CHAPTER 1 International and comparative employment relations: An introduction

1. CHAPTER 1 International and comparative employment relations: An introduction Nick Wailes, Greg J. Bamber and Russell D. Lansbury

2. Lecture outline • International and Comparative Employment Relations • Definitions • Objectives of the field of study • Research challenges • Theories of convergence and divergence in employment relations systems • Views on the impact of globalisation and employment relations (ER) • The Varieties of Capitalism (VoC) approach • Main features of the approach • Applying the VoC approach to ER • VoC, globalisation, and the convergence/divergence debate • Limitations of the approach • Transnational employment relations • Capital and labour as transnational actors • International labour organisations • International employer organisations • Multinational corporations (MNCs) • Transnational regulatory bodies • International Labour Organization (ILO) • World Trade Organization (WTO)

3. What is ‘employment relations’? • Employment relations (ER) can be seen as encompassing the study of all aspects of people at work. • It is concerned with the relationship between employers and employees and their interaction at the workplace. • It is also concerned with employers’ and employees’ representative bodies, such as trade unions and employer associations, and with how they interact at the workplace, industry, national and international levels. • It encompasses both industrial relations and human resource management.

4. Industrial relations and human resource management • Industrial relations (IR) traditionally focuses on formal and informal institutions of job regulation. • Human resources management (HRM) focuses on the level of the individual organisation and is concerned with issues such as recruitment, selection, pay, performance and human resource development.

5. Key elements of industrial relations • The Parties include: • Employers • Employees • Unions and professional associations • Government and state agencies • The Processes include: • Collective bargaining between unions and employers or employer associations • Industrial disputes and dispute resolution mechanisms • Employee participation at the workplace • The Outcomes include: • A collective agreement between employees (and their unions) and employers (and their associations) • A decision by a tribunal or conciliation committee that resolves a dispute • An agreement between employees and an employer on an issue at the workplace

6. What is international and comparative ER? • International ER • Transnational: institutions and phenomena which cross national boundaries, e.g. multinational corporations (MNCs); international labour movement; European Union; International Labour Organization (ILO) • Foreign: studying employment relations systems in other countries • Comparative ER • A systematic method of investigating ER in two or more countries which is analytic rather than descriptive

7. Objectives of international and comparative ER as a field of study • To learn about ER in different countries • To provide insights into our own system of ER • To develop theories and explanations for different patterns of ER • To guide policy-making by learning from successful ER systems

8. Challenges in comparative ER research • There are important international differences in ER • The meanings and significance of key ER terms differ across countries (e.g. differences in the nature and role of unions) • Data is collected in different ways (e.g. differences in how industrial disputes are defined, categorised and how their incidence is recorded) • Therefore, effective comparisons require detailed understanding of each national context • Researchers choose a comparative research design: • Most similar cases: two or more countries that are similar in as many respects as possible except for phenomenon under study • Most different cases: two or more countries that differ in almost every respect except the phenomenon under examination

9. Convergence and divergence in national patterns of ER • One of the most enduring debates in international comparative ER is: • whether national patterns of ER are converging (becoming more similar) • whether they are diverging (becoming more different) • whether a more complex pattern of convergence and divergence is taking place

10. Convergence theories of comparative ER • Convergence theories assume that there are common pressures across societies to adopt a particular (‘best practice’) ER system • Original convergence thesis was developed by Kerr et al. in Industrialism and Industrial Man (1960) • Logic of Industrialism: industrialisation creates pressures across societies to adopt a certain, American-style ER system. • Critique of this argument: technological determinism; American perspective • Later revised by Clark Kerr: convergence as a tendency among democratic industrialised societies • Dore (1973) suggested convergence may be towards the Japanese ER model rather than an American one. He argued that countries which industrialised at later stages were able to develop ER institutions that are well suited to industrialisation

11. Divergence or partial convergence theories • Comparative ER research has found that: • Some country differences persist and some even increase • But overall there may be convergence towards 2 or more patterns of ER • Some aspects of ER are converging while others are diverging • Common trends don’t necessarily result in common outcomes • There is increasing variation in ER practices within countries

12. Globalisation • Globalisation is used to characterise changes in the international economy • It normally refers to growing interconnectedness of the international economy • It is associated with growth in: • Cross-national trade • Foreign direct investment (FDI) • Growth in international financial transactions • It is argued that globalisation has created a common set of economic pressures across all markets (products and factors) which may impact on ER

13. Globalisation and ER Two views on how globalisation impacts on employment relations: • Simple globalisation approach • economic pressures associated with globalisation will result in a convergence of employment relations policies and practices • “race to the bottom” in terms of wages and labour standards as mobile capital seeks lowest labour costs • governments lose autonomy in policy making and can no longer guarantee labour rights • Instead, legislation to accelerate decentralisation and deregulation of the labour market and to attract capital investment • Institutionalist approach • Despite common economic pressures associated with globalisation, diversity in national patterns of ER will persist • existing ER institutions mediate and filter those pressures, and will do so differently in different countries

14. The Varieties of Capitalism approach • Main features of the approach • Applying the VoC approach to ER • VoC, globalisation, and the convergence/divergence debate • Limitations of the approach

15. Main features of VoC 1 • There are two ideal-typical forms of capitalism • Liberal market economies (LMEs) • Coordinated market economies (CMEs) • Each of these forms of capitalism include a set of ‘complementary’ institutions that form the basis of a country’s economic competitiveness and lead to good economic outcomes • The firm is at the centre of their analysis • In order to develop, produce and distribute goods and services profitably, a firm must effectively coordinate with a wide range of actors e.g. investors, employees, unions, the state, suppliers, buyers.

16. Main features 2 • A firm must coordinate with other actors in 5 spheres: • Industrial relations • Vocational training and education • Corporate governance • Inter-firm relations • Relations with its own employees • The relations with actors in these spheres are problematic • Firms can resolve coordination problems • Internally within the firm (hierarchies) • Externally (market or non-market institutions)

17. Main features 3 • National institutions shape how firms resolve these coordination problems • In LMEs, firms resolve coordination problems mainly through hierarchies and markets – i.e. arm’s length relations and high levels of competition • In CMEs, firms resolve coordination problems not only through hierarchies and markets but also through non-market institutions – i.e. strategic interaction • Both these solutions to coordination problems form institutional equilibria which have comparative advantage • In LMEs, the comparative advantage arises from the flexibility of these coordination arrangements • In CMEs, the comparative advantage arises from cooperative behaviour among actors, based on information exchange, monitoring and sanctioning of defections

18. Liberal market economies • Classic example: United States • Corporate governance: outsider shareholder dominated; performance represented by current earnings and share prices; management agency controlled by shareholder exit • Employee relations: short term, market relations between employee and employer; top management has unilateral control of the firm • Industrial relations: employer organisations and unions relatively weak; decentralised wage setting; insecure employment (hire and fire; fluid labour markets) • Vocational training/ education: vocational education offered on market; labour force has high general skills • Inter-firm relations: market relations, competition; use of formal contracting and subcontracting relationships.

19. Coordinated market economies • Classic example: Germany • Corporate governance: long-term bank-dominated insider systems; cross-directorships; cross-shareholding; management agency controlled through ‘network reputational monitoring’ • Employee relations: long term, formalised participation of employees; consensus decision-making with management • Industrial relations: trade unions and employers organised; industry-wide collective bargaining and pay determination; employment relatively secure • Vocational training: elaborate industry-based training schemes; labour force has high industry-specific and firm-specific skills • Inter-firm relations: development of collaborative networks; cooperation among firms in diffusing technologies

20. Institutional complementarity • Complementarity occurs where the presence of one institution enhances the returns from another institution • In this way comparative advantage arises from the ‘bundling’ of complementary institutions • Hence, countries cluster around bundles of complementary institutions – two distinct clusters are LMEs and CMEs • This important departure from comparative IR studies which sought to link single features (e.g. collective bargaining structure) with economic performance • The effect of single institutions may be misleading as performance may arise from a constellation of institutional arrangements • Implications for ‘bolt on’ policy responses • Comparative institutional advantage: the institutional frameworks (either LME or CME) provide nations with comparative advantages in performing certain activities and producing certain kinds of goods and services

21. Applying the VoC approach to ER • ER concerns are a central feature of the VoC model (e.g. collective bargaining, unions and employer associations, skill development, relations with employees at the workplace) • VoC approach places ER in a broader political economy context • Focus on institutional complementarity overcomes tendency to treat ER institutions in isolation • VoC approach brings firms and employers into the centre of analysis

22. VoC, globalisation, and the convergence/divergence debate • VoC approach emphasises the importance of institutions (‘institutions matter’) • Different sets of institutions will mediate and refract the pressures associated with globalisation in different ways • Regarding ER: • in LMEs, we can expect deregulation and a ‘race to the bottom’ as outlined in the ‘simple globalisation approach’ • in CMEs, we can expect firms and workers to resist deregulation as that threatens comparative institutional advantages • This results in a bifurcated response to globalisation; globalisation will have a different impact on IR in LMEs than in CMEs

23. Limitations of VoC approach There is a large literature criticising the VoC approach, in part because it has been so influential. 1. Not enough variety • LME/ CME distinction doesn’t capture all of the diversity of market economies (several OECD countries that don’t fit) 2. Ignores differences within varieties • Especially among CMEs 3. Static and Determinist • Compares two countries at the same point of time • Only 2 varieties of capitalism are viable; change to other category is impossible • Makes it difficult to explain change • Downplays role of agency, conflict, power, politics 4. Downplays or ignores international factors • Neglects linkages between nation states

24. International industrial relations • Capital and labour as transnational actors • International labour organisations • International employer organisations • Multinational companies MNCs • Transnational regulatory bodies • International Labour Organization ILO • World Trade Organization WTO

25. Labour internationalism • Labour as a passive victim of globalisation or as a global actor? • International union confederations • Global confederations e.g. International Trade Union Confederation ITUC (was ICFTU) • Regional confederations e.g. European Trade Union Confederation ETUC • Global union federations which link together national unions from a particular trade or industry e.g. International Metalworkers’ Federation IMF • European works councils

26. Activities of international union organisations • Representational activities at ILO and other international forums • Services to member unions, especially in less developed and newly industrialising countries • Information sharing • International campaigns • International Framework Agreements IFAs on minimum labour standards between global union federations and MNCs

27. Employers – international dimensions • International Employers’ Associations, e.g. • International Organisation of Employers IOE represents employers at ILO • BUSINESSEUROPE (formerly Union of Industrial and Employers' Confederations of Europe UNICE) represents employers in EU institutions • Multinational companies • Country of origin/home country effect and host country effect shape ER practices in subsidiaries • Current questions about ER in MNCs: • Do ER practices of MNCs spill over into other (local) companies in the industry? • Is there any reverse diffusion, i.e. transfer of ER practices from foreign subsidiaries to the headquarters of MNCs?

28. The International Labour Organization (ILO) • Established in 1919 in association with the League of Nations • In 1946 became first UN agency • Has a unique tripartite structure - government, employers and union representatives • Key contribution is a series of Conventions and Recommendations which set international labour standards • Major source of international labour law: 181 conventions, 188 recommendations • Important role in technical advice and assistance to less developed countries (LDCs) and newly industrialising economies (NIEs)

29. International Core Labour Standards Ratification of conventions by member states of the ILO create binding obligations to put their provision into effect (181 conventions ratified so far). Source: Hughes, S (2005) ‘The International Labour Organisation’, New Political Economy, 10 (3): 413-425.

30. Criticisms of the ILO • Bureaucratic structures and procedures which are resistant to reform • Inadequate monitoring of compliance and ‘policing’ of conventions • The tripartite model of governance of the ILO is outdated and impotent. • The governing body of the ILO is dominated by the advanced industrialised economies although less developed economies comprise the majority of ILO members • It has lower status and is weaker than many other international bodies, e.g. WTO and the World Bank (which are competing with the ILO is some areas)

31. Proposals for reform of the ILO • The adoption of more innovative and pragmatic approaches to issues (e.g. the current campaign for ‘Decent Work’) • Focus on fewer issues on which it can have a major impact • Build stronger linkages with other international bodies e.g. non-governmental organisations (NGOs) • Place more emphasis on technical assistance to the less developed economies • Provide for greater representation of third world countries on the governing body of the ILO

32. World Trade Organization • Established 1996 • United Nations agency • Aim is to promote free trade and provide mechanisms for the resolution of trade disputes • There was debate around whether labour standards should be included in the rules of the WTO – not included

33. Conclusion • Globalisation is having a profound influence on the way that work is regulated. • Studying internationally comparative employment relations allows us to develop an understanding of our own and other employment relations systems. • The Varieties of Capitalism approach is a useful framework for studying internationally comparative employment relations. It allows us to study employment relations within a broader institutional context.