What makes collective bargaining work and what makes it worthy of institutional support? In a recent EU workshop, we have been discussing the case of Belgian and also possible lessons for other EU Member States. I will briefly summarize the discussion and draw my personal conclusions.
The social dialogue construction
I like to compare social dialogue with a simple building that has four walls and a roof. Most people will agree that a roof is almost sufficient as a shelter, but it needs the walls to support its function. Note that at the heart of social dialogue, which is bipartite (between employers' federations and trade unions) or tripartite (adding the state or government), there is always some form of collective bargaining. The terms are therefore often interchanged.
Coincidentally, we came up with four conditions for a solid structure for social dialgue:
1. Representativeness
This answers the question of who is sitting around the table. The legitimacy of social dialogue depends on the position of the participating actors. For instance, the unionization rate should be high enough to show the force of collective action, while the employers' density rate equally should be high to ensure enforcement of the agreements and no undercutting by rogue employers. It could be that the actors involve only represent a part of the economy or a limited number of companies.
2. Rules and procedures
Social dialogue can be an informal or a formal matter, but it should ideally take place within a legal or paralegal framework that sets out the structure, procedures, and rules. This should be clear, transparent, and with some degree of universality. In closed shop negotiations, the rule is that what is negotiated, only affect affiliated parties, and no other parties (e.g. non-unionized workers) are allowed. More developped collective bargaining has a much wider scope, leading to agreements that are binding to all parties, even non-affiliated, through legal extension. This means that the agreements, which essentially are private contracts, obtain the status of a law. This is the material aspect of social dialogue, answering the question how dialogue is done.
3. The process
The rules and procedures are an empty box that needs to be filled. This happens through a process of negotiation, and the contents answer the question what is the stake in the game. This is rather intangible, and relies to the influence the parties have, the sense of ownership and responsibility, the shared goals and trust in the system, and the ability to reach a consensus or compromise. Beside the fact that collective bargaining is essentially a power game, social dialogue also relies on a mutual understanding.
4. The outcomes
Social dialogue is sometimes an end in itself, ensuring information and communication about decisions that are taken by the organization, and allowing some codetermination. It may also reach further, contributing to the interests of an economic sector or the national economy, as well as other social goals (inequality, poverty, democracy). Social dialogue is justifying its existence by answering the question why it takes place. This also implies a cost-benefit calculation: as negotiations take time and take away individual degrees of freedom, which are replaced by collective arrangements, the benefits should compensate the losses. An easy example is an agreement that would need to be negotiated in every company and lead to similar results, is better done just once. Also, some agreements would be preferred by most companies if all others would do the same, but avoided if there was no guarantee that this would take place. For instance, higher salaries may respond to the reservation wage of workers, but a firm that implements the higher wage would be outpricing itself on the market, while others continue a practice that leads to a loss in the workforce and therefore for the sector, but at least manage to survive another turn.
Lessons for Belgium
The Belgian system of collective bargaining is a well-known archetypical example of post WW II social dialogue. It is the end of a buildup that actually started after WW I, where the working class organized its interests against the power of the ruling capitalist class. It is also a compromise between two ideologies: on the one hand a militant socialist movement that strives for a revolution, and on the other hand the corporatist, Christian, anti-socialist and even fascist idea of a common interest between workers and employers. It is a little known fact that indeed the nazi's spurred employee participation of employees in the workplace during the occupation of the country. Yet both the elements of opposition and interdependence are present as it is. For instance, collective action (strikes) is less constrained as in other countries, and trade union representatives are protected against dismissal, while at the same time, trade unions are represented in the OSH committee, in the company council (but without decision power), in sectoral and national joint committees and tripartite bodies.
An interesting observation is that the 'outside options' currently go in two directions. On the one hand, there is popular protest and the threat of striking, on the other hand, there is the state that represents the interests of the ruling class. As a side note, this is a critique of the state that liberals and socialists share, although the former are accused of being 'neoliberal' (e.g. effectively using the state to manipulate the free market), and the latter of being 'statist' (e.g. aiming for a maximal state), which is twice correct.
Either way, although social dialogue / collective bargaining is very well organized and institutionally integrated in Belgium, it's independence is not absolute. Even if it never was, and some 'grease' to facilitate bargaining has often been necessary, today this takes a legal form that explicitly constrains collective bargaining: because of a lack of trust by the 'third party', the state imposes a number of laws and procedures (e.g. on wage growth, training plans, ageing plans, gender inequality. To the outsider, or to the social partner that benefits from the state option, even if it is an agreement of last resort (in which case the negotiator only loses time by not reaching an agreement in his favour), this may seem wise. In reality, it is a loss of sovereignty and independence of collective bargaining, taking away the benefits of the system and mainly its flexibility, as the government is only a remote player. However, it is not only the lack of trust by the government and its ambition to plan the economy that reduces the scope of collective bargaining, but also the belief of the social partners themselves that collective bargaining will deliver the desired results or that a consensus or compromise is possible. Hence there is a couple of bricks missing in the third wall (the process), as they have been used to fortify the second (rules and procedures). The roof is still on the building, but it is more unstable now.
Lessons for Europe
The problem of best practices is that there is a reason why institutional structures have a certain form, and therefore a nice dress doesn't always fit on someone else. This is the functionalist view but it should not take away the ambition to converge. Yet it should be clear that the practices of Belgium, Germany, and the nordic countries cannot be immediately introduced in, for instance, the new members states with a much weaker tradition of social dialogue. Even if all parties would agree that the building consists of those four walls and a roof, and then allows social and economic development, there are no incentives to start building it if there are no immediate gains.
This perspective is most often totally lacking in the political discourse: the reason why workers join a trade union is
not macro-economic growth. A union has three functional levels: the first, as a service provider; the second, as a representative organization; and the third, as a social actor. The first level, services, is what matters most: trade unions provide legal protection, voice at the workplace, and in the case of Belgium, do the administration of unemployment benefits, and aid in the shifts from and towards sickness leave, training, and retirement. The second level is, representation, is more important from a legal and institutional point of view - concluding agreements - but in countries where this is all that remains of workers' organization, it quickly fades out because of free-riding tendencies. The third level, social action, is ideological, and relates in part to the origins of the trade movements: one from the revolutionary socialist movement, one from the corporatist christian movement, and one from the liberal movement that recognizes the freedom to organize interests. At the third level, trade unions also contribute to democracy, as the main player in the civil society, with a more direct link with the members in contrast to political parties that are periodically elected and where no membership fee is required. Hence, the vote that workers cast is 'voting with the feet', a saying by Lenin that was taken up by Tiebout and many scholars (
Hayek, Friedman, Hirschman) later on.
Hence we should be careful on the one hand not to confuse the origins and the structure of the system (the Althusser argument). Other countries will not replay the history of Belgium, nor will it be possible to directly copy the structure, even if they have the finished building in mind. However, too often the statements of either party, whether it is the state, the trade unions, or business organizations, is that institutional traditions are too different and welfare state levels cannot be generalized, so that nothing should be undertaken. This goes beyond the fact that good ideas don't stop at the border and beyond the need for higher-level coordination of social developments in a unified economical sphere. Rather, a number of steps can be set to build up the four walls, so that already they provide shelter against the wind, if not against the rain. For instance: workers can gain influence at the company level, and discussions on OSH can lead to more safety as a direct outcome that is more efficient than legal formalism. Rules and procedures are developed on the go, and representativeness is an endogenous outcome when gradually more rights are given to the parties. In other words: the stepping stones are building bricks. The role of the state is rather to nudge and facilitate than to impose practices that lack foundation. This is not only the case in developing systems of social dialogue, but also, as outlined above, in mature regimes.
