Multi-employer bargaining: good for the economy, good for the society
In Europe, the crisis stopped upward social convergence among our countries and the fragile economic recovery which followed was not able to revitalise it. The quality of employment, wage levels as well as working and living conditions still suffer from scars left by the crises and vary deeply in European countries while inequalities have widened in our society. The European Pillar of Social Rights and the Sustainable Development Goals are political initiatives aimed at reactivating such a process. They encourage concerted solutions and call for all relevant stakeholders to step up efforts, to take responsibility and to actively contribute to deliver such a vision of our societies.
In this framework, the promotion of collective bargaining is not only a matter of ensuring a more democratic society, it is also a matter of creating a more inclusive and sustainable economy, ensuring prosperity for all: citizens, working people and businesses. Indeed, there is no trade-off because collective bargaining can contribute to economic growth with high social standards. However, in many European countries social partners do not enjoy the right conditions to allow them to deliver on their responsibilities. For a wide range of different reasons, social partner organisations meet obstacles to the autonomous and robust deployment of industrial relations and, in particular, collective bargaining. This is why revamping upward social convergence in Europe will inevitably have to involve (re-)building and supporting stronger systems of multi-employer collective bargaining.
THE CASE FOR SECTOR-LEVEL BARGAINING
Multi-employer bargaining allows bargaining in a professional and cost-effective way. Instead of negotiations in each individual business, bargaining can be done by skilled and experienced sector-level teams of negotiators. Thus, realising tangible savings, especially for SMEs which in many most EU countries represent the large majority.
Multi-employer bargaining helps build social trust and more stable relations between business and labour. It does so by setting generally acceptable fair pay standards and by keeping potentially tense and conflictual discussions and negotiations out of the workplace. In some cases, sector agreements include a social peace obligation which commits parties to refrain from industrial action for the duration of the agreement itself. Experience from the euro crisis teaches us that attempts to lower conditions agreed at sector level via a company agreement or a unilateral decision can result in increased social strife at the company and expensive and time-consuming court cases.
Multi-employer bargaining contributes to address market failures and to tackle common challenges. Multi-employer agreements can result in pooling resources and share risks within the sector. This is particularly important, for instance, when it comes to provide funding and access for workers to training, and share the risk and cost of adjustment to structural change. These investments in human capital help the labour market to adapt to new challenges in a concerted and widely accepted fashion.
Multi-employer bargaining fights inequalities so contributing to better social and economic outcomes. There is overwhelming evidence that countries with stronger systems of collective bargaining are more resilient and that unequal economies perform badly. Unequal economies experience shorter and weaker growth spurts as they harm aggregate demand. High inequalities also undermine investment in human capital thus also harming longer growth performance. Prosperity, when not widely shared, fuels citizens’ resentment and erodes confidence in institutions, even in democracy. This creates instability and a detrimental environment for business.
Multi-employer bargaining is the best and most effective way to redistribute the wealth created in the economy. It helps countries tackle excessive inequality by preventing wage competition from driving down salaries within the sector. At the same time, sectoral wage scales also compress inequality between workers themselves as they imply ‘equal pay for equal work’. Moreover, experience shows that multi-employer systems with higher collective bargaining coverage better prevent in-work poverty and gender pay gap while promoting higher employment rates and participation of most vulnerable groups in the labour market. Finally, multi-employer bargaining prevents economies and business from getting caught in a ‘low wage trap’ by incentivising companies lagging behind in productivity to organise the workplace in a better and more productive way.
THE EVIDENCE FOR SECTOR-LEVEL BARGAINING
Multi-employer bargaining contributes to higher employment. The graph below shows how different collective bargaining systems compare to fully decentralised bargaining in terms of total employment and unemployment rates. The evidence is crystal clear: sector-level bargaining systems lead to superior outcomes while fully decentralised (company level) systems underperform.
This is also true when looking at the most vulnerable groups of workers. Graph B shows that youth, women and low-skilled workers have much lower unemployment rates under sectoral bargaining compared to company-level bargaining.
Multi-employer collective bargaining tackles inequality. The difference between wages at the top of the distribution (ninth decile) and the bottom (first decile) and the middle (fifth decile) is more limited in centralised multi-employer bargaining systems.
The combined findings of above graphs show that collective bargaining, when undertaken at the multi-employer level, can address inequalities while at the same time improving employment performance.
 This leaflet was developed by the ETUC in cooperation with IndustriAll Europe. The content is based on the work of ITUC Chief Economist Ronald Janssen
 See, for instance. OECD (2015) In It Together. Why less inequality benefits all.
 Source : OECD 2018 Employment Outlook.
 Classification of collective bargaining systems by OECD:
- Predominantly centralised and weakly coordinated : Switzerland, France, Spain, Italy, Portugal, and Slovenia
- Predominantly centralised and coordinated: Belgium,Finland
- Organised decentralized and coordinated sector level bargaining: Nordics, Germany,Austria, Netherlands
- Largely decentralized: Japan, Greece, Slovakia, Australia, Luxembourg, Ireland
- Fully decentralized : Canada, Chile, Czech Republic, Estonia, Hungary, Korea, Latvia,Lithuania, Mexico, New Zealand,Poland, Turkey, UK, US.