and employers’ organisations

• Key example = Hungary28.09.2015Guy Van Gyes & Thorsten Schulten

Szilvia Borbély and László NeumannChapter 5 Similarities and diversity in the development of wages and collective bargaining in central and eastern European countries – a comparison of Hungary, Slovakia and the Czech Republic

Shadow of Germany in the North

Coverage of collective agreements in the private sector*

Extension of collective agreements

Regime

Denmark 74% No Autonomous Collective bargaining model

Sweden 85% No

Norway 50% Yes, some since 2004

Mixed model

Finland 85% Yes, widespread

Statutory regulations (and strong unions

Iceland 95% Yes, widespread


Table 1 Mechanisms for determining wages in the Nordic countries

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

-4

-3

-2

-1

0

1

2

3

4

5

6

Average_wages_FICollectively_agreed_wages_FIAverage_wages_GERCollectively_agreed_wages_GER

Figure 1. Developments of average wages and collectively agreed wages in Finland and in Germany 2001-2013: manufacturing (%).

+ Social dumping in the liberalising labour mobility (construction, transport, food industry)

Søren Kaj Andersen, Christian Lyhne Ibsen, Kristin Alsos, Kristine Nergaard and Pekka SauramoChapter 4 Changes in wage policy and collective bargaining in the Nordic countries –a comparison of Denmark, Finland, Norway and Sweden

Non-convergence: internal and external imbalances/inequalities => less social inclusion

• Growing divergence in demand, inequality, poverty between countries

• Pre-crisis: see next presentation for details• Non-convergence in productivity; real wages in the

service sector, inflation

• Since the crisis• Deflation popping up around the corner; sluggish

growth• Increased ‘beggar-thy-neighbour’ => high social cost• Loss of a governance instrument


Maarten Keune Chapter 8 Less governance capacity and more inequality: the effects of the assault on collective bargaining in the EUOdile Chagny and Michel Husson Chapter 9 Looking for an ‘optimal wage regime’ for the euro zone






What kind of wage policy for inclusive growth?

Inclusive growth strategy• Reference in new economic discourse (EU 2020, OECD etc)• Everyone should participate in economic development• Reduction of inequality• Better economic performance

What role for wage policy?• Everybody a fair share• Wage-led demand growth• Unions and organised wage bargaining as countervailing power to

market/capital forces• Coordinated wage bargaining (multi-employer, institutionally supported,

coordination by centralisation)• = Belief in the own European model of a social market economy


Thorsten Schulten and Guy Van GyesConcluding remarks A transnational coordinated reconstruction of collective bargainingas a precondition for inclusive growth in Europe

Towards an alternative view on wages?

Stabilising and enforcing wage developments:• counter deflationary price developments• stabilise and increase private demand• counter income inequality• Pushing ‘smart’ productivity growth

Requires …• stop of wage cuts and wage freezes• wages increase at least in line with productivity and

target inflation• more expansive wage developments in the surplus

countries

Requires … as STRUCTURAL REFORM• Strengthening/reconstruction of wage setting institutions


Torsten Müller, Thorsten Schulten and Sepp ZuckerstätterChapter 7 Wages and economic performance in Europe

Towards an alternative view on wages?

Reconstruction of wage-setting institutions in

Europe requires as structural reform …

• No more restrictions and interventions in autonomous collective bargaining

Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo LeonardiChapter 3 Impact of the euro crisis on wages and collective bargaining in

southern Europe – a comparison of Italy, Portugal and Spain

• Promotion of a higher bargaining coverage

Maarten Keune Chapter 8 Less governance capacity and more inequality: the effects of the

assault on collective bargaining in the EU

• Promotion of multi-employer bargaining“The impulse to collective industrial relations in the UK private sector has not entirely disappeared and might be re-kindled under the right circumstances”

Lewis EmeryChapter 6 Multi-employer bargaining in the UK – does it have a future?


DELTLVEEUK

IELUCYPLROEU ATESMTNLSI

BGHUCZGRBEDK

ITFRPTSK

FISE

0 5 10 15 20 25

2424

221919

1817

16161616

1513131313

1212

1111

101010

888

77

Chart Title

Reconstruction: European minimum Wage Policy

Current situation: rather lowMWs at rather low level


Future: 60% of the median wage 28 million workers in the EU ! (2010)FR

SLPTHULTBEDEPL

ROLVIE

NLUKSKELESLUEECZ

0 10 20 30 40 50 60 70

6161

5654

5250505050

4848

4747

4645

4141

3836

Chart Title

Poverty threshold50%

Low-pay thres-hold66.67%

Thorsten Schulten, Torsten Müller and Line EldringChapter 10 Prospects and obstacles of a European minimum wage policy

Institutional support: Can extension mechanisms support the reconstruction of collective bargaining ?

A high bargaining coverage usually requires some form of state support through extension or functional equivalents

Current attempts at national and European level to reduce or even to abolish extensions lead to a strong decline of the bargaining coverage

European policy to strengthen collective bargaining would require a European initative to promote extension


Thorsten Schulten, Line Eldring and Reinhard NaumannChapter 11 The role of extension for the strength and stability of collective bargaining in Europe

What next?

Macro-economic challenges A European Solidaristic Wage Policy:

Is there an optimal wage coördination (rule) beyond the national?

Macroeconomic Coordination:How to coordinate Wage with Monetary and Fiscal Policy?

Political challenges How to strengthen European wage coördination?

What actors? What instituions? How to bring economic democracy in

European governance


Thorsten Schulten Guy Van Gyes

WSI HIVA


Thank you very much for your attention !

Free download:

http://www.etui.org/Publications2/Books/Wage-bargaining-under-the-new-European-Economic-Governance






Documents

TURI-seminar IRES, Paris 28 September 2015. Output of CAWIE II Project Collectively Agreed Wages in Europe 28.09.2015Guy Van Gyes & Thorsten Schulten