Respect And Promote Wages And Collective Bargaining
28/06/2013 by
Ronald Janssen
Ronald Janssen
I regard the growth of collective
bargaining as essential. I approve minimum wages and hours regulation. I
was altogether on your side the other day, when you deprecated a policy
of general wage reductions as useless (…).
These words were written 75 years ago.
In today’s Europe, they are now even more valid as they were then. Just
like the United States in 1938 was digesting its renewed fall in
recession, the Euro Area economies are now expected to slowly emerge
from their ‘double dip’. Just like the United States in 1938, the
2012/2013 recession of the Euro Area recession was triggered by an
untimely and exaggerated policy of fiscal contraction.
Back in 1938, President Franklin D.
Roosevelt took the message John Maynard Keynes had written to him in
this letter of February 1938 by heart. A few months later, he signed a
Fair Labour Standards Act based on the idea that goods that were not
produced under “standards of decency” should not be allowed to “pollute
the channels of interstate trade”. This Act outlawed child labour,
guaranteed a minimum wage, limited the working week at 40 hours and
introduced overtime pay. Some years later, at the end of the Second
World War, a follow up act was proposed aiming to strengthen the
practice of collective bargaining itself but president Roosevelt passed
away before this second act could be approved.
From the Great Depression in the US to the Great Recession in the Europe of today
Where do we in Europe stand on this? For
the past half year, the different European Council formations have been
discussing how to build a so called ‘genuine’ Economic and Monetary
Union, a discussion that was supposed to include the social dimension
and social dialogue as well.
One – optimistic – reading of this is to
think that European leaders have realised that their double strategy of
fiscal austerity and wage deregulation they are pursuing turns out to
be disastrous and that it is their genuine intention to change course.
If so, there is a not to be missed opportunity to draw up a list of
demands on Social Europe.
Another – rather machiavellistic-
interpretation is that European leaders have not really changed their
mind but have become nervous because of the political backlash against
‘la pensée unique’ in some member states. In this case, European leaders
actually remain convinced of the need to continue with internal wage
devaluations by getting rid of all wage formation institutions that
prevent wages from being cut. However, in an attempt to contain
widespread resistance against such policies, an invitation is extended
to trade unions to join the discussion table and actually assist in the
implementation of these policies.
What are the facts saying? One fact is
that the social dimension in the draft conclusions of this week’s
European Council is minimal and limited to proposing “appropriate
indicators” and “better coordination of employment and social policies”.
This does not say very much.
Another fact is that the Council
conclusions remain on the track of building even more new instruments of
European economic governance, the idea being to force individual member
states to undertake those types of reforms that weaken wage formation
systems and allow employers to cut wages easily.
Meanwhile, the wage race to the bottom
is ongoing. After wages have been squeezed in Greece, Spain and
Portugal, it’s now France’s and Italy’s turn to put downwards pressure
on wages .One – cynical- illustration here is that financial markets,
becoming aware of the fact that the Euro Area domino’s keep falling,
have invented a new acronym. Markets are now referring to France, Italy,
Slovenia, Holland as the FISH countries. And it will surely not end
there: Sooner or later, with the export prospects of the remaining group
of countries (Germany, Austria, Finland) under continuing pressure from
the collapse in import demand in the rest of the Euro Area and with
their relative unit wage costs increasing because of the wage cuts
elsewhere, the view that the latter countries (the ‘GAF’s’?) have lost
competitiveness and need to follow the example set by Spain or Greece,
will gain traction. If so, GAF’s, FISH and GIP countries will then
compete for the questionable title who is able to cut wages most.
A Genuine Social Dimension: Respect and promote collective bargaining on wages
If the social dimension of European
Monetary Union is to be genuine, then one of its key priorities should
be to ensure that currency devaluations are not being replaced by wage
devaluations and that the wage race to the bottom is prevented from
taking place.
As Keynes indicated in his quote above,
the practice of collective bargaining is key to this. Robust collective
bargaining systems with wide coverage and representative trade unions
and employer organisations allow to arrive at balanced outcomes. This is
in particular the case when collective bargaining is coordinated so
that all bargaining parties can take the situation of the macro economy
at national as well as the need to avoid counterproductive ‘beggar thy
neighbour” policy at the Euro Area level into account. Moreover, one
particular concern, often expressed by trade unions in CEE member
states, is that a minimum wage floor without strong collective
bargaining practice is not sufficient since 60% of a low average wage is
still a low wage.
A first and urgent action to take is
stop the ongoing attacks on collective bargaining systems, attacks that
are systematically coming from the new system of European Economic
Governance (‘six-pack’, competitiveness contracts, ex ante coordination,
Troika programs).
This can be done by giving the social
dimension side of monetary union the power to set clear limits on this
system of European economic governance and its instruments to torture
wages and collective bargaining systems. The almost unlimited power the
masters of finance (EU finance ministers council, DG ECFIN) and money
(ECB and IMF) have managed to obtain over national economic and social
policy making needs to be constrained from the very beginning and from
inside the system itself. One concrete example here is the wage
safeguard clause in the regulation on excessive macroeconomic imbalances
stating that the application of the regulation shall not infringe on
the freedom to bargain and the right to take action and that national
systems of wage formation are to be fully respected. Similar wage
safeguard clauses should be developed and inserted into all the other
regulations, contracts and programs that make up this system of economic
governance.
A second line of action is to complement
these wage and collective bargaining safeguards with a policy approach
that supports and promotes the practice of collective bargaining. This
could take the form of introducing collective bargaining related clauses
in public procurement or of explicitly imposing on employers when using
posted workers to pay the collectively bargained wage (and not the
lower minimum wage). In line of with the existing European Social
Dialogue giving social partners the primacy over European social and
labour market regulation, one could also propose to establish a platform
of coordination at European level where social partners meet to discuss
and take action in an autonomous way how to improve collective
bargaining practice.
Finally, we insist on the fact that
European Treaty does not need to be changed for the Commission and the
Council to undertake the policy directions described above. Indeed, the
Treaty contains quite a number of principles that allow and even oblige
European policy makers to respect and promote collective bargaining.
There are the objectives to improve and harmonize living and working
conditions (TFEU article 151). There’s the obligation of the Union to
promote social justice (EU article 3). There’s the obligation of the
Union to facilitate dialogue between social partners, while respecting
their autonomy as well as the diversity of industrial relations systems.
Finally, there’s the horizontal social clause forcing the Union to
take, amongst others, the values of democracy and equality into account
when defining and implementing its policies (article 9 TFEU). Collective
bargaining has clear links with all of these objectives and values.