Q3. The European systems of industrial relations exemplified by France, Germany and Sweden are fundamentally similar. Furthermore, the Japanese and U.S. systems of industrial relations are fundamentally different from those found in the three European countries. What is your view of these statements? How do you justify your view?
Industrial relations in Germany, France and Sweden have fundamental differences from the industrial relations in USA and Japan, but there are still some similarities between them. This essay would analyse those differences and similarities through the three main actors- unions, employers and their associations and government- in the industrial relation and the main process of industrial relation-collective bargaining.
This essay can be mainly divided into four parts, namely 'the role of trade unions', 'the role of employers and their associations', 'the role of government' and 'collective bargaining'. By analysing the four key factors, the fundamental differences and similarities can be found out. In each part, the three European countries will be discussed first, and then compare them to USA and Japan.
The first part-'the role of trade unions'- is the most important part. Union is the essential element in industrial relation. From the role of unions, we can see the differences of them. Trade unionism in the EU has been characterised by a high degree of unity (Crouch, C.). Unions in European countries have more power than that in USA and Japan. Unions have influence on employers, government and collective bargaining. Some convergences can also be found in this part. For example, membership and union density declined in all five countries in recent year. From the densities of five countries, the difference between European countries and USA and Japan cannot be recognized, because the highest density and lowest density are both in European countries.
The main content of the first part in as follows. In this part, unions in all five countries will be briefly introduced first. In terms of union membership, all five countries have the same trend of decline. The reasons for the decline have some convergence. Three reasons are listed to illustrate. As for the union density, all five countries have different densities. Sweden has the highest density while France has the lowest density (Eaton, J.), so we cannot see the difference between European countries and USA and Japan through the union density. All the five countries also have the similarities which is the decline of union density in recent years. From the role of unions in five countries, we can see the differences between them. European countries unions have strong powers and great systems (Ghent system in Sweden), while unions in USA are not so powerful and there are dynamic anti-union activities (Frege, Carola M.). The unions in Japan make agreements only on company level, not industry or higher level. The structures of unions are not in one type in Europe, USA and Japan. Only France and Japan have the same structure. So we cannot distinguish European countries and USA and Japan through the structure of unions.
In the second and third part, the differences between the three European countries and USA and Japan in industrial relation become obvious. In Germany, Sweden and France, employer associations are quite important that the density is very high (Furstenberg, F.). They are the key components in the collective bargaining and represent most employers. While the employer associations in USA and Japan are relatively unimportant. The associations in USA would not engage in collective bargaining and their main purpose is to avoid unions in the companies. The employer associations would not get to collective bargaining with unions directly. Employers are the dominant power in USA and Japan (Kuwahara, Y.). Employers negotiate with unions in the union sector. In the non-union sector, employers determine the wages, working hour and working conditions by themselves.
As for the role of government, Germany, France and Sweden have some same features: Firstly, the government exert its influence through legislation (Furstenberg, F.). Secondly, the state plays a significant role in encouraging collective bargaining. Thirdly, the state emphasizes vocational training (Furstenberg, F.). While in USA and Japan, the government is relatively lack of welfare programs compared with Western Europe countries. The state would regulate terms of employment, but only in areas of discrimination, minimum wages ad worker safety.
The last part is talked about collective bargaining. The coverage of collective bargaining is relatively high in the three European countries and low in USA and Japan. Germany, France and Sweden are all facing the problem of decentralization. Germany, Sweden and France have more and more company-level agreements (Ellguth, P. and Kohaut, S.). Agreements of SMEs in France and agreements in terms of pension and insurance in Sweden are still negotiated at sectoral or industry level. While in USA and Japan, most agreements are at company level because of the company-dominant system is these two countries (Kuwahara, Y.).
The role of trade unions
Brief introduction of unions in five countries
In Germany, there are three union confederations. More that 85% of all union members belong to the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB). According to the Eurofound data, DGB has 6,371,475 members in 2008. The major DGB affiliated unions are the Unions of Metal Industry Worker (IG Metall) with 2.3million members, the Union of Public Service, Transport and Communications Workers and the Union of Chemical, Paper and Ceramics Industry workers (Ellguth, P. and Kohaut, S.).
Trade union membership in France is quite low that the union density was around 8% in 2004, the lowest among five countries. There are five main union confederations across the whole economy: CGT, CFDT, CGT-FO, CFTC, and CFE-CGC ( Furstenberg, F.).Trade union presence in the workplace is higher in large companies that that in small companies and the presence is also higher in public sector than that in private sector (Eurofound).
In Sweden, there are three main union confederations. They are LO (the Swedish Trade Union Confederation), TCO (the Swedish Confederation) and SACO (the Swedish Confederation of Professional Associations) (Hammarstrom, O. and Nilsson, T.). Most workers in Sweden are union members, about 90% of blue-collar and 80% of white-collar workers. The density is as high as 68% in 2007 (Eurofound).
The American Federation of Labour and Congress of Industrial Organisations (AFL-CIO) is the main union confederation in USA. AFL-CIO is made up of a large number of industrial and occupational unions. 85% to 90% of the union members belong to AFL-CIO. (Eurofound) The density of 12% in 2006 is second lowest density among the five countries, only higher than that in France. Unions only represent a small proportion of the workforce, so unions are difficult to become powerful forces. Membership density in public sector is higher than that in private sector (Frege, Carola M.).
In Japan, there are two main confederations. The Japanese Trade Union Confederation (Rengo) has over 60% of unionised workers (Kuwahara, Y.). Most of Rengo's affiliated unions are enterprise-level unions. The National Confederation of Trade Unions (Zenroren), organizes only about 7% of unionised workers (Eurofound).
As we can see from the table, in all the five countries, unions had the trend of decline in membership. Only French union membership had a slight increase from 1998, other four countries union memberships decreased continuously. On a whole, all of the memberships were declining (Crouch, C.).
The reasons of the decline of union membership in the five countries have some convergences. The reasons will be discussed one by one.
Reason one: The shift of workforce from manufactory to services sector.
All the five countries were confronted with this reality. That is the common reason in those countries why the union membership decline. In services sector, there are a large number of part-time and temporary workers, who are not suitable to join unions (Eaton, J.).
Reason two: The change of people's attitude towards union.
Unions in France, USA and Japan had this kind of problem. American workers are politically independent that they want to fight for the better working condition by using their own rights given by laws, not by union leaders. Young workers in Japan and France, they would like to accept something new and be persuaded by managers to neglect unions (Frege, Carola M.).Reason three: The problems inside the unions.
For example in France, All employees, including those non-union workers, would benefits from any agreements won by unions. So there is no extra benefit for employees to join the union. And also the French unions were fragmented and treated other unions as rivals. In USA, a controversial reason is the corruption of unions. Robert Fitch pointed out that American unions had profound relations with sinister gangs in his book (Eaton, J.).Union density
The union density in the five countries is quite different. Germany union density is the highest, while in another European country, France, the density is the lowest one, as displayed in Table 2.
The reasons of this high density in Sweden had been concluded by Hammarstrom and Nilsson for the following two factors.
- Unions have unemployment benefits system (Ghent system). They can protect member against possible unemployment;
- Unions have wide influence and play significant roles in the society.
Swedish unions have high level of centralisation when making decisions. Unions also accumulate funds for the industrial disputes. Unlike France, Swedish unions are rich in financial resources thanks to their high density of membership. When there are strikes or lockouts, unions can give members two to four weeks full pay (Hammarstrom, O. and Nilsson, T.).
Although France is among the European countries, the union density is as low as 8%. Goetschy and Jobert had concluded six reasons for the low density of French unions, but I only completely agree with four of them. They are:
- Individual freedom is safeguarded by closed shop practices to choose whether to join a union;
- All employees, including those non-union workers, would benefits from any agreements won by unions;
- Union members have no specific welfare;
- Unions are ideologically fragmented.
The low density of union membership resulted several problems. Financial resources, for example, might be relatively poor compared with unions in other European countries. However, unions still have great industrial and political influence on collective bargaining and the election of employee delegates. The union confederations mentioned above are also known as 'representative unions', which are give several right, such as the nomination of candidates of employee delegates and seats in some of the social security bodies (Goetschy, J. and Jobert, A. ).
There is one common feature in all five countries. That is the union density in public sector is higher than that in private sector.Different structures of unions in five countries
The structures of unions in the five countries are different. Those European countries are not in one type, and USA and Japan do not use one structure. In Germany, there is one single dominant confederation, DGB (Ellguth, P. and Kohaut, S.). In France and Sweden, more than two confederations organise unions, but the structures of confederations are different in the two countries (Eaton, J.). The type is totally different between American unions and Japanese unions. In USA, there is an umbrella confederation with mixed organisation structure, while two confederations with industry organisational structure exist, as we can see in table 3.
In Germany, because of the wide scope of DGB's policies, they make the agreements with employers to improve workers' right, not only at workplace level, but also at industry and wider society level. Germany unions play significant role in collective bargaining and they cooperate with employers (Furstenberg, F.). In many concerns, there is cooperation between government, employer and union. DGB also has well-equipped training centres, so that they can train members who are being made redundant to help them to find another job. Unions have the right to call for strike action. Individuals have no right to go on strike (Ellguth, P. and Kohaut, S.).
Major sectors in USA industrial relation can be divided into non-union sector and unionised sector. Unions only concerned the traditional goal of wages, working hours and conditions. They didn't ask for the management involvement. The structure of USA labour movement is rather loose than that in developed Europe countries. (Wheeler, Hoyt N. and McClendon, John A)
In Japan, enterprise-level unions play significant role in industrial relations. Those unions are financially independent and most union activities are organised in enterprise-level, not industrial or higher level. Enterprise unions have developed cooperative relations with management. Employers would even provide office for unions after the negotiation. The belief in the Japanese company is that 'a community of shared fate', 'everyone is in the same big family'. This kind of belief results in harmonious labour-management relations in companies (Kuwahara, Y.).
The role of employers and their associations
In the three European countries, the role of employers' association is quite important. The employers' association is regarded as the main component of collective bargaining in Germany, France and Sweden. While in USA and Japan, employers' association is relatively unimportant (Kochan, T.A.).
The employer organisation density is very high in Germany, France and Sweden. In Germany, the number was as high as 63% in 2006. Although the union density is quite low in France, the employers' association density is very high, about 75% in 2003 (Furstenberg, F.). The MEDEF, founded in 1998, is the main employer association in France, consisting of companies which have more than 10 workers. MEDEF organises 87 federations covering about 600 associations and 165 regional organisations (Eurofound). The employers' associations in Sweden is well organised, with very high density (80% in 2008, Eurofound). The largest employer organisation is the Confederation of Swedish Enterprise, which represents 54,000 companies.
The USA is unlike Japan and European countries. There is no identifiable national employers' organisation playing a role in industrial relations. The main purpose of some employers' organisations is to avoid unions in the companies (Wheeler, Hoyt N. and McClendon, John A.). For example, the Council on Union-Free Environment (CUE), with 300 member companies, is 'dedicated to assisting companies desiring to remain union-free through positive employee relations'. Those employers' associations rarely engage in bargaining, which is always taken in company levels. Japan is like many European countries that it has a central employers' association-the Japan Federation of Employers' Associations-Nikkeiren (Kuwahara, Y.).But Nikkeiren is not involved in collective bargaining with unions, they only formal tripartite dialogue with government and unions (Mark Carley).
In the three European countries, employer organisations represent employers. It is difficult to divide the function between employer organisations and employers. While in USA and Japan, things are different. In USA, Employers are the most powerful and dominant actor. Employers always have the belief that 'management is the driving force in any advanced industrial relations system' (Thomas Kochan 1980). They implemented different kinds of innovative management practices to ensure the efficiency in the workplace, especially under the pressure from global business competition. In non-union sector, employers have implemented a wide range of management practices to determine conditions of work. In addition to pay, employers introduced fringe benefit, ranging from health insurance, life insurance and holidays, which could attract and keep needed worker. So the company can keep competitive position (Gomez-Mejia, Balkin and Cardy 1995). In Japan, most Japanese companies, Toyota for example, insisted lifetime employment. They would employ university graduates, who will be given low level of pay. The promotion is on the basis of the working experience in the company, so it is not wise for workers to change employers. Japanese companies, especially big companies, are closed to 'employee-managed firms', which seek to maximise the dividend or net income per worker (Ward 1958).Employees were able to participate in some decision-making stages.
The role of government
The three European countries, Germany, Sweden and France, have many similarities in the role of government. Firstly, the government exert its influence through legislation(Ellguth, P. and Kohaut, S.). The state introduced laws to set up the framework of industrial relation, dealing with issues such as working condition, employment security and union rights. Secondly, the state plays a significant role in encouraging collective bargaining. Thirdly, the state emphasizes vocational training. The vocational training in Germany well developed, which is regarded as a model for other countries. According to 'Wirtschaft und Statistik', 55% of people over 15 years old had finished those kind of vocational training in 1991. Sweden has a policy of life-long training, which is also for blue collar workers.
In France, certain laws are enacted on the basis of some agreements of collective bargaining. Another role of the government is big employer. Around 25% of civilian employees were working in the public sector. The government influence wages by adjusting the national minimum wage (Goetschy, J. and Jobert, A.). The Swedish state is also a large employer, with a lot of employees in the public sector. In Germany, there are also self-governing public organisations under the supervision of government. They are responsible for the health, safety and insurance of labours, for example (Furstenberg, F.). In terms of strikes, strikes and lockouts are only lawful in the context of collective bargaining. Civil servants are banned from striking.
While in USA, The government is relatively lack of welfare programs compared with Western Europe countries. The state would regulate terms of employment, but only in areas of discrimination, minimum wages, working conditions and worker safety. (Ledvinka and Scarpello 1991). Government plays a limited role in the collective bargaining in the private sector. The structure of collective bargaining is fragmented. Most collective bargaining is at company levels. The Japanese government negotiates co-operation agreements on a regional level (Kuwahara, Y.). The government employs only 5% of the total workforce in 2009, compared with the 14% in all the OECD countries. Government employment in Japan is so decentralised that most government employees working for local governments. (Government at a Glance 2009)
The coverage of collective bargaining is relatively high in the three European countries and low in USA and Japan, as showed in table 4. The three European countries, Germany, France and Sweden are all facing the problem of decentralization. Especially for France and Sweden, although there is high coverage of collective bargaining in both countries, many of the agreements are made at company level or local level (Frege, Carola M.). Agreements of large companies in France and agreements regarding to payment and working conditions in Sweden are more likely to be negotiate at lower level. Agreements of SMEs in France and agreements in terms of pension and insurance in Sweden are still negotiated at sectoral or industry level. Although Germany also faces the decentralization, the dominant level of collective bargaining is still sectoral level. While in USA and Japan, there is company-dominant system. Almost all the agreements are at company level (Wheeler, Hoyt N. and McClendon, John A.).
In Germany, unions and employer's federations negotiate at industry and regional levels . The collective bargaining is mainly at the sectoral level. Negotiations at national level are rather rare. From 1998 to 2007, the coverage of collective bargain dropped from 76% to 63% in western Germany and from 63% to 54% in eastern Germany (Ellguth and Kohaut, 2008). Most of the agreements were in sectoral level. Take western Germany for example, among the 63% of all employees covered by collective bargaining, about 89% of them were covered by sectoral collective agreements. The others are in the company level (Eurofound).
While in France, collective bargaining coverage is as high as 90%. This is because agreements can be easily extended to entire sectors by the government after the negotiation is agreed (Goetschy, J. and Jobert, A.). The collective bargaining in France is also decentralized. Most large companies have their company-level agreements. Bargaining at sectoral level only limits in the SMEs. If the company is not a member of an employer association, it would accept the agreement at the sectoral level. Regional level bargaining is rare, except in the metalworking sector (Eurofound).
The coverage of collective bargaining in Sweden is even higher than that in France, 91%. The structure of collective bargaining also become decentralised in recent years. Bargaining regarding to wages and working hours is negotiated to local level. But some agreements in terms of insurance and pension are still at the industry level.
The coverage in USA is relatively low, about 15%. There are union sector and non-union sector in USA. In a union sector, collective bargaining negotiates agreements regarding wages and working conditions at company level (Wheeler, Hoyt N. and McClendon, John A.). While in non-union sector, management is given the absolute power to determine payment and other terms. In Japan, the coverage of collective bargaining is only 22%. The collective bargaining is at company level. Employees ask for improvement of working conditions and wages for themselves, not for the whole industry. Japan, just like USA, has the company-dominant system (Eurofound).
The three European countries and USA and Japan have fundamental differences in industrial relations, although there are some similarities between them. All the five countries began the decline of union membership and density, which is regarded as the convergence, but the roles of unions in European countries are quite different from that in USA and Japan. The role of employers and employer associations are also different. In Germany, France and Sweden, employer associations play significant roles in collective bargaining. But in USA and Japan, employer associations seem to be so unimportant that the main purpose of the associations in USA is to avoid unions. Employers are dominant in industrial relation in USA and Japan. In the three European countries, the government exert influence on industrial relation through legislation to set up the framework. The government also tries to encourage the collective bargaining. In USA, the state would only regulate some terms of employment, but only in areas of discrimination, minimum wages and worker safety, not collective bargaining. The coverage of collective bargaining in the three European countries is much high than that in USA and Japan. But Germany, France and Sweden have the problem of decentralization. Some of their agreements are made at company level which is the dominant level in USA and Japan. On the whole, the fundamental differences between European countries and USA and Japan are related with the different structure of economy and the different roles of three actors in industrial relation. The former countries are in coordinated economy while the latter are in liberal economy. But from the same trend of the decline in union membership and density and the decentralization of collective bargaining in European countries, it might be estimated that there will be more and more convergences between both two kinds of countries in terms of industrial relation.
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