Role of Trade Unions for Employment Promotion

Nov 6, 2014

Weon-Ho JEONG

Introduction 1

2

3

4

Theoretical Considerations

Case Studies

Strategies of Trade Unions

Policy Recommendations 5

1 Introduction

• After the Great Recession in 2008, the crisis of employment continues

Introduction

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Trend of employment rate of OECD

• Trade Unions are one of the major actors in labour market.

• My theme

Introduction

- Their role is significant in the determination of variables

such as wages and working time, which affect employment.

- The role of trade unions for the promotion of employment

in theories and cases.

2 Theoretical Considerations

• Neo-classical basic model (under perfect competition)

Theoretical Considerations: Employment Effect of Trade Unions 1

W1 W2

Wage increase by trade unions

L1 L2

Reduction in employment

- This model is strongly supported by employers.

• Neo-classical basic model

- This model is not working in the real labor Market !

Theoretical Considerations: Employment Effect of Trade Unions 1

Reasons :

1. imperfect and asymmetrical information 2. heterogeneity of labor force 3. wage inflexibility

⁞

• Efficiency Wage Hypothesis

Theoretical Considerations: Employment Effect of Trade Unions 2

W1 W2

Wage increase by trade unions

Marginal Reveneu Product

L1 L2

Increase in employment

Higher wages might create jobs!

Upward movement of the demand curve (D1 D2)

• Keynesian Theory of Employment

※ 1% increase in labor income (Korea, 1999~2012)

ㆍ0.22~0.58% increase in employment

ㆍ0.68~1.09% increase in GDP

ㆍ0.45~0.50% increase in real productivity

Theoretical Considerations: Employment Effect of Trade Unions 3

Wage (=labor income) increase

increase in total demand of economy

increase in investment/production

increase in employment

3 Case Studies

History

Background

Driving force

- 1953 : 48h per week

- 1989~1991 : 44h per week

- 2003~2011 : 40h per week

- the longest working time in the OECD countries

- Struggles of trade unions

ㆍstruggle for the revision of labor laws in 1988

ㆍstruggle for the reduction of working time

from the end of the 1990s

Case Studies I : Reduction of working time at national level 1

• Reduction of legal working time in Korea

Results

- Employment effect

ㆍreduction (’89~’91) increase by 4.7% (until 1999)

ㆍreduction (’04~’11) increase by 5.2% (until 2011)

Background

Contents

Results

- Recession - Inflation - Rising unemployment

- TU : wage moderation

- Employer : increase in investment,

reduction in working time

(esp. spread of part-time)

※ Government : tax reduction,

protection of part-time worker

- Employment increase during the 10 years after the WA : ca. 1 mio. (1.8% increase per year)

※ Among them 80% part-time job

- Reduction in unemployment rate : 9.7% (‘83) 6.6% (‘93)

Case Studies I : Reduction of working time at national level 2

• Wassenaar Agreement (Netherlands, 1982)

Background

High road strategy

- crisis of manufacturing in Milwaukee in the 1980s

- Partnership for vocational training between ㆍ trade union (AFL-CIO Wisconsin) ㆍ employers (membership) ㆍ regional government ㆍ university (“Center on Wisconsin Strategy”)

WRTP

ㆍ Pre-employment training ( direct placement)

ㆍ manufacturing modernization

ㆍ incumbent workers training program

Case Studies II : High Road Strategy at regional level

• Wisconsin Regional Training Partnership (WRTP; 1992)

from 2001 cooperation with “Building Industry Group Skilled Trades Employment” WRTP/BIG STEP

- Initiatives of trade union

ㆍAFL-CIO Wisconsin ran the workplace education

centers from 1988.

- 6,000 new jobs (1994~1999)

- 12-month retention rate 75%(1996~2001)

- annual average earning increased from $8,500

to $22,500 in the first year

Case Studies II : High Road Strategy at regional level 2

• Wisconsin Regional Training Partnership (WRTP; 1992)

Driving force

Achievements

4 Strategies of Trade Unions

Strategies of Trade Unions : Reduction of working time 1

• Under lasting increase in productivity, the reduction in working time is inevitable and essential for the promotion of employment.

• Trade unions should continuously make efforts to reduce legal / contractual working time.

Reduction of legal / contractual working time

※ Working time (per week) in German Printing Industry

70h(1856) → 60h(1900) → 48h(1956) → 38h(1993) → 30h(2025)

Strategies of Trade Unions : Reduction of working time 2

• Expansion of part-time job

• full-time ⇄ part-time

• principles of non-discrimination, esp. principle

of pro rata temporis (in proportion of time)

Job-sharing

Strategies of Trade Unions : High Road Strategy

• Not only incumbent worker training but also pre-employment training

• Experts in vocational training in trade unions

• Close cooperation with employers

Skill development through vocational training

5 Policy Recommendations

Policy Recommendations

• For employment promotion social partnership is important. • For social dialogue the role of government is essential. • Government needs to carry out labor policies faithful to workers and employers.

Encouragement of social dialogue

Policy Recommendations

• If working conditions of part-time workers are improved, the preference for part-time work would increase. • Principles of non-discrimination (principle of pro rata temporis)

Protection of part-time workers

Policy Recommendations

• Wage moderation due to the reduction of working time should be compensated through expansion of social welfare.

Expansion of social welfare