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Transcript of 1 Collective Bargaining and Harmonious Social Economy Chang-Hee Lee Senior Specialist on Industrial...
1
Collective Bargaining and Harmonious Social Economy
Chang-Hee LeeSenior Specialist on Industrial Relations and Social
DialogueILO
ACFTU/ILO Workshop on Collective Bargaining and Wage Negotiation
August 2006, Yinchuan, Ningxia
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PART 1: LABOUR RELATIONS AND HARMONIOUS SOCIETY IN A MARKET ECONOMY
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Industrial relations in a market economy Move towards what kind of market
economy? Industrial relations influence on the
relations between market and its stakeholders, and therefore define nature of a market economy (next slide).
What kind of society does ACFTU with more than 100 million members want to build for the future of China?
Sound IR system is a key to ensuring a harmony between economic efficiency and social justice, leading to social harmony.
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Union Density and Collective Bargaining Coverage (2001)
USAUSAJapanJapan
UK
UKGer
Ger
Nether
Nether
Italy
Italy
Sweden
Sweden
France
France
Austria
Austria
0
10
20
30
40
50
60
70
80
90
100
Collective bargaining coverage Union density
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Union Members in China “Where there is a worker, there should be a
union” Campaign for union membership has
contributed to increase of union membership since 1999
Recent breakthrough of union organizing in Wal Mart!
020000000400000006000000080000000
100000000120000000140000000160000000
1996
1997
1998
1999
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Union members
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Industrial Relations and Social Policy Challenges in a Market Economy Labor is not a commodity: a fundamental principle of IR
and ILO Can we leave wage determination to the market alone? Workers who possess labor power needs to support not
only his/her living but also their family’s living as well. Workers are a source of productivity and progress.
Under individual contracts alone, workers are too weak to get equal contract with employers, because workers are desperate to find jobs
Birth of trade union in 19th century and gradual spread of collective bargaining in 20th century. “Take wage out of competition” was a goal of trade unions. Collective IR emerged…
IR is one of major social policy areas to reconcile social justice/equity and economic efficiency in a market economy since 19th century…
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Importance of autonomous industrial relations Pure market forces (in the absence of collective representation)
Competition based upon sub-standard working conditions, undercutting living standards
Social legitimacy eroded, social stability undermined Government regulation:
Government tends to lack information required for wage determination in a market economy
By its nature, government regulation tends to be rigid and uniform, unable to consider specific conditions of enterprise and business sectors
Collective bargaining: Workers (represented usually by trade unions) and employers negotiate
working conditions including wages Considering specific business conditions of the enterprise: unreasonably
high wage will lead to loss of competitiveness, damaging workers as well; too low wage will lead to high turn-over of workers.
Bound to find an equilibrium suitable both for workers and employers But bad relations between two parties may lead to sub-optimal solution
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PART 2RECENT DEVELOPMENT OF
INDUSTRIAL RELATIONS IN CHINA
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Past achievements and future challenges in China Opening of the economy in late 1970s; rural reform in
1980s; urban reform in 1980s and 1990s including SOE restructuring; accession to WTO; highest economic growth of largest country in the world combined with successful records of poverty reduction.
At the same time, widening gap between the rich and poor, and urban and rural areas.
Explosion of various forms of labour disputes and growing concern on social stability.
Great and urgent need for balanced development and social harmony.
IR institutions intersects society and economy, reconcile social equity and economic efficiency.
Building sound IR is a key condition to harmonious society.
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Major Industrial Relations Development
Established tripartite consultative committees at all levels
Union membership campaign And recent breakthrough of union
organizing at Wal Mart branches Promotion of collective bargaining Promotion of wage negotiation
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Tripartite consultation mechanisms National tripartite consultation committee set
up in 2001 All provinces and most municipalities
completed TCC establishment, and moving down to district level
Instrumental in spreading collective bargaining and coordinating IR
Issues: Employers’ representation Scope of agenda for consultation: IR or broader
social and labor policy issues Feedback from constituents at enterprise level
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Spread of Collective Agreements
Since adoption of the Labor Law in 1995, collective bargaining has been rapidly introduced
Tripartite consultation mechanism further accelerated spread of collective agreements
Experiments of industrial/territorial agreements underway
0100000200000300000400000500000600000700000
1997 1998 1999 2000 2001 2002
Enterprises with CA
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Wage negotiation Wage negotiation has been actively promoted since
early 2000s. More than 30 million workers are covered by wage agreements.
By its nature wage negotiation involves negotiation over new interests and new conditions of work instead of legal minimum.
Until recently, wage negotiation used to deal only with total wage bill of enterprises without negotiation of further distribution of wage bills among different groups of workers.
Wage negotiation creates an incentive for workers to actively participate in union activities and collective bargaining and therefore provides a momentum for unions to become more accountable and representative to their members.
14
Labour Disputes Both individual and collective disputes are on rapid rise
(three times higher than GDP growth rate) Spread of CA does not help to reduce the number of
disputesFigure 4. Labour Disputes Referred for Aribration
0
50000
100000
150000
200000
1996 1997 1998 1999 2000 2001 2002
tota
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ber o
f dis
pute
s
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2000
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10000
12000
colle
ctiv
e di
sput
es number of disputes forarbitration
number of collectivedisputes for arbitration
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Challenges 1: Improving quality and process of collective bargaining
Quantity achieved. Need to improve
quality of collective agreements
Need to improve process of collective bargaining
Need to improve representational structure of trade unions at the workplace
Internal coordination among different categories of workers/members within trade union is as important as labour-management relations
Need to find a solution to break the deadlock in collective bargaining
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Challenges 2 Wage negotiations
Policy consideration on relationship between local minimum wages, municipal wage guidelines, negotiated wages at sectoral (district) and enterprise level.
Also, more active participation in local MW setting and municipal wage guideline formulation is important.
17
Challenges 3: protecting migrant workers and reversing the trend of widening income gap
Developing a strategy to organize migrant workers and representing them effectively through democratic process of collective bargaining
Developing a union strategies, including wage negotiation and social protection strategies, to reverse the trend of widening income gap
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Part 3: Three Models of Collective Bargaining
Note: This part was prepared for a workshop for Vietnam General Confederation of Labour in early 2006.
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Model 1: Purely enterprise bargaining
Practices in many East Asian countries (Japan, most sectors in Korea, China?, Thailand, the Philippines etc). Vietnamese labour law and practices appear to be based on this model.
Advantage: flexibility and adaptability for setting enterprise specific working conditions suitable for workers and management in the enterprises concerned
Disadvantage: disparity between companies Disadvantages in Vietnamese context: enterprises
trade unions are too weak to negotiate with their employers at the workplace.
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Model 2: enterprise bargaining, assisted by professional negotiators of trade unions (and if agreeable, employers’ organizations) at higher level
Practices in USA, some sectors in Malaysia, a few sectors in Korea. Same advantage as pure enterprise bargaining model Disparity between companies may be less, as trade unions (and
employers’ organizations) at higher level (usually at industry/regional level) may have desire to produce more or less similar bargaining outcome across the companies in the sector concerned.
Advantages in Vietnamese context: trade unions at higher level are independent from the management of specific companies, while enterprise union leaders are close to the management rather than workers.
Still, there is a need to establish strong and direct link between trade unions at enterprise and higher level, and rank-and-file members, through prior consultation before entering into CB and approval of tentative agreements by union members.
21
Model 3: industry bargaining between trade unions and employers’ organizations at industry level
Practices in most continental European countries (Germany, Italy, France, Belgium, Sweden etc), two sectors in Korea, port workers in Japan, some sectors in USA
Advantages: better solidarity among workers, less bargaining costs, enterprises are relatively free from hassle of negotiation and therefore conflicts.
Disadvantages: less flexibility and adaptability for each enterprise Trend: decentralization more towards enterprise bargaining
(globalization) In Vietnamese context, it runs the same danger of disconnection
between trade unions at higher level and their members at the enterprise level. Without democratic linkage between unions and employers organizations at higher level, and their members at enterprise level, this system may not function.
22
Note and Questions Model 2 can be a
stepping stone for a transition towards model 3.
It may be also conceivable that model 2 may gradually strengthen the capacity of enterprise unions to negotiate with their employers at the enterprise level.
Questions Any relevance for China? What is current situation
in China? Share your experiences
of industrial or district bargaining
What is your view about three models?
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Part 4: Wage negotiation in a broader IR context: wage
negotiation, minimum wage policy and tripartite
consultation
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Union strategy on wage negotiation and income distribution in a market economy
Union as balancer in a market economy Trade unions are a crucial social actor and institution in a
market economy, ensuring social cohesion and harmony, representing voices of workers’ legitimate desire for decent work as a human being, against and within the force of a market.
Union’s strategy on wage negotiation and income distribution has a critical importance in ensuring decent work and harmonious society.
Specific model of a market economy is to be shaped not only by ‘market force’ but also by interaction between various economic and social actors – particularly unions.
25
Contradiction is a driving force of progress of history. And history is not straightforward.
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Factors for Wage Increase:ACFTU Collective Consultation Text Book (1996)
External factors Inflation Economic growth
in the locality Demand & supply
of labour Interest rates Local wage
guideline issued by government
Internal factors Enterprise profits Productivity Labour costs Balance sheet of the
enterprises Debt/Asset ratio Wage level of other
companies in the same sector and region
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Different Priority Factors When Each Party Decide Their Bargaining Policy
Government GDP growth Inflation Labor market situation Interest rates
Employer Profit Productivity Balance sheet Labor costs etc
Union at regional level Survey of average working
family’s expenditure for decent living
Inflation Labour market and
economic situation of the locality
Enterprise union Ask its members how
much they need and want! Fair sharing of profits as
workers are main contributors to the profit
Productivity
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Unions do not need to internalize all factors which are main concerns of other parties in the beginning of the negotiation process.
In any case, other parties will bring those factors in the consultation and negotiation, and therefore final outcome will be produced based upon consideration of all factors.
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Case of Korea and Japan Before annual wage
negotiation, nation centres of trade unions announce its demand.
Their demands are formulated in the form of standard living costs for standard workers family, through a union survey.
While also considering GDP and productivity growth, they place importance on the concept of living wages for standard working family.
Employers’ organizations (Korean Employers’ Federation and Japan Business Federation) formulate their response based upon GDP growth, competitiveness, profitability of industries.
The proposals by both unions and collective employers at national level set the parameter for negotiators at lower level.
Lower level negotiators will consider the guideline set by higher level social partners, but not necessarily bound by them.
30
Other models Singapore: National
Wage Council Wage guidelines
From a non-binding recommendation on wage increase rate until mi 1980s
To a recommendation on flexible wage model
Ireland: wage negotiation in a broader economic policy
From decentralized enterprise bargaining on wage
To centralized social dialogue on income policies (tax, income, training, wages and HR innovation)
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From simple living wage concept to combination of different factors
As a staring point, the concept of living wage is important for trade unions
Composition of wages: Invariable and variable components of wages
Or basic wages and other benefits What to be negotiated at enterprise, sectoral/regional and
national level? Direct wage and social wage components
What to be negotiated at enterprise, sectoral/regional and national level?
As unions get mature and get involved in various policy formulation, other factors come into play more and more important role
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Wage negotiation in a broader IR context Wage negotiation
At enterprise level At higher levels
(sectoral and/or district)
Minimum wage
Wage guidelines at municipal level
Tripartite consultation system
What are ideal relations between different IR processes regarding wage determination?
What are the policies and approaches of ACFTU?
What are respective roles of each process?
What are the implications of these processes for harmonious society?
33
Minimum wage : Policy Goals
Ideally, MW instrument designed to protect the most at-risk workers as a social protection measure.
Social purpose of MW: to prevent labour exploitation and avoid poverty; i.e., the minimum wage should provide sufficient purchasing power to enable a worker to have a basic standard of living.
However, no single formula for MW policy
Closely related with other factors such as collective bargaining, income policy and social protection measures.
34
Labor shortage and its impact on minimum wage adjustments in major cities
Locality 2004 (yuan)
2003 (yuan)
increase rate
北京 545 495 10.10%
上海 635 570 11.40%
廣州 廣東省
684 510 34.12%
成都 四川省
450 340 32.35%
This suggests that wage negotiation does not function properly
This indicates that local MW is close to actual wages for unskilled workers.
Rigidity Low wage- low
productivity trap MW is not ideal tool for
actual wage determination, economically and socially…
35
Wage negotiation and MW process What is the policy of
municipal trade unions regarding the relations between MW and wage negotiation?
Ratio of MW to average wage
Idea of living wages for standard workers’ family
How do municipal trade unions participate in MW determination process?
What is – should be - the role of municipal wage guideline in the context of local MW and enterprise bargaining?
36
Consultation with and participation of social partners 2 Government fixes MW
No obligation to consult social partners: Lao
Following direct consultation with W&E: China, NZ, Czech, Russia
Following advice or recommendation of specialized body: Cambodia, Thailand, Japan, Ireland, UK etc
Specialized body sets MW Australia, Korea,
Turkey, Poland etc Collective bargaining
and other procedures Austria, Germany,
Greece, Belgium etc
37
Minimum Wage : Criteria for adjustment
According to ILO survey, most frequently cited criteria for MW fixing are
Inflation/cost of living General economic
condition Wage levels Workers’ need Productivity Employment rate
Different ways of applying the criteria
In some countries, strict Inflation automatically
linked MW adjustment in some countries
In others, loose Consideration of
general economic condition leaves plenty of scope for interpretation
38
Questions: Municipal unions’ participation in MW determination and municipal wage guideline
You are the leaders of municipal union federation. Your city has recently experienced labour shortage and workers are not happy with current wage levels.
How do you see respective roles of enterprise wage negotiation, municipal wage guideline and MW?
What would you do regarding MW determination and formulation of municipal wage guideline?