chapter 12

MEXICO

The high degree of economic integration between the United States, Canada, and Mexico has focused greater attention on the labor relations system of Mexico. The Mexican system is important in its own right, but it is also presented here as broadly representative of labor relations in developing countries. In essence, the primary theme is appearance versus reality: On paper Mexican law provides strong protections for workers and unions, but the extent of enforcement is questionable.10 Moreover, labor negotiations and unions have traditionally been controlled by the government as part of a larger economic development strategy. As in many other developing countries, this results in sharp clashes between the government and independent labor unions because of the government's focus on competitiveness and foreign investment at the expense of democracy and working conditions. Quite strikingly, social and economic rights for workers are written directly into Mexico's constitution of 1917. In fact, this was the first constitution or basic national charter anywhere to explicitly include workers' rights.11 Article 123 guarantees the right to organize unions, bargain collectively, and strike; provides protections against unjust dismissal and dangerous working conditions; and mandates minimum wages, overtime pay, profit sharing, an eight-hour day, a six-day workweek, and pregnancy and childbirth leave. Under Mexican labor law, a union must have at least 20 employees and can be an industrial union, craft union, or enterprise union (representing workers at only one company). In rural areas where there is difficulty meeting the 20-worker minimum, general unions are also allowed. To have legal rights, unions must register with the government as one of these types. A union does not need to represent a majority of employees to engage in collective bargaining, but it does need this to legally strike. All contracts automatically include the minimum provisions mandated by the constitution. Once approved by the government, contracts are legally enforceable. There is no explicit obligation for management to bargain; rather, this is enforced through the strike-related aspects of labor law. Once the legal standards for a strike are fulfilled and mediation fails, a strike can occur. Red and black flags are flown at the entrances to the workplace, and all employees must stop working except those necessary to protect raw materials and equipment.12 Interestingly, the union is legally responsible for protecting the company's materials and equipment. The employer must cease operations, and permanent strike replacements are prohibited. As such, the legal protections for workers and unions are much greater in Mexico than in the United States—at least on paper.13 The effectiveness of these protections, however, has long been questioned. For 60 years, the most influential union federation was the Confederación de Trabajadores México (CTM, Confederation of Mexican Workers). The CTM was closely connected to the longtime ruling party—the Partido Revolucionario Institucional (PRI, Institutional Revolutionary Party)—and was therefore frequently criticized as making the labor movement subservient to the government.14 CTM-affiliated union leaders have been portrayed as being more loyal to the PRI than to their unions. Similarly, collective bargaining agreements have traditionally been alleged to be more a function of the government's overall economic development strategy than the product of independent collective bargaining. To wit, as the government privatized industries and embraced free trade, union density fell from 30 percent to 20 percent from 1984 to 2000.15 Government control of labor unions has been facilitated by Mexican labor law. Government agencies play significant roles in approving union registrations, determining the legality of strikes, and approving contracts. These seemingly administrative requirements allow for abuse. Of particular concern are "protection contracts" in which a "ghost union" and an employer agree to a collective bargaining agreement that does not grant workers any benefits or rights. The government can be complicit in this by approving the registration of this sham union (even if the registrant is the company's lawyer), by using the existence of this sham contract to prevent workers from switching to an alternative, independent union, and by denying approval to strikes not supported by the ghost union. By some estimates, these sham ghost unions and protection contracts have been widespread.16 The independence, and therefore legitimacy, of the Mexican labor movement has been a concern nationwide. Such concerns are particularly acute in the maquiladora industry because of the need to attract foreign investment (recall Chapter 11). At the same time, the rank and file are not universally passive, and struggles for democratic unions and free collective bargaining occur within and outside the official (government-approved) labor movement (see the accompanying "Labor Relations Application" box).17 Such struggles sharpened in the first decade of the 21st century. After seven decades in power, the PRI was ousted by the conservative Partido Acción Nacional (PAN, National Action Party) which was supported by independent unions who saw its pledges of government reform and transparency as a way to end the government's control of the labor movement. But after taking office, the PAN government pushed a pro-business agenda of privatization, budget cuts, and labor law reform.18 Indeed, in 2012 unions from 35 countries participated in a global solidarity effort to pressure the Mexican government to stop its repression of independent labor unions. The PRI was again in power during 2013—2018, but was not friendly to the independent labor movement. In 2018, Andres Manuel Lopes Obrador was elected to Mexico's presidency after campaigning for poverty relief and improvements for workers. In early 2019, a wave of strikes grew into the "20/32 movement" seeking 20 percent wage increases and 32,000 peso annual bonuses, and the new government remained neutral.19 In May 2019, labor law reforms were enacted that seek to prevent protection contracts while bolstering independent labor unions by giving workers the right to approve contracts and elect their union leaders. Only time will tell whether this represents a significant shift away from Mexico being broadly representative of labor relations in developing countries: strong labor rights on paper, but in reality a high degree of state control that creates conflicts with independent labor movements.

ASIAN DEVELOPING COUNTRIES

The history of labor relations in the developing countries of Asia parallels the major concerns in other countries. As emphasized in Parts Two and Three of this book, the U.S. labor relations system has evolved from a mid-20th-century emphasis on economic growth through industrial peace to a 21st-century struggle with competitiveness through flexibility. Asian industrial relations are undergoing this same evolution: Earlier policies emphasized industrial peace to promote industrial development, whereas contemporary policies focus on achieving global competitiveness through flexibility.87 The developing countries of Asia have taken different approaches in designing specific labor systems to promote similar objectives. By this point in the chapter, the types of systems found in Asia should be familiar: a high-level tripartite or corporatist model (Singapore—recall Ireland), a pluralist model with varying combinations of political representation and collective bargaining (the Philippines and India—recall Germany, France, Canada, and the United States), and a government control model (Malaysia and Indonesia—recall Mexico), as well as systems that are in flux (China and South Korea—recall central and eastern Europe).88 Within these developing countries, however, the government frequently exercises tighter control over unions and labor relations than in developed countries. In Singapore's tripartite system, unions appear to participate with the government and employers at high levels to craft wage guidelines and various social policies, but the tightly controlled unions are not an equal partner in this tripartite system. Moreover, government control over workplace-level labor relations is exercised through restrictions on bargaining items, limitations on strikes, and government approval of collective bargaining agreements (agreements not deemed consistent with Singapore's economic development interests can be rejected).89 In the Philippines, legacies of earlier authoritarian regimes persist with very weak unions (less than one percent of workers are covered by a collective bargaining agreement), and a dominant federation that continues to be focused more on pleasing the government than organizing workers.90 Government control over labor relations is more explicit in Malaysia and Indonesia. In Malaysia, for example, the government controls the structure and size of unions by selectively approving or rejecting the required union registration applications and has used this administrative power to force Japanese-style enterprise unions rather than industrial unions.91 In the export-focused electronics industry in particular, the government has used the registration requirements to keep unions weak.92 An important underlying thread in all these developing country models of labor relations is the subservience of labor relations to the country's industrial development strategy.93 When the Philippines was pursuing an import substitution strategy in which domestic industries were protected from foreign competition, a pluralist labor relations model was allowed because international cost competitiveness was not critical. But when the industrial development strategy switched to an emphasis on exports, the government stepped in with greater control over labor relations to keep costs low and attract foreign investment. The supremacy of industrial development strategies underlies another theme in developing country labor relations: appearance versus reality. Malaysian law, for example, might appear to allow collective bargaining, but in reality government control of union registration can be manipulated to keep unions weak, as we also discussed for Mexico earlier in this chapter. Labor union subservience to governmental political regimes and developmental policies is also a common theme in African labor relations.94 Finally, several Asian developing countries are experiencing significant economic or political transitions similar to the situation in eastern Europe. Perhaps most notably, the Republic of Korea (South Korea) became a democracy in 1987, and China's economic system has been moving from state socialism to a mixed economy with elements of private ownership and competition. In Korea, political democratization loosened the government's previously tight grip on labor relations—unions were given greater freedoms to strike, and collective bargaining became more important. Note, however, that a second labor federation that challenged the longtime government-recognized federation was not legalized until 1999. Since that time, there has been an unusual trend away from enterprise unionism toward industrial unionism, and increased levels of labor-management conflict. Works councils for consultation and communication are required in companies with more than 30 employees, and there have been recent attempts at high-level tripartite social dialogue as well. Another challenge for the Korea labor relations system is a sharp increase in the number of contingent and nonstandard workers who lack benefits and earn only half the pay of regular employees. Korean labor relations are therefore still in transition.95 China The People's Republic of China is a single-party state ruled by the Communist Party of China which legally recognizes only one umbrella labor union organization—the All-China Federation of Trade Unions (ACFTU). Before the late 1980s, labor relations were similar to the eastern European Stalinist model, and the ACFTU union structure served as a transmission belt for the Communist Party. Remember that communism and socialism are seen as solving capitalism's deep-seated conflict between capital and labor; in other words, the official ideology of communist and socialist states insists that communism and socialism achieve a unitarist employment relationship (recall Chapter 2) where the interests of workers, managers, and the state are aligned. Thus, the ACFTU's function was not to represent workers' interests in opposition to employers' interests as in a pluralist employment relationship. Rather, the ACFTU's traditional responsibilities focused on promoting the common, national good and social harmony through enterprise unions that maintained labor discipline and administered state-sponsored housing and other social benefits programs.96 These widespread enterprise unions were also generally dependent on and integrated with management. Indeed, by Western standards, the ACFTU has not been the world's largest labor union, but instead has been a quasi-government organ controlled by and subordinate to the Communist Party.97 Starting in the late 1980s, China's economic system transitioned from socialism to a socialist market economy. The Communist Party weakened its control over economic activities while allowing the growth of private ownership and market mechanisms. But it has not relaxed its control over the political system. Labor relations change, therefore, must navigate a tricky path, and a complicated picture continues to emerge and evolve. Fundamentally, workers lack a true freedom of association because the ACFTU remains the only legally approved union organization and continues to be closely intertwined with the Communist Party. Many union leaders are appointed by Party leaders rather than elected by workers. Independent union representation is also undermined by the emphasis in Chinese labor law on regulating outcomes rather than promoting true collective bargaining, which would require the Communist Party to give up some control; indeed, strikes are still illegal. On the other hand, a number of legal changes have intended to benefit workers.98 New labor laws were enacted in the mid-1990s to promote collective bargaining, though to be more consistent with the conflict avoidance ethos of Chinese culture and unitarism, this was called "collective consultation."99 The Labor Contracts Law (2008) requires written employment contracts for individuals that meet certain protective standards, and the Labor Mediation and Arbitration Law (2008) provides for improved dispute resolution procedures. Enforcement of these laws, however, depends on complex dynamics between local union officials, managers, and local government officials, and is typically weak.100 Until around 2013, there were ACFTU initiatives to increase union organizing, pursue collective bargaining, and enhance organizational practices, such as allowing limited elections of local leaders. This can be seen as trying to enhance the ACFTU's legitimacy with workers struggling to improve their conditions, or as funneling conflict into official channels to maintain political control.101 Many of the resulting collective bargaining agreements, however, can be seen as inauthentic in that they simply restate the legally required labor standards, often without rank-and-file workers even knowing about them.102 And yet, there were cases where workers made advances before 2013. In spite of its limitations, the ACFTU was not strictly a paper tiger, and the ACFTU seemingly experimented with a type of collective bargaining that used state power to win (modest) gains for workers.103 There were also grassroots strikes not led by the official ACFTU leaders, such as those at a number of Honda auto factories during 2010, that resulted in wage increases and other improvements.104 All forms of collective action and protest, including strikes, in China run the risk of repression by the state because of the potential threats to the political regime. Before 2013, social stability was a key Party objective, but local government officials were allowed to maintain stability in ways they saw as effective. So repression was fragmented—some activists were jailed, others were bought off, and, as in the Honda strikes, some local government officials allowed strikes to continue as long as they remained economic in their focus and did not turn political.105 But when Xi Jinping became the China's paramount leader in 2013, the social stability narrative hardened into a national security narrative, and protest became criminalized.106 Repression has become more centralized, leading to the mass arrests of labor (and other) activists, including university students who were campaigning for workers' rights in 2018 and 2019. Simultaneously, new laws were passed that led to aggressive crackdowns on nongovernmental organizations (NGOs) that are important for providing assistance to workers.107 In contrast to these contentious forms of activism and protest, however, institutionalized channels of political participation have not been restricted.108 This would suggest a renewed primacy of the ACFTU as the only recognized worker representative that must also act in the interests of the Party. Indeed, in a 2018 speech, Xi told the ACFTU that "It is the political responsibility of trade unions to guide employees and the people in following the party, and consolidate the class foundation and public support for the party's governance."109 This is reminiscent of the Stalinist view of unions as the transmission belt of the Party. Whether this is able to develop a labor relations system with Chinese characteristics that balances economic competitiveness with improved living and working standards for millions of Chinese workers' remains to be seen, and many labor scholars have shifted from cautioned optimism to renewed pessimism.110 In any case, the economic and political landscape surrounding Chinese labor relations will be important to watch. Briefly and in broad terms, the situation in Vietnam is similar to that in China—a Communist state with party-controlled labor unions, wildcat strikes that cannot be ignored, and attempts to make some adjustments to labor law and the practice of collective bargaining to pacify the workers without allowing for a truly independent labor movement.111

GREAT BRITAIN

The labor relations system in Great Britain illustrates the important concept of voluntarism. Unlike U.S. and Canadian labor relations, in which the law requires unions and companies to negotiate if the union represents a majority of the workers, in Great Britain collective bargaining has traditionally occurred only if the parties voluntarily agreed. Voluntary refers to the absence of legal force—labor and management use their economic power, not legal rights, to get the other side to do something, especially to bargain or abide by a contract. When management voluntarily agrees to bargain, for example, it is because the economic costs of refusing to bargain, such as strikes or poor morale, are greater than the costs of bargaining. Representation questions have traditionally been settled through economic force, not elections as in the U.S. system. Management recognizes a union when the union is powerful enough to make it costly for the firm to refuse. The Employment Relations Act (1999) modified the voluntaristic approach by providing for statutory recognition of a union under specified majority demonstration provisions, but voluntary recognition is still encouraged.20 Another major component of British voluntarism is that contracts are not legally enforceable. Labor and management voluntarily agree to abide by the contract—as long as the costs of following the contract are smaller than the costs of breaking it. Contracts are thus enforced by economic force, not the legal system. British voluntarism can be traced back to the late 19th century. At that time production was largely craft-based, and skilled workers could shape workplace practices through formal and informal negotiations in individual workplaces using the scarcity of their skills as bargaining leverage.21 Based on this tradition of unregulated bargaining, both labor and management feared unfavorable, restrictive government involvement—unions did not want restrictions on strikes and boycotts while management did not want restrictions on the freedom to manage. Thus, a voluntarism system emerged and has essentially been maintained. This does not mean, however, that British labor relations are not regulated. The Trades Disputes Act facilitates voluntarism by making labor unions immune from being sued for breach of contract and for striking. Moreover, various pieces of legislation passed by the Conservative government of Margaret Thatcher in the 1980s restrict labor's ability to conduct secondary boycotts, outlaw the closed shop, and require unions to follow certain democratic procedures for electing officers and determining membership support for a strike.22 Legislation enacted in 2016 further tightened the rules for strike ballots and strike notice, and required unions to get members to opt in before collecting money for union political funds. Voluntarism in labor relations is therefore a relative term, not an absolute one: British labor relations are voluntaristic relative to labor relations in many other countries that have more extensive legal regulation of labor relations, but they are not free of all regulation. As a result of its craft origins, the British labor movement historically consisted of numerous occupationally focused unions. Recent mergers have created more general unions. Relative to the United States, there are still many unions, and the largest are UNISON (representing public sector workers), Unite, and the General, Municipal, and Boilermakers' Union (GMB).23 Many unionized workplaces have multiple unions. There is one union federation, the Trades Union Congress (TUC), and its role in British labor relations is similar to the AFL-CIO's role in the United States: political lobbying, education, and union coordination, but not collective bargaining. Another notable feature of the British labor movement is its close association with the Labour Party, which was founded in 1900 by British unions and the TUC to increase labor's legislative representation in the House of Commons.24 Before the 1980s, there were periods in which Labour governments worked closely with the labor movement—for example, in linking wage restraint to industrial relations reform.25 The current issues facing British unions are similar to those in the United States. The biggest issue is probably the decline in union density. Although the British decline began much later (1979) than in the United States (mid-1950s), since 1980 British union membership has fallen by more than 5 million members, and union membership as a fraction of the labor force (union density) has plummeted from 50 percent to 25 percent. This decline appears to stem from structural changes in the economy, unfavorable legal changes, increased competition, and perhaps most importantly, employers moving away from preferring to deal with employees collectively.26 Similar to what happened in the United States, this has caused the British labor movement to increasingly emphasize organizing.27 A second issue for unions in Great Britain is the challenge of employer demands for flexibility and partnership. As in the United States, diverse and widespread changes in workplace practices present a great challenge for unions.28 A third issue is the future course of public policy. As its power has waned with the legal reforms of the Conservative government, some in the British labor movement look more toward the European Union (EU) as a method for achieving labor regulations that favor workers and their representatives.29 For example, the European Works Council directive discussed in the previous chapter was enacted by the British government in 1999 and the EU's Information and Consultation Directive in 2004. Under the latter, an employer must consult with employees about business changes that might affect employment if 10 percent of the employees request consultation. Movement toward a European type of representation, however, entails significant change from the voluntaristic and adversarial traditions of British labor, and uncertainty looms after the 2016 Brexit vote to leave the EU. The balance among efficiency, equity, and voice in a voluntaristic system to a large extent depends on markets and the economic leverage of the two parties. In the early 1960s, low unemployment gave workplace shop stewards significant leverage, and many strikes were called to win grievances and other gains—recall that contracts are enforced by economic force, not legal procedures.30 As a result, British labor relations developed a reputation of being adversarial and turbulent and therefore harmful to efficiency and competitiveness (see the accompanying "Labor Relations Application" box). When unemployment is higher, management has the upper hand and efficiency-enhancing policies dominate equity and voice concerns. Because a voluntaristic system lacks legal standards for representation and bargaining, strong employer leverage can result in representation mechanisms that are illegal elsewhere. As a graphic example, consider Nissan and Toyota's recognition of the Amalgamated Engineering and Electrical Union (now Unite) at their British plants. Because of their economic leverage, the companies were able to insist that broad managerial prerogatives remain the sole function of management. In addition to production methods and standards, these prerogatives include core labor issues such as employee communications, transfers, and promotions. Moreover, wages and terms and conditions of employment are established not through bargaining but through a joint employee-management company council in which the union has no formal role, strikes are not allowed, and the company retains final decision-making authority.31 This essentially nonunion form of employee representation is illegal in the United States because of restrictions on company-dominated unions and obligations to bargain over wages and terms and conditions of employment; but voluntarism allows any arrangement that is mutually acceptable, where the definition of acceptable is determined by bargaining power.

JAPAN

The primary institutional feature of Japanese labor relations is enterprise unionism. An enterprise union, such as the Hitachi Workers' Union, represents only workers in a single company (enterprise). The dominant type of enterprise union in Japan represents all regular (not temporary or part-time) employees in a single company, including white-collar workers except higher-level managers. At some companies, however, several enterprise unions coexist and compete; but even in these cases, each union represents only workers within the one enterprise. As such, while union density is approximately 20 percent, there are more than 50,000 labor unions.81 There are also a handful of women-only unions that were formed to combat gender inequality, discrimination, and harassment. They are important advocates for Japanese women as a complement to, rather than substitute for, enterprise and industrial unions.82 In addition to a close alignment between enterprises and unions, there are also close ties between management and the union leadership. Supervisors are generally part of the enterprise union, and union leaders are often career-type employees who continue their promotions within the enterprise through the management ranks after being union leaders. This system of enterprise unionism is embedded in a broader system of human resource management structured around lifetime employment, seniority and firm-based wages, and broad job classifications. These features are not universal, but they have traditionally been central for core employees in large firms. Lifetime employment is an arrangement in which employees normally are never laid off and stay with a single firm until retirement. Cyclical and seasonal burdens are shifted to temporary workers who are not covered by this implicit—not contractual—lifetime employment tradition (and are usually not covered by the union either). Wages for regular employees are generally based on seniority plus a large annual bonus that partly reflects firm or industry profitability. Japanese firms also often use broad job classifications, and workers are rotated across jobs to increase their skills. All these features mean that employees identify with an enterprise—its internal labor market and financial performance—not a specific job. Enterprise unionism fits well with this strong enterprise identification among employees, and Japanese labor relations are often characterized as cooperative or consensual.83 Enterprise unions are very concerned with the company's performance and tailor demands and agreements accordingly. A number of companies also have joint labor-management consultation bodies in which information about the firm is shared with employees, and employees are consulted about personnel matters and working conditions. Although enterprise unions are entitled to bargain over wages and working conditions, some argue that a more cooperative and less adversarial relationship can develop if these issues are settled through a consensual approach in a joint consultation committee. By some accounts, joint consultation is therefore more important than collective bargaining in Japanese labor relations.84 Enterprise-level consultation and bargaining are complemented by an annual wage negotiation process called Shunto. Traditionally, the Japanese labor movement was successful in using the Shunto negotiations to obtain uniform wage increases across companies, but this uniformity hasn't been as strong in the 2000s as companies have successfully increased the linkages between pay and company performance. The Japanese system is an important contrast to U.S. labor relations. The two countries share a broadly similar labor law framework. In fact, Japanese labor law was established by the U.S. occupation authorities at the end of World War II and is based on the U.S. model of using unfair labor practices to support employee rights to organize and bargain collectively. There is limited use of exclusive representation and majority rule, however.85 Also, enterprise unions are not mandated by law—there are isolated examples of industrial and other forms of unions in Japan—and have essentially developed within a Wagner Act framework. Because of the economic success of Japan in recent decades, the cooperative model of Japanese labor relations, with high levels of employee participation and union concern for firm profitability, is often advocated as a model for U.S. labor relations. As discussed in Chapter 10, it is often argued that U.S. unions should be more cooperative and do more to enhance productivity and quality. These arguments are frequently rooted in an idealized view of a cooperative and productive Japanese labor relations system of enterprise unionism. On the other hand, what some view as cooperative enterprise unions, others see as management-dominated sham unions. This is a major debate in both countries. For example, the prevalence of enterprise unions in Japan is characterized by some as stemming from worker concern for an efficient enterprise and by others as resulting from management and state suppression of industrial unions in the 1950s.86 Lastly, note that in a system of enterprise unionism, existing unions have little incentive to organize new unions at other establishments, and overall labor movement solidarity is low.

CENTRAL AND EASTERN EUROPE

After World War II, labor relations in the Soviet Union and the communist countries of central and eastern Europe were characterized by Stalinist unionism named for the Soviet dictator Joseph Stalin.65 In centrally planned Stalinist economies, managers of state-owned enterprises and unions were both controlled by the government (the Communist Party). Unions were a critical part of this economic and political system, primarily to transmit the Communist Party's agenda to the working class (the common phrase is that unions are the Party's "transmission belt"). In the workplace, unions in a Stalinist system had dual roles: to facilitate the state's production goals (such as through maintaining discipline) and to protect individual workers from abusive managers (such as by refusing to approve employee dismissals).66 As transmission belts of the Communist Party, unions emphasized the first role much more than the second. Unions also administered the government's various social benefits, such as housing and recreational programs, and therefore membership rates were very high (approaching 100 percent). There was no collective bargaining because wages and other terms of employment were determined by central planners—"the official trade unions in the Soviet Union were never designed to represent workers' interests, since official ideology held that there could be no conflict of interests between the working class and its vanguard that ran the economy, the Communist Party."67 As such, strikes and independent unions were illegal. Unions were tightly controlled by the Communist Party, typically structured along industry lines, and, following the model of the Communist Party, very centralized. There were some deviations from this strict model during the Cold War—for example in Hungary and most visibly in Poland. Led by electrician Lech Walesa, 17,000 workers conducted a sit-down strike at the Lenin Shipyards in Gdansk, Poland, in 1980.68 The most important demand of the strikers was the right to form free labor unions independent of the Communist Party, and thus the Solidarity union (Solidarność) was born. The strike was a major victory, and Solidarity's membership jumped to 10 million workers. In 1981, additional strikes were used to pressure the Polish government for free elections. However, under pressure from the Soviet Union, the Polish government imposed martial law in December 1981, outlawed Solidarity, and jailed its leaders. Strikes in 1988 again pressured the government to legalize Solidarity, and it was allowed to participate in free elections in 1989. Solidarity was very successful in these elections and was able to form a coalition government. Walesa won the Nobel Peace Prize in 1983 and in 1990 became Poland's first popularly elected president. In addition to the Solidarity movement in Poland, the fall of the Berlin Wall in 1989 marked the end of communist East Germany; by the end of that year, communism was collapsing throughout central and eastern Europe. In 1991, the Soviet Union dissolved into Russia and a number of independent states. These events were triggered by the Solidarity movement, which underscores the power of collective action and the need for independent labor movements in society. As part of the transition to capitalist, free market economies with democratic, pluralistic political systems, collective bargaining, economic strikes, and independent labor unions were legalized. But unions fared poorly. Leaders from the communist era believed that once they had overthrown the communist regimes, their work was done. Indeed, the Stalinist model left behind a legacy of weak unions at the enterprise and workplace levels with no experience in collective bargaining and with little rank-and-file involvement. Unions were frequently marginalized in industries that were privatized and turned over to private ownership. Additionally, when new unions emerged, they had anticommunist, political goals more than workplace objectives, and support for tough economic reforms alienated them from workers. In the first decade of post-communism, then, "everything about [labor unions] declined: their membership, workplace authority, collective solidarity, sectoral diversity, enterprise responsibilities, and political influence."69 To take just one example, union density in Hungary fell from 83 percent in 1990 to 20 percent in 2001.70Page 452 To add to the unions' challenges, 12 central and eastern Europeans joined the European Union (EU) between 2004 and 2007. The resulting freedom of movement with the EU led to significant levels of out-migration among younger and skilled workers, making it difficult for unions to attract the next generation of members and leaders.71 And then, the global financial crisis further pressured labor unions in central and eastern Europe just as it did in many other regions, leading to largely symbolic social dialogue at the national level, and concession bargaining at the company or enterprise level. On the other hand, unions are not completely irrelevant, there have been pockets of union innovation, and connections with western European unions via European Works Councils and other EU channels have the potential to increase the capacity of labor unions in central and eastern Europe.72 But to date, political and economic instability, intensified economic competition, public sector spending cuts, a legacy of dependence on management and the state, out-migration, and other challenges have resulted in weak workplace representation, collective bargaining, and social dialogue across most of central and eastern Europe.73

GLOBALIZATION RECONSIDERED

Analyzing national labor relations systems from around the world is important. A comparative approach provides rich material for thinking broadly about the underlying labor relations problem of balancing efficiency, equity, and voice. Examining the pros and cons of other countries' policies and practices can aid efforts to reform law and practice in the United States to better strike this balance. And understanding how labor relations work in other countries is vital for managers and union leaders whose professional activities involve other countries. But recall from the previous chapter that a major feature of the labor relations environment in nearly every country is globalization. Globalization raises a key question for comparative labor relations in the 21st century: In an integrated world economy, is it possible to have unique national labor relations systems, or does integration force convergence of national institutions? In a competitive world, free trade should harmonize labor standards if countries with higher standards have higher labor costs and are unable to compete with lower-cost countries. If certain labor relations practices are more productive than others, competitive pressures are expected to cause others to adopt those practices—such as U.S. attempts to emulate the more cooperative style of Japanese labor relations. More ambitious efforts at political and legal as well as economic integration, such as in the European Union, should further weaken national differences as common standards and policies are enacted. The convergence thesis predicts that labor relations practices and policies across countries will converge to a common set of practices and policies, and national differences will disappear. The evidence, however, does not support this convergence thesis.118 In particular, arguably the most important effects of globalization on labor relations across many countries are declining union strength and intense corporate pressures for increased workplace flexibility (Chapter 10). These factors have caused increased decentralization of labor relations activities in many countries.119 Even though collective bargaining in Germany, for example, has traditionally been much more centralized than in the United States, the bargaining structure in both countries has become more decentralized than in earlier years. This decentralization is key: Increasing decentralization gives rise to divergent local labor relations practices because of attempts to tailor employment practices to the specific needs and constraints of individual workplaces, and because local practices are the outcome of bargaining processes in which firms, unions, and other institutions such as work councils have varying degrees of influence.120 Uniform convergence, therefore, is not occurring. However, several standard models appear to be followed across workplaces, such as an antiunion, low-wage approach, a traditional human resource management approach, and a high-performance work systems approach. Thus, labor relations practices within countries are becoming more diverse but are simultaneously embracing several common patterns. In other words, rather than a strict convergence, there appears to be "converging divergences."121 Increased divergence on a local level as well as convergence can undermine the importance of national-level labor relations systems. So in the face of globalization and decentralization, does it continue to make sense to discuss national labor relations systems? In a word, yes. The laws and institutions that characterize the labor relations systems of different countries shape the choices faced by companies and unions as they confront competitive pressures. National-level institutions are therefore still important determinants of labor relations practices and employment outcomes.122 Even in the European Union (EU), the greatest convergence toward uniformity has been in minimum standards through European-wide directives for health and safety requirements, gender equity, and other labor standards.123 With the limited exception of the European Works Councils mandate (Chapter 11), EU policies have not erased national differences in the labor relations processes in individual countries; instead, employment relationships in Europe and elsewhere are increasingly characterized by a multilevel system of governance with important institutions and outcomes embedded in the workplace, company, sector, national, and supranational levels.124 In sum, globalization is causing converging divergences of labor relations practices across countries through pressures for decentralization and flexibility. National-level institutions nevertheless remain important for shaping the responses of companies and unions to these pressures. Studying labor relations in different countries is therefore still an important component of understanding labor relations. Moreover, these local practices and national institutions can be evaluated against the objectives of efficiency, equity, and voice.125 Comparative labor relations therefore reveal numerous labor relations possibilities for tackling the challenges of the 21st-century employment relationship and striking an effective balance between the objectives of employers and workers.

BARGAINING OR LEGISLATING LABOR STANDARDS?

From these descriptions of labor relations systems in different countries, it is apparent that there are numerous possibilities for structuring labor relations (see Table 12.7). The U.S. emphasis on exclusive representation and majority support is often absent outside North America. Consultation between labor and management through peak-level organizations at a national level and through works councils at a workplace level occurs throughout Europe, and in some Asian countries. Some countries have centralized industrywide bargaining arrangements while others focus on enterprise-level unions. Moreover, while U.S. union contracts are highly complex, legally enforceable documents that specify a wide range of employment terms, in many other countries union agreements provide more of a skeletal specification of minimum terms. In some countries, union contracts are not legally enforceable. The political activities of the labor movement in many countries outside the United States are also at least as important as their workplace activities, if not more so. Rather than the U.S. labor movement's philosophy of business unionism, European labor movements often embrace social movement unionism. Gains for workers are won through social and political activism as well as through bargaining with employers, and unions are often closely aligned with left-wing political parties. In Great Britain, the Trades Union Congress founded the Labour Party. One of the major parties that sometimes rules Australia is the Australian Labor Party. In Sweden and Germany, the labor movement is closely aligned with social democratic parties. French and Italian unions are closely connected with communist and socialist political parties, and political strikes to win gains for workers are common. Advocates of a stronger U.S. labor movement see this type of political and social activism as the avenue to more power.112 Such activism can bolster the labor movement's voice in the political arena and can result in laws supporting union activities. Nonunion Application: Universally Mandated Benefits and Protections - Political strength can also result in labor standards that are legislated for all workers rather than confined to workers covered by collective bargaining. Outside the United States, many employment conditions, especially employee benefits, are established by government regulations. For example, while the United States does not mandate any vacation days, workers in many European countries are entitled to at least four weeks of paid vacation each year. The importance of legislated rather than negotiated labor standards is further demonstrated by job security protections. U.S. workers are subject to the employment-at-will doctrine and can therefore be laid off or fired at any time. In addition to legislative restrictions against discriminatory discharge, the major exceptions to this doctrine are just cause provisions in union contracts and unjust dismissal protections in some public sector civil service systems. Thus, only about one-third of U.S. workers are protected against dismissals except for valid reasons related to job performance or economic conditions.113 This contrasts starkly with the widespread unjust dismissal protections granted by national legislation in much of the rest of the industrialized democratic world. Legislation in many countries also limits employers' abilities to lay off workers. - In Germany, for example, after a six-month probationary period, only "socially justified" employee discharges are legal. In other words, employees can be dismissed only with just cause due to poor performance or economic necessity; discharge must be justified by "the conduct of the employee or by pressing reasons connected with the enterprise." Note that in contrast to the United States, this protection is provided by law and does not depend on union representation. Disputes are resolved by a federal labor court, and coverage is nearly universal. Belgium, France, Great Britain (except for part-time or temporary workers), Italy, and Spain all have legislative protections similar to those found in Germany.114 In Mexico, after a 30-day probationary period, employees may be laid off for economic reasons or dismissed only for just cause—and these protections are written into Mexico's constitution.115 In Japan, the doctrine of abusive dismissal protects workers against unjust dismissal. This doctrine has been extended to all employees with the exception of short-term, contract employees who have not yet had their initial contracts renewed.116 Even in Canada, employees must either be dismissed for just cause or be given several weeks of advance notice.117 In other words, the United States stands alone with its low level of protection against unjust dismissal (see Figure 12.1). But in many countries, such protection was obtained through the legislative rather than the bargaining process. This political aspect of comparative labor relations should not be overlooked, and an important question for the future is whether labor standards should be negotiated or legislated (or neither).

CANADA

In broad terms, Canada and the United States have similar economic, institutional, and legal features, comparable demographic, occupational, and industrial structures, interdependent product markets, and many of the same corporations. Labor unions in the two countries have similar structures, many Canadian workers are represented by U.S. unions, and Canadian labor law is patterned after the U.S. Wagner Act (but not the Taft-Hartley Act).2 Exclusive representation, bargaining structures and strategies, and the resulting union contracts are therefore similar.3 However, some cultural and small yet important legal differences have caused Canadian outcomes to diverge from those in the United States. Canadian labor law is not centralized as it is in the United States. The provinces have similar yet unique laws that govern labor relations. Although these laws are largely modeled after the U.S. National Labor Relations Act (NLRA), there are some important differences between the provincial laws and the NLRA (see Table 12.3).4 First, Canadian labor law makes it easier to establish and maintain a union. In contrast to the sometimes lengthy National Labor Relations Board certification election procedure in the United States, some Canadian provinces provide for card check recognition (certification based on authorization cards without a secret ballot election) and instant elections that occur within a couple of days of filing the election petition. These quick processes reduce the scope for contentious campaigning and antiunion managerial tactics, and when newly organized unions fail to reach a first contract, some Canadian provinces provide for arbitration to establish a contract.5 Canadian labor relations also lack right-to-work laws banning union security agreements, and in fact the larger provinces require at least an agency shop, which strengthens the financial base of Canadian unions.6 Second, Canadian labor law makes it more difficult for employers to break an existing union. Some provinces do not allow decertification elections during a strike; and where they are allowed, strike replacements are often not considered part of the bargaining unit and therefore are not allowed to vote. Moreover, most provinces ban permanent strike replacements or provide striking workers with immediate reinstatement rights; in Quebec and British Columbia, even temporary replacements are prohibited.7 Relative to the processes in the rest of the world, Canadian labor relations processes are similar to those in the United States; but subtle legal differences and some cultural factors appear to support a more stable labor relations system in Canada.8 Union density has remained more stable, though Canada also has a larger public sector that accounts for at least some of this difference with the United States. Canadian public sector unions have not been immune to attack in the years since the global economic crisis, but they have not been as hard hit as in the United States.9 In contrast to the U.S. business unionism philosophy, Canadian unions have more of a social unionism philosophy in which labor has a more militant, social activist role. For advocates of a stronger labor movement and greater employee representation in the workplace, the small legal differences pertaining to union organizing and strike replacements form the basis for proposals to reform U.S. labor law.

FRANCE

Labor relations in France consist of an interesting mixture of militant, often politically oriented unions but weak collective bargaining, very low union density, very high contract coverage by industry-level agreements, and several mechanisms for workplace-level representation.41 As Table 12.5 shows, there are eight major union federations; recall that the United States (between 1955 and 2005), Britain, and Ireland each had or have one. Unlike the U.S. emphasis on business unionism, the French union federations often have distinct political or ideological perspectives. The CGT has traditionally been communist and therefore has conveyed Communist Party priorities to the working class, though it is moving away from this platform. While also becoming more pragmatic in recent years, the FO and CFDT have traditionally been associated with socialist ideals of worker control; the CFTC has a Christian orientation. The CFTC supports collective bargaining—but note that in general terms, communist and socialist unions have not always supported collective bargaining because signing a contract limits worker freedom and legitimizes capitalism.42 With such sharp ideological differences between unions, and between labor and employers, a stable social partnership arrangement is nearly impossible to achieve. Rather, political mobilization and political strikes motivated by each union's ideological focus have been as important as, if not more important than, collective bargaining in French labor relations. As such, France is an example of political or ideological unionism. This could be labeled "mass and class unionism" because of the emphasis in using class struggle ideology to create large-scale protests.43 In 2017, nationwide strikes were called to protest the government's push to reduce unjust dismissal awards, reduce the number of employee representatives, and increase the use of short-term contracts. In 2018, public sector and transportation workers were at the forefront of strikes and mass protests against proposed cuts in public sector employment and benefits. Other southern European countries such as Italy and Spain are broadly similar in this regard. Moreover, this is a pluralist model of political unionism rather than a corporatist model: Unlike in the Irish social partnerships, the French unions (as "outsiders") pressure the government to enact policies favorable to the unions' agendas rather than participating directly in policymaking (as "insiders"). Bargaining takes place at both an industry and company level. The industry agreements provide the broad parameters and minimum standards for individual companies to follow regarding working time, pay, and other issues. Company-level agreements implement specific pay and working conditions provisions, and reforms in 2017 made it easier for companies to negotiate weaker terms than the industry standards. Note that there is no exclusive representation: French law mandates this company-level bargaining regardless of whether a majority of employees authorize a single union as their representative. Thus, an employer may negotiate with a committee composed of individuals from various unions as long as they represent at least 30 percent of the workforce, and any single union has official representation status if at least 10 percent of the workers support it in a periodic election. These elections are held nationwide every few years, and the most recent aggregate results are shown in Table 12.5. Moreover, as is true in a number of other European countries, French law allows industry agreements to be extended to all companies within the same industry irrespective of the number of union members (if any) at a specific company. Thus, while union density is low, the fraction of workers covered by collective bargaining agreements is high. On the other hand, collective bargaining agreements in France are weak by U.S. standards—though this is perhaps offset by national legislation that often favors workers, such as a 35-hour workweek. Lastly, French law provides for workplace-level employee representation separate from labor unions for workplaces with at least 50 employees. Changes in 2017 consolidated multiple bodies with different responsibilities into a single Social and Economic Council that handles grievances and health and safety, and is entitled to information and consultation on workplace and companywide decisions (see the discussion of German works councils in the next section). Representatives are elected via secret ballot by all workers, and a single council likely has members of different unions. French labor law also guarantees workers a right of expression, so workers are entitled to voice their opinions regarding the nature of their work. How French law struggles with trying to balance efficiency, equity, and voice is captured by this description of earlier reforms: "The Auroux laws were intended to foster a mutual learning process within the enterprise, with employers becoming more aware of their social employment responsibilities and unions more attentive to the firm's economic constraints."44

IRELAND

Labor relations in Ireland are an interesting contrast with the British system. At their core, Irish labor relations are similar to British labor relations. When Ireland gained independence from Great Britain in 1922, the existing British laws for labor relations continued under the new Irish government. Consequently, the British system of voluntarism and labor union immunity from common law liabilities underlies Irish as well as British labor relations.32 Collective bargaining was therefore also traditionally adversarial and produced restrictive work rules, and until 1980, Ireland was perceived as one of the most strike-prone countries in Europe.33 The Industrial Relations Act of 1990 implemented reforms similar to the British changes in labor law initiated in the 1980s by the Thatcher government—restrictions on secondary activity and picketing plus requirements for secret ballot strike votes—but the basic labor relations framework remains voluntarism. As in many other countries, union density declined after 1980 and now stands at approximately 30 percent. The striking contrast with British labor relations was the Irish inclusion of social partnership on top of its voluntaristic labor relations system between 1987 and 2009. Social partnership can mean various things, but here the term is used in a corporatist sense: a social partnership of labor, business, and the government that results in a series of peak-level agreements on social and economic issues.34 Peak-level organizations are the highest national groups representing the public, employees, and employers. For the public this is the government; for labor it is the major labor union federation; and for employers it is the major employers' association. In a corporatist political system, these key peak-level organizations are integrated into the political decision-making process. This stands in contrast to a pluralist political system (as in the United States) in which interest groups such as the labor movement and employers' associations compete for influence by pressuring and lobbying lawmakers, but are not formally incorporated into the decision-making process. The Irish peak-level organizations include the major union federation—the Irish Congress of Trade Unions (ICTU)—and the Irish Business and Employers' Confederation (IBEC) representing employers. Prompted by a growing economic crisis in the 1980s—including stagnant personal income and sharply increasing unemployment and government debt—the government, the ICTU, and the IBEC negotiated a social partnership agreement called the Programme for National Recovery (PNR) in 1987. The goal of the PNR was to create a fiscal and monetary climate that was conducive to economic growth and a reduction in government debt. This included changes in the tax system, increased employment opportunities, and private sector pay guidelines (a six-month pay freeze followed by 2.5 percent annual increases). This three-year social partnership agreement was followed by six additional agreements (see Table 12.4). In a break from the earlier agreements, the seventh partnership agreement, "Towards 2016," negotiated in 2006, was designed to last for 10 years except for the wage agreement, which covered only the first 27 months. A new wage agreement was negotiated in 2008, but this agreement, and the social partnership process more generally, broke down when the government implemented a pay freeze during the recession in 2009. On one level, these social partnership agreements reflect a system of centralized bargaining. Each of the agreements established pay guidelines for the Irish economy, and while some local bargaining occurred, collective bargaining for wages was essentially done by the one major union federation and employers' association on an economywide basis. But this was more than just centralized collective bargaining. In addition to labor and management, the government participated as a third pillar, and in the 1990s, a fourth pillar of community groups was added to the partnership process.35 The later social partnership talks therefore included representatives from organizations such as the Irish Farmers Association, the Irish National Organization of the Unemployed, and the Conference of Religious of Ireland; the resulting agreements reflected a social partnership much broader than a limited economic or workplace agreement. Far-ranging economic and social issues were tackled in these agreements: government spending and taxation, unemployment, housing, access to health care, poverty and social exclusion, and education and lifelong learning. Moreover, although the agreements were not legally binding contracts, they provided a public framework to which the parties generally tried to adhere. The resulting stability and predictability—for the aggregate economy as well as workplace labor relations—was widely credited with laying the foundation for Ireland's exceptional economic performance during the 1990s and early 2000s.36 How thoroughly this climate of partnership extended to the workplace, however, can be questioned.37 Moreover, in the 2000s, the Irish economy shifted to being driven by a housing bubble induced by financialization, and this pressured the social partnership away from moderation. The global financial crisis burst the housing bubble, collapsed the Irish economy collapsed, and revealed that social partnership was no longer serving its earlier economic purpose. The government then made unilateral changes to public sector pay and conditions, and social partnership ended.38 Various forms of social partnerships or corporatism have been prevalent, albeit not continuously, in smaller European countries such as Austria, Belgium, Denmark, the Netherlands, Norway, and Switzerland.39 The benefits of the participation of labor, business, government, and other groups in developing a national plan for both economic and social development are inclusion, stability, predictability, and a climate of consensus rather than conflict. Government policy can also be depoliticized because labor and business are involved in establishing economic and social policy. For unions, a social partnership arrangement provides greater social relevance as the voice for all workers, and perhaps for consumers and taxpayers as well. This voice is on a national level, however, not in the workplace, and unions need to be careful not to lose their workplace voice. Echoing the workplace-level debates over unions and high-performance work systems (Chapter 10), there can be a fine line for unions in a social partnership arrangement between collaboration and "selling out."40 Lastly, although social partnerships can promote stability and consensus, the centralized nature of this form of labor relations is under pressure at the workplace level as management seeks greater flexibility, increased prevalence of pay for performance, and other decentralized, efficiency-enhancing human resource management innovations.

Comparative labor relations is the study of labor relations systems in different countries, and the goal of this chapter is to compare the U.S. labor relations system to other systems. A comparative perspective on labor relations is important for three reasons. The analytical reason is that considering labor relations in multiple countries provides a rich basis for thinking broadly about the underlying problem of balancing efficiency, equity, and voice and for obtaining a stronger understanding of the primary issues in labor relations. The public policy reason is that comparative analyses of labor relations can provide ideas for reforming the U.S. system. Aspects of labor relations in Canada, Germany, and Japan have all been championed as proposals for reforming U.S. labor relations. The practical reason is that if you work for an organization that does business in another country or for a labor union that has strategic alliances with labor unions in another country, it is important to understand that country's labor relations framework. This chapter, therefore, outlines the major features of labor relations in Canada, Great Britain, Ireland, France, Germany, Sweden, Australia, New Zealand, and Japan (see Table 12.1). These countries are representative of the types of labor relations systems found in industrialized, democratic countries. It is also important to consider labor relations systems in transition and less developed economies, so Mexico, central and eastern Europe, and selected Asian countries are also discussed.

In thinking about labor relations systems, it is important to remember that the legal, economic, sociopolitical, and institutional factors that make up the labor relations environment can vary from country to country (recall Chapter 5). Along many of these dimensions, a traditional claim is that U.S. labor relations are exceptional. Low levels of support for unionization, lack of a socialist movement, legal protection of individuals rather than unions, and intense employer resistance to unions are all claimed to be relatively unique to the United States among industrialized, democratic countries; in other words, support for unionization, a socialist movement, legal rights for unions, and low employer resistance to unions are widely present in industrialized, democratic countries except the United States.1 In this vein, when considering the labor relations systems of other countries, note the sometimes great differences with the U.S. system—exclusive representation is not always present, contracts are not always legally enforceable, and business unionism is not always the dominant philosophy. Moreover, not only are unions often organized differently but so too are employers. In many countries outside North America, employers' associations rather than individual companies dominate collective bargaining. Table 12.2 shows that in many other countries, union membership is not as closely associated with being covered by a union contract as it is in the United States. In Spain and France, over 70 percent of employees are covered by a collective bargaining agreement, yet union density is less than 20 percent—and is not even 10 percent in France. At the same time, labor relations around the globe are similar in other respects. The contemporary pressures on labor, management, and government are universal: globalization, financialization, decentralization, and flexibility. Moreover, the fundamental issues of labor relations are constant across all countries. The objectives of the employment relationship are efficiency, equity, and voice; there is a need to balance labor rights and property rights; and labor relations outcomes are determined by the environment and individual decision making. The U.S. New Deal labor relations system is one possible method of pursuing these objectives, but the comparative study of labor relations in other countries reveals many alternative possibilities. Therefore, this chapter outlines the labor relations systems of a number of representative countries. There are innumerable ways to order these countries, so to avoid confusion the tour here proceeds geographically from North America to Europe to Asia. The chapter concludes by revisiting the question of globalization: In an integrated world economy, is it possible to have unique national labor relations systems, or does integration force convergence of national institutions?

GERMANY

The labor relations system of Germany is best known for its system of codetermination, but this important feature must be understood in conjunction with a second major feature, sector bargaining. In contrast to France, there is one dominant union federation, Deutscher Gewerkschaftsbund (DGB, German Trade Union Confederation), that accounts for over 80 percent of German union membership and has eight affiliated unions, each of which represents a specific industry. Employer federations are also organized by industry. As such, each major industry or sector has a dominant employer association and union, and these two bodies engage in sector bargaining—industrywide bargaining that produces a contract for the entire sector. Sector bargaining often takes place at a regional level, but it is tightly coordinated by the national organizations, and the first regional agreement sets a strong pattern for the other regions. For example, a regional branch of Gesamtmetall, the metal and electrical industry employers' association, and the regional branch of IG Metall, the metal and electrical industry union, will negotiate basic agreements on wages, pay structures, working time, and working conditions under the direction of their parent organizations. These agreements establish minimum labor standards that apply to all members of the employers' association—the number of union members at each company is unimportant. Moreover, to promote a level playing field and "take wages out of competition," an agreement can be legally extended by the government to cover other companies, as is the case in a majority of European countries.45 As such, the contract coverage rate (approximately 50-60 percent) is much higher than the union membership rate (approximately 20 percent). Strikes are illegal during the life of an agreement. A company cannot invalidate the contract by leaving the employers' association, so it is difficult to become nonunion in Germany.46 As in many other countries, competitive forces are pressuring the German collective bargaining system to become more decentralized. Thus, local exceptions to the industry standards are increasing, and some companies have negotiated independently rather than through their employers' association—Volkswagen is a prominent example; but because of strong traditions and institutions, such deviations are still exceptional.47 Increased outsourcing to subcontractors that fall outside the sectoral bargaining agreements is another threat to the stability of the traditional sector bargaining system.48 Like labor movements elsewhere, then, German unions are under pressure to develop new strategies for maintaining their strength and influence.49 Centralized collective bargaining in Germany is complemented in the workplace by codetermination—an institutionalized system of employee voice in which employees are entitled to participate in workplace decision making. German codetermination has two components: works councils and employee representation on corporate supervisory boards. A works council is a workplace-level committee of employees elected to represent all the workers (except senior executives)—skilled and unskilled, blue- and white-collar, union members and nonmembers—in dealings with management. Works councils in various forms are also found in France, Spain, the Netherlands, Austria, Italy, and Belgium, but the German example is perhaps the best known.50 German law entitles all workers in companies with at least five employees to form a works council if some employees wish; generally only 5 percent of the employees need to sign a list of candidates to trigger an election of employee representatives to a works council (or a minimum of two employees in very small establishments and a maximum of 50 in large workplaces). Do not confuse this with a drawn-out and sharply contested NLRB representation election as in the United States (Chapter 6)—"once the procedure is initiated by employees, the election of a works council is to all intents and purposes automatic."51 Nearly 90 percent of establishments with at least 500 employees have works councils, but fewer than 10 percent of small establishments do; changes to the German Works Constitution Act in 2001 therefore further simplified the election process in small establishments.52 German works councils have codetermination, consultation, and information rights regarding various workplace issues and are legally distinct from unions—their existence does not depend on a local union presence. Nevertheless, in practice union members are likely to be active in the works councils and unions help provide training and expertise; in return, unions can use the rights granted to works councils to strengthen their influence within the workplace.53 The size of works councils varies with the size of the workforce: A 500-person establishment has an 11-member works council (including one full-time member), whereas a 5,000-person establishment has a 29-person works council (including seven full-time members). The works council must meet with the employer at least once a month, and the company pays for the works council's expenses. Companies with multiple establishments must also establish companywide works councils. The law mandates that "the employer and the works councils shall work together in a spirit of mutual trust . . . for the good of the employees and of the establishment." A works council cannot strike, but it can sue if the employer does not fulfill its legal obligations of codetermination, consultation, and information provision. Granting codetermination rights to works councils means that a company must jointly determine with the works council issues pertaining to work rules and discipline, daily working hours, leave schedules, performance-based pay and bonuses, overtime, safety and health, training, and personnel selection methods (see Table 12.6). In other words, on these matters the employer cannot take action without the agreement of the works council. Negotiated agreements on codetermined issues are incorporated into works agreements. The second set of rights granted to works councils are consultation rights—the works council must be consulted before an employer changes the nature of its work. And third, a firm's works council must be given financial information about the firm's balance sheet, investment and marketing plans, and other corporate intentions (see Table 12.6). Remember that industrywide collective bargaining agreements specify minimum standards and other broad parameters for the workplace. As such, works councils are left to work out specific details, especially pertaining to implementation issues, for each workplace.54 Moreover, when the labor market is strong, some works councils are able to negotiate extra wage increases; conversely, when a firm's financial health is weak, some works councils agree to concessions below the collective bargaining agreement's standards ("wildcat cooperation").55 Works councils are also viewed as generally supportive of workplace changes and the implementation of new processes and technologies if the company and its workforce will be strengthened, and management can utilize works councils to help implement such changes.56 German companies are introducing the same types of flexible work systems as in other countries, but the legal rights of works councils give them the power to ensure that employee interests are represented when these changes are implemented.57 Research on works councils fails to consistently uncover significant effects on economic efficiency; in other words, it is difficult to conclude that works councils either improve or harm productivity, employee turnover, investment, and the like.58 Supporters of works councils, however, see them as mechanisms for providing equity and especially voice, but not efficiency. Complementing works councils is the other major component of German codetermination: employee representation on corporate supervisory boards. German corporations have two boards for managing the company: A management board controls the daily management of the firm and reports to the higher-level supervisory board, which sets strategic policies and appoints upper-level managers. The supervisory board generally meets four times per year. Depending on the size of the company, one-third to one-half of the supervisory board members are representatives of the employees. German supervisory boards are less powerful than U.S. boards of directors, but employee representation nevertheless gives workers a voice in strategic decisions.59 In the United States unions occasionally obtain a single board seat, often as part of a significant package of employee wage and work rule concessions; but significant board-level representation is mandated by law in Germany. Finally, note that because union membership is not linked to industry-level collective agreements, workplace-level works council representation, or supervisory board representation, the decision to join a union is different than in the United States. In Europe "joining a trade union is as much an act of political commitment as it is a step to support collective bargaining. It is more an act of solidarity than simply a means to secure personal gains."60 Similarly, European unions traditionally have not focused solely on winning economic improvements for their members. Rather, advocacy of broad working-class interests—either within capitalism or in opposition to it—and integration of workers into broader political movements have been as important as, and frequently more important than, collective bargaining.61

SWEDEN

The major dimensions of labor relations in Sweden and the other Nordic countries appear broadly similar to those in Germany: A high contract coverage rate and a dual representation structure with centralized, industrywide collective bargaining and strong workplace representation.62 An important difference, however, is that while workplace representation in Germany is institutionalized by law in the form of works councils that are technically independent of labor unions, until recently workplace representation in Sweden has been institutionalized by culture and tradition in the form of strong workplace-level unions. Like that in the United States, workplace representation in Sweden relies on unions; unlike that in the United States, union density in Sweden is high (close to 70 percent), so workplace representation is widespread. As in other countries around the world, bargaining in Sweden has become more decentralized. But in the Swedish case, decentralization means a shift away from economy-wide bargaining. The dual system of high-level industry or sectoral bargaining followed by company-specific negotiations remains, so compared to the United States, for example, the bargaining structure remains more centralized. Bargaining coverage is very high (around 90 percent), but unlike in many European countries this is not because of the legal authority to extend agreements throughout an industry. Rather, as in the case of workplace representation, collective bargaining coverage is high because of a combination of strong unions and strong employers' associations.63 The traditional goal of the Swedish labor movement was a "solidaristic wage policy" that consisted of equal pay for equal work across companies (making company ability to pay unimportant) and a compression of wage outcomes within an establishment. New forms of work organization, however, have reoriented this objective more toward a "solidaristic work policy" in which unions are involved in transforming work to ensure that workers as well as companies benefit from these changes.64 In particular, the solidaristic work policy advocates self-directed work teams, training, job and skill development, and compensation for skills and responsibilities. The extent to which U.S. unions might also be less resistant to workplace change if they had the institutional and cultural security of Swedish unions is a thought-provoking question.

AUSTRALIA AND NEW ZEALAND

Whereas unions in Germany and Sweden are organized primarily along industry lines, unions in Australia were traditionally organized mostly on a craft or occupational basis. Unions typically had members in more than one industry, and managers often had to deal with multiple unions—in the 1980s the average number of unions per Australian firm was 12.74 Union density, however, has declined sharply since the mid-1970s from above 50 percent to less than 20 percent.75 Consequently, since the late 1980s the Australian labor movement has actively pursued union mergers and amalgamations to transform a relatively large number of small unions into a smaller number of industry-based or general unions. By 1995, nearly all union members belonged to 1 of 20 unions. This strategy unsuccessfully attempted to counter the decline in union density by increasing the number of services that larger, industry-focused unions can provide to potential members.76 Such merger activity, however, raises the same issue that faces the U.S. labor movement: how to balance union strength with responsiveness to the needs of individual workers and workplaces. The drive to increase the power of Australian unions through rationalization along industry lines also stems from the trend toward decentralization of Australian labor relations. A main feature of labor relations in Australia has traditionally been a centralized system of arbitration awards. In this awards system a federal or state arbitration commission (or tribunal) issues an award that specifies the minimum standards for pay and working conditions, often for an occupation. This arbitration system dates back to the early 1900s and was devised to prevent strikes. For a number of years, the basic federal award established a minimum wage for unskilled workers to fulfill "the normal needs of an average employee, regarded as a human being living in a civilized community" based on a family of 5. Wage differentials for skilled occupations were established relative to this basic wage award. The federal awards established the pattern for state and industry-level awards. In tight labor markets, unions were successful in using collective bargaining with individual employers to negotiate "over-award" pay more generous than the arbitration awards. Working conditions were established separately from the arbitration awards through workplace-level bargaining, often informally and with high levels of wildcat strikes. But because of the importance of the national and regional awards, overall this was a very centralized system of labor relations in which arbitration, not collective bargaining, was the centerpiece.77 In the late 1980s, Australian labor relations pushed away from centralized awards toward greater decentralization and enterprise-level bargaining. This effort was the product of both the government (due to macroeconomic problems such as an exchange rate crisis) and employers (to improve labor-management cooperation, flexibility, and responsiveness to firm-specific conditions). In other words, Australia has also struggled with globalization, decentralization, and flexibility. In the 1990s, the role of the federal arbitration commission shifted away from issuing awards to ensuring that union and nonunion enterprise-level agreements met a few minimum standards. Opposition to these trends, however, led to the defeat of the conservative government in 2007, and many of the changes were rolled back. A new system now includes (i) 10 minimum national employment standards for all workers, including maximum weekly hours of work, parental and other leaves, and public holidays; (ii) "modern awards" on minimum wages and other issues that will be tailored to the needs of particular industries or occupations; (iii) enterprise-level collective bargaining, including a legal obligation for companies and unions to bargain in good faith; and (iv) a national agency (Fair Work Australia) to oversee the modern awards, facilitate bargaining, and resolve disputes.78 These changes reflect a desire to restore some of the equity and voice that were sacrificed in the pursuit of efficiency between 1987 and 2007—that is, to strike a new balance among efficiency, equity, and voice. Labor relations in New Zealand exhibit a similar trend, albeit with even more radical reforms.79 New Zealand's arbitration system dated back to 1894 and operated much like Australia's. A federal arbitration commission issued awards for minimum conditions while collective bargaining, often on a multiemployer basis, established above-award terms. Moreover, an employer could unilaterally establish terms and conditions of employment as long as they exceeded the minimum provisions established by the relevant arbitration award. Due to the arbitration system, many workplace were unionized, and between 1936 and 1991, union membership was compulsory in unionized workplaces, essentially due to union shop clauses to use the U.S. terminology. So union density was high. Unlike the 1987-2007 Australian initiative to decentralize labor relations by weakening the arbitration awards system, New Zealand has pursued decentralization by abolishing its award system. The 1991 Employment Contracts Act replaced the awards system with voluntarism (recall Great Britain's system described earlier in this chapter). The Employment Contracts Act created a voluntaristic system, so it did not require bargaining of any type—unions could negotiate collective contracts, but only if they had explicit authorization from each worker and if the employer wanted to bargain; otherwise, individual nonunion contracts were used. Compulsory union membership was also outlawed, and the existing decline in union density accelerated. The Employment Relations Act of 2000 moved New Zealand industrial relations away from a pure voluntarism system. Individual employment contracts are still allowed, but employers have an obligation to bargain in good faith with a union if a group of employees requests it. It is also illegal for employers to pressure or discriminate against employees in order to encourage or discourage union membership. In 2010, New Zealand was swept up in an interesting labor controversy when several actors unions, including the U.S. Screen Actors Guild and American Federation of Television and Radio Artists, urged their members not to work on The Hobbit movies being produced by Peter Jackson because the production company would not agree to a union agreement for the filming that was likely to occur in New Zealand. After Warner Brothers publicly threatened to move filming to a different country, the New Zealand government gave the filmmakers $25 million in additional subsidies and took only a single day to amend the Employment Relations Act to clearly exclude anyone involved in making a film, thus excluding them from any labor law protections.80 Filmed in New Zealand, the three Hobbit movies would become worldwide blockbusters.