Topic: BusinessDecision Making

Last updated: February 3, 2019

Comparative Labor Relations Essay
For the most part, the general public does not wonder what the differences are between our labor relations process comparative to the methods and processes of the European Union (EU) countries (Germany, France, Sweden, Ireland, and United Kingdom). It is interesting to compare and contrast the similarities and/or differences and see why they utilize these processes and why the United States does not. In the following paragraphs, I will go into further detail about similarities and differences between the United States and EU countries’ labor relations processes. In addition, I will also elaborate on a good model of labor relations process compared to a bad model and how I see that this impacts the goals of the labor relations process.
According to the text, “Comparative labor relations is the study of labor relations systems in different countries” (Budd page 427). One important reason for analyzing this system is because it provides a foundation for thinking broadly about the issues of balancing efficiency, equity, and voice and for attaining a stronger understanding of the key issues in labor relations. There are similarities and differences between the EU countries and the United States. There are a variety of similarities and differences within the EU countries which include Germany, France, Sweden, Ireland and the UK.

Germany’s labor relations utilize a system of codetermination with sector bargaining. There is one leading union federation called the Deutscher Gewerkschaftsbund (DGB, German Trade Union Confederation) that takes over about 80 percent of German union membership. They have eight associated unions, each which represents a specific industry. Each industry or “sector” in Germany has a main employer association/union, which participates in sector bargaining. Sector bargaining is defined as “industrywide bargaining that produces a contract for the entire sector” (Budd, pg. 438). The differences between labor relations practices in Germany and the United States is based on the elements of codetermination, particularly works councils or participation on supervisory boards. Codetermination is defined by John Budd as, “an institutionalized employee voice in which employees are entitled to participate in workplace decision making” (pg. 438). In the U.S., workers can determine whether or not they would like to be represented by a union and employers can take measures to avoid union organization as we have learned this semester. In Germany, “nationally or regionally negotiated labor agreements” apply to virtually all of the companies in an industry. A works council is defined as “workplace-level committee of employees elected to represent all of the workers (except senior executives)—skilled and unskilled blue-and-white-collar, union members and nonmembers—in dealings with management” (Budd, pg. 438). Works councils exist in environments where collective bargaining will occur. In addition, unless works councils were labeled as a “bona fide collective bargaining agent” and recognized by most of the employees voting in the representation election, this would most likely violate U.S. labor law. In Germany, about 40 percent of employees belong to a union, while in the U.S. it sits at roughly 10.7 percent belonging to a union (in 2017). Another difference between Germany and the U.S. is that in Germany, almost all of the workers, regardless of membership status, are covered by basic wage, salary, and benefits agreements which are negotiated by unions. In the U.S., the local union which employees have elected to represent them essentially is like the works council role in Germany. Additionally, some local issues that have been taken care of by works councils are similar to ones found in the U.S. Lastly, worker participation on supervisory boards in the United States are rare, compared to Germany where it is welcomed. U.S. management does not allow, except under special circumstances, representation of labor officials on boards of directors, which is essentially the concept of codetermination. Codetermination is the most integrated form of worker participation known in any country. It can be argued that worker participation in the management process, or the use of works councils, may be the solution for the U.S. to obtain the kind of production flexibility required by management.
France, on the other hand, has politically oriented unions with weak collective bargaining power and low union density. Additionally, they have high contract coverage by industry-level agreements, and many methods for workplace representation (Budd, pg. 435). France seems to take on ideological perspectives when it comes to unionization with Communist Party precedence. In addition, communist and socialist unions present in France feel that a collective bargaining agreement would “limit worker freedom and legitimize capitalism” (Budd, pg. 437). France utilizes ideological unionism, which 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”) (Budd, pg. 437). However, in the 1980s, the government changed the labor relations process, and now bargaining occurs on three levels: multi-industry (minimum standards for flexibility and working time), industry (pay), and company (specific pay and working conditions) (Budd, pg. 437). Unlike the U.S. where employees get to elect a union to represent them in bargaining with their employer, the French do not utilize this option. Instead, company-level bargaining occurs whether or not employees choose a union to represent them. This way, an employer negotiates with groups of individuals from many different unions. Like Germany, industry agreements are used for all companies within the same industry. This would account for the low union density, but high collective bargaining agreements (Budd, pg. 437). Much like Germany, France also seems to utilize codetermination where employees are delegated to handle complaints, make sure that the labor laws are enforced, and obtain information and participate in company decision-making (Budd, pg. 437). Similar to the U.S., once a company has been unionized, they can influence company decisions.
Sweden offers a centralized collective bargaining structure. There is “A high contract coverage rate and a dual representation structure with centralized, industrywide collective bargaining and strong workplace representation” (Budd, pg. 442). Sweden’s collective bargaining structure relies on unions for workplace representation, which is much like the U.S. structure. However, the union density in Sweden is around 80 percent, which is extremely high compared to the U.S. The goal of the Swedish labor process is to promote a “solidaristic work policy” where unions help to change work to promote equality in terms of pay within companies, also promoting work teams, training, development, and pay for skills and responsibilities. John Budd says that if the U.S. had a practice much like the Swedish labor process, then maybe employees might not be so resistant to change (Budd, pg. 442).
Ireland utilizes a social partnership and a voluntaristic labor relations process. Social partnership is defined as “a social partnership of labor, business, and the government that results in a series of peak-level agreements on social and economic issues” (Budd, pg. 433). Different from the U.S., labor groups and employer associations vie for influence by pressuring lawmakers. The use of social partnership creates a centralized bargaining structure. Each agreement set pay standards for the Irish economy and was usually done by one main union federation and employers’ association for the whole economy (Budd, pg. 435). Now, the government and community groups are also a part of the process. “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” (Budd, pg. 435). Unlike the U.S., the voice that this practice gives people is on a national level, not just in a particular company.
Great Britain utilizes the voluntarism concept for collective bargaining. Different from the U.S., where unions and organizations negotiate if majority of the workers are represented by a union, Great Britain’s bargaining attempt happens only if both sides have agreed to bargain. Interestingly enough, no legal presence is needed, as both the union and management use their “economic power, not legal rights” to bargain or tolerate a contract agreement (Budd, pg. 430). In Britain, management will only work with a union if they see that it will cost them much money if they refuse to participate (Budd, pg. 430). The contracts in Britain are not “legally enforceable”. In short, both sides will voluntarily agree as long as “the costs of following the contract are smaller than the costs of breaking it” (Budd, pg. 430). A current issue that is similar to one that the U.S. is facing, is Britain’s union density decline. Much like the U.S., changes present in workplace practices have become hard for unions to overcome (Budd, pg. 430). Since Britain utilizes a voluntaristic process without legal representation for bargaining, employers seem to have the upper hand. This is illegal in the U.S. due to limits on company-dominated unions and responsibility to negotiate over wages and workplace conditions. The downside to voluntarism is that as long as both sides agree, (even though employers mainly have more power), it is considered collective bargaining (Budd, pg. 433). In Britain, since unemployment is higher and they utilize the process of voluntarism, management has more of an advantage and efficiency-enhancing policies control equity and voice concerns.
What the EU countries all to seem to utilize is the concept of national level or industry-wide bargaining between labor and management. Additionally, some countries utilize a centralized industry-wide bargaining system. The differences between the above mentioned countries and the U.S. is not one of these countries has the multifaceted and highly enforceable collective bargaining processes and agreements that the U.S. does. Different from the U.S., the EU countries use more of a social movement union process, where worker benefits are gained from social and political activism along with bargaining with employers, and unions that are “closely aligned with left-wing political parties” (Budd, pg. 450). The reason why understanding different approaches and processes of different countries are important is to be able to understand how other countries utilize efficiency, equity, and voice. By understanding their interpretations of this concept, it can help the U.S. improve laws and practices.
I believe that a good model of labor relations that we have studied is the solidaristic work policy in Sweden. The country aims to achieve fair wages for work of equal value, and to balance the wage structure. This utilizes the concept that excessive wage differences should not exist as it tends to cause problems and a sense of unfairness in the workplace. Although the U.S. aims to achieve this outcome as well, it can be argued that wage differentials still exist between employees, which is what the main purpose of unions is to resolve. In addition, this policy also utilizes the implementation of work teams and developmental programs, which is essential for higher productivity and happier employees. This is much like the U.S. labor relations programs, as they too use developmental and training programs to help employees reach their highest potential and raise performance standards for the company.
A bad model of the labor relations process is the voluntarism concept of Great Britain. This concept utilizes economic influence instead of legal rights as a basis for bargaining. I feel that this gives employers an unfair advantage as in most cases, they have the upper hand. In addition, bargaining will only occur if both the union and management agree to it. This can also contribute to its union density declination. Since the contracts are not legally enforceable, the companies dominate the unions and even if bargaining occurs, the results will be more favorable for management.
In conclusion, the similarities and differences regarding the EU countries and the United States demonstrate different strategies and outcomes of their policies. Some may seem like a good idea, while others just seem unfair and corrupt. The point is that no policy demonstrated by the EU countries is as close and as respectable, in my opinion, as the ones that exist in the U.S. The U.S. gives individuals a fair chance to unionize with laws protecting them from employer actions. Other countries do not have specific processes/steps or the level of legal representation that the U.S. does. However, learning how other countries operate regarding labor relations is important. This can help us learn and adapt in new ways. Economic influences are a main factor when determining policies—this is the reason why each country utilizes the policies they do. What works for one country, may not work for another, and this illustrates each country’s uniqueness.

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