Paul MarginsonETUI Monthly Forum, May 2010

Big players, different rules MNCs as significant employers, with the capacity to move

production, jobs and workers across borders, have important implications for structure, agenda and outcomes of CB

disjuncture between international scope and structure of MNCs and nationally-based systems of CB

‘destructive’ effects pressure for changes in national CB systems, including levels, agenda,

and comparisons deployed heightened by threats to relocate, ‘beauty contests’ for new investment

‘constructive’ effects transnational institution-building, including ‘agreement-making’

capacity sources

EIRO CAR; major (2006) survey of MNCs’ UK operations; qualitative study of US and German automotive supply MNCs in CEE

‘Destructive’ effects ‘if the owners of a global firm do not find a fiscal or labour regime

congenial, they will threaten to go elsewhere’ (Crouch, 2004) MNCs the ‘visible hand’ of international processes of marketisation

that are undermining the social regulations of the post-war era (Hyman, 2001)

empirical evidence on whether FDI is driven by a ‘race to the bottom’ in terms of institutional arrangements is inconclusive: Cooke: bargaining centralisation negatively effects US FDI Traxler and Woitech: no unambiguous relationship between the two Traxler et al: no ‘feedback effects’ ie FDI inflows do not push changes in CB

structure if structure of CB is rather stable, the agenda and outcomes have been

substantially affected by MNCs: competitiveness agenda, focusing on costs and flexibilities coercive comparisons, relocation threats → concession bargaining incidence and extent of concession bargaining shaped by contingencies

‘Constructive’ effects MNCs political institutions concerned to negotiate order and

secure legitimacy at transnational as well as national level (Kristensen/Zeitlin)

multi-level governance analysis: externalities of MNCs’ cross-border decisions prompts transnational social regulation (Marginson/Sisson)

no conclusive evidence that transnational CB emerging International and European Framework Agreements do not

meet traditional definition of collective agreements implicit developments: transnational frameworks for national /

local collective bargaining, primarily employer-driven contingencies again important in shaping incidence and extent

MNCs’ economic and employment significance worldwide, economic and employment significance of MNCs

increased rapidly since 1990 (UNCTAD, 2008) tenfold increase in FDI three-fold increase in number of MNCs, and in MNC employment

MNCs’ significance amongst the EU economy even greater given: concentration of FDI flows within the OECD economies scale of intra-EU flows within the European ‘macro market’

major country differences within the EU in the significance of FDI, and hence its impact on CB

three main country clusters

Varying prominence of FDI across countries

Source: OECD, UNCTAD, EIRO national centres

Cluster Share of foreign–owned MNCs in employment

Small FDI-dependent countries (CZ, EE, HU, IE, LV)

Large (>40% in manufacturing, >20% in total private sector)

FDI-open countries of North-west and East EU(AT, BE, DK, FI, FR, LT, NL, NO, PL, RO, SE, SI, SK, UK)

Medium (20-30% in manufacturing, 10-20% in total private sector)

Home investment-reliant – Germany and Southern EU (DE, EL, ES, IT, MT, PT)

Small (<10%)

Collective bargaining coverage [1]MNCs collective bargaining coverage Countries

A) Higher than average BG, CZ, ES, IE, LT, MT, NL, SE, SK, UK

B) (Virtually) 100% for the whole economy

AT, BE, FR, IT, RO, SI

C) Same as average CY, DE, DK, EL, FI, HU, LU, NO, PL, PT

D) Lower than average EE, LV

Source: EIRO national centres

Collective bargaining coverage [2] relationship between pattern of coverage and prevailing, multi-

employer or single-employer, bargaining arrangements under multi-employer bargaining, coverage tends to be the

same as for the private sector under single-employer bargaining, coverage is more likely to

differ given scope for deviation → deviation is usually upwards

MNCs role under multi-employer bargaining generally affiliate to nationally-based employers’ organisations

leading role of home-based, export-oriented MNCs in some countries (Noridcs, DE, IT)

leading role of foreign-owned MNCs in some others (IE, CEEs) 2-tier bargaining arrangements widespread, in which MNC

pressure central to progressively enhancing scope for company-level negotiations differences in looseness / tightness of coupling between levels relatively tight articulation in Nordics, DE, Benelux, FR, IT MNC company negotiations relatively detached from sector

agreements in ES, PT and relevant CEEs MNCs stand outside sector agreements and conclude own

company agreements in a few countries (ES, NL)

Destabilising multi-employer bargaining? Two main possibilities … opting-out, by leaving the relevant employers’ association →

rather rare (role of legal extension mechanisms) agreement switching, to sector agreements which specify inferior

wages and conditions and permit greater flexibilities → more frequent usually linked to new business activities by established MNCs ICT and service activities of metalworking MNCs call centre and processing activities of financial service MNCs

Overall, adaptation by further extending ‘organised’ decentralisation, rather than radical disruption, seems the dominant trend

MNCs role under single-employer bargaining MNCs often act as pacesetters for local companies, negotiating

(or setting) higher wages and better conditions spread of ‘double-breasting’ practice, involving union recognition

at established sites but not at new ones (UK, IE) UK: of 60 unionised MNCs opening new sites, 40% recognised unions

at none and 40% at only some (3-year period) non-union forms of representation as likely as no representation →

impact of 2002 national consultation directive? ‘double-breasting’ practice can also arise on a cross-border basis,

although data less available example: FI-owned MNCs in the Baltic States

Overall, signs of destabilisation with MNCs introducing non-union forms of representation as union density declines

MNCs and the bargaining agenda MNCs prominent in developments in the bargaining agenda,

particularly at company level (either directly or through openings in sector agreements)

payments systems: introduction of new variable payments schemes, including individual appraisal-based, performance pay and profit-related bonus.

working time arrangements: introduction of greater scope for company-specific arrangements; longer reference periods / annualised arrangements; individual working time accounts

new issues, including agreements regulating use of temporary agency workers; teleworking; equality and diversity practice

innovative provisions in agreements on restructuring

Cross-border context which frames MNCs national / local operations, important in driving many of these developments.

Internationalisation of MNCs’ management organisation internationalisation of markets and production, including

European integration, prompted the deepening of international forms of management organisation and coordination

downgrading of the national subsidiary, the ‘traditional building block’ of MNCs’ management structure

spread of international forms of management organisation: international business divisions; regional management organisations; global business functions one of these forms the most important axis in internal management

structure in 94% of MNCs with operations in the UK (national subsidiary in only 6%)

internationalisation of the ‘second degree’, with dispersion of business headquarters, global functions across countries

International HR structures accompanied by a growing international architecture of

structures, services and control mechanisms within the HR/IR function (UK survey of MNCs) worldwide HR policy committee (53%) regular meetings / conferences of HR/IR managers from

different countries (63%) international, electronic HR information systems (52%) cross-border HR shared services (31%) international performance monitoring systems

90% of MNCs monitor 2+ HR/IR performance indicators 53% monitor five or more HR/IR indicators

growing capacity to develop common, transnational approaches to HR and IR, including collective bargaining

Transnational management approaches to collective bargaining Two possibilities, of which the first is the more widespread decentralised or ‘implicit’ through cross-border coordination of

local bargaining agenda and outcomes underpinned by cross-border benchmarking and ‘coercive comparisons

of performance’ ‘constructive’ side of the coin: identification of ‘best practices’ and

pressure to adopt them ‘destructive’ side of the coin: threats to ‘punish or reward’ sites in

terms of investment and future mandates according to cost and flexibility performance

exacerbated by threats to relocate when unit labour costs significantly differ between actual and potential production sites elsewhere (eastern enlargements)

centralised or ‘explicit’ through negotiation of transnational frameworks and agreements

Incidence and impact of coercive comparisons Incidence more extensive in manufacturing (especially metalworking) than

services, although emerging in financial services widespread amongst MNC operations in the EU-15, but now

increasingly routine in the Visegrad countries and SI MNC operations in Visegrad countries and SI no longer immune

from relocation threats Impact management’s deployment of ‘coercive comparisons’ results in

agreements introducing cost-saving and flexibility-enhancing measures, including concessions in working conditions, reductions in company-specific payments, more flexible WT arrangements

where a threat to relocate involved, concessions sometimes – but not always – accompanied by an employment guarantee

Overall: decisive shift in distribution of bargaining outcomes to employer advantage

International and European Framework Agreements IFAs (concluded with GUFs) and EFAs (concluded with EWCs and/or

EIFs, national trade unions) negotiated in a small, but growing number of MNCs

- 68 known IFAs and 73 known EFAs (Telljohan et al, 2009) - 12% of MNCs surveyed in UK claimed to be covered by a negotiated

international code further source of transnational agreements: SEs (eg Nordea) whilst extending joint regulation of aspects of MNCs’ employment

practice to transnational level, IFAs and EFAs do not address core collective bargaining issues arising in national / local MNC negotiations exception: EFAs which establish a European framework for the handling of

specific restructurings across several countries → ‘crossing a line in the sand’?

contingencies: IFAs largely EU-owned MNCs, although EFAs also with prominent US MNCs; a large size (and visible) MNC phenomenon

Overall: ‘constructive’ effects remain under-developed

Challenges for trade unions [1] How to deal with relocation threats and cross-border comparisons? contingencies: different responses suitable in different contexts

automotive supply MNCs in CEE: cross-border coordination only relevant in some cases

local action, where MNC operations ‘stand alone’ coordinated cross-border response where MNC operations highly integrated political mobilisation, political exchange as further alternatives /

complements counteract MNCs’ coercive comparisons with trade unions’ own cross-

border comparisons use of EWC networks to compile surveys of conditions in some

metalworking MNCs

Under SEB, how to build union membership and organisation to extend the reach of union recognition and therefore collective bargaining? role of public policy in supporting collective bargaining

Challenges for trade unions [2]Opening the door further towards transnational collective

bargaining problems with current practice: role of EWCs, mandates to

negotiate, implementation at national and local level securing a legally-framed regulatory basis for company-based

European agreements the critical factor differentiating (the few) cases where European

framework agreements address specific restructurings from other EFAs is the capacty of unions to coordinate negotiation and forms of action across borders

Conclusion ‘destructive’ effects of MNCs have different aspects under multi-

employer and single-employer bargaining arrangements MEB: at first sight, MNCs adapt to national systems, but also

drive significant adaptation greater scope for company negotiation under ‘organised

decentralisation’ the dominant trajectory opting-out of, and switching between, sector agreements rarer

SEB: growing practice of ‘double breasting’ interaction of ‘destructive’ and ‘constructive’ effects (and impact

on CB agenda) apparent in use of cross-border comparisons in local negotiations ‘destructive’ effects uppermost where threats to relocation involved

only a minority of IFAs/EFAs address cross-border restructuring

If CB is to remain a prominent form of labour market regulation, embryonic mechanisms of transational negotiation and coordination need strengthening