Uncoordinated Decentralization In Collective Bargaining: Challenges And Effects

Uncoordinated decentralization in collective bargaining can allow companies to reach deals of their own with workers rather than being forced to comply with multi-employer industry-wide agreements negotiated by representative trade unions. What are the social effects and who stands to gain or lose most?

Under Emmanuel Macron’s recent labour market reforms SMEs, (small and medium-sized companies), employing fewer than 50 workers in France can negotiate deals directly with employees on specific working conditions (e.g. working hours, pay and overtime) without a union representative being present. After the multi-employer ‘exit’ strategy of Fiat in 2010-11, Italy’s Renzi government (Jobs Act 2014-15) introduced fiscal incentives (i.e. variable wage increases receive a lower taxation rate of just 10% up to a maximum of 2000 euros), which have fostered decentralized bargaining. Social partners are thereby encouraged to negotiate company-based agreements though the new legislation does not embrace the majority principle of the most representative unions as the ones entitled to negotiate at the decentralised (company) level. The result is to open the door in principle for negotiation with organisations of workers that are not necessarily signatory parties in the sectoral (national) negotiation (i.e. CCNL or Contratto Collettivo Nazionale di Lavoro) (see Leonardi, 2017).

We have recently witnessed in Italy the emergence of so-called ‘pirate agreements’ (‘contratti pirata’). These are agreements which are negotiated at company level with organizations of workers which are not affiliated to the most representative trade unions. This is the case of the textile sector in Italy, for example, where a worker (normally a woman) earns €4.68 per hour or almost the half of what she would have earned (€9.13 per hour) under the CCNL. This is reported by a recent study conducted by FEMCA-CGIL (Federazione Energia, Moda, Chimica e Affini – the Italian “Federation in Energy, Fashion, Chemistry and Similar”). This also points out that the “reshoring” of previously delocalized production units to Central Eastern European countries and North Africa in the sector, due to the political instability of these countries, is one of the main factors explaining the downward shift in pay and working conditions for the workers concerned.

Precariousness

Of course, we would need more sophisticated scientific tools to research the extent to which causality exists between the wave of ongoing uncoordinated decentralization in collective bargaining and the escalating spiral of low pay and working conditions across (and within) countries, sectors and workplaces in Europe. However, uncoordinated decentralization, particularly when combined with a lack of clear rules regarding who is/are the most representative trade unions that should negotiate agreements at company level, may reinforce the worsening of working conditions, increase inequality between (and within) companies by fissuring workplaces (see Weil, 2014), and thereby generate precariousness for workers and individuals alike.

Non-predatory competition conversely requires clear and stable rules which are set by representatives of both employers and trade unions that are signatories to industry-wide collective agreements. These rules should in the best circumstances upgrade or maintain – and not downgrade – rules and conditions established at multi-employer industry-wide bargaining.

According to the ILO Global Wage Report 2016/17, women make up 60 per cent of the lowest-paid decile of workers, and only 20 per cent of the top 1 per cent of earners in Europe. Moreover, lower-paid workers (women) are over-represented in the wholesale trade as well as in the hotel and restaurant, construction and textile (including garment, footwear and shoe) sectors.

If we focus on the textile sector, for example, the ILO also reports that initiatives have been taken in recent years to address the growing inequality between (and within) companies, particularly between buyers and their subcontractors. Interestingly enough, these initiatives promote ‘multi-employer’ industry-wide bargaining in the producing countries as the way to ensure that all parts of the supply chain are included in collective bargaining agreements. At the international level, major global brands have started joint initiatives with manufacturers and the most representative trade unions to create comprehensive agreements in an effort to stabilize markets for these companies in the face of ruinous competition and economic and social downturns. This involves companies searching for non-predatory ways to compete, which by all accounts may be deleterious not only for workers but also for business.

Finding ways to compete that do not revolve around price competition alone is pivotal to producing stability for companies and workers alike in all advanced industrial societies. The ability to do so depends on creating stable societal institutions such as social dialogue and bargaining structures between representative organizations of both employers and trade unions. In every advanced industrial society, national governments, companies and workers have to solve their collective problems by producing rules to help stabilize their interactions. Modern states produced social welfare systems, wealth and the rule of law and have worked to find solutions to the conflict between capital and labour. In so doing, they promoted competition, protected workers, and provided opportunities for economic growth.

Nowadays we witness the creation of markets where not only workers’ pay and working conditions are threatened but also companies face problems in avoiding ruinous direct competition and staying alive. In this regard, the above-mentioned ‘multi-employer’ bargaining initiatives along the value chain are relevant. When direct competition cannot be avoided, companies tend to build excess capacity, sell goods and services below cost, and eventually see themselves driven into bankruptcy. Therefore, institutions such as structures for social dialogue and collective bargaining supported by representative social actors could guarantee the sustainability of both companies and workers.