Labour-Management Relations

▪ 1995

Introduction

International Developments.

      For most of the industrialized market economies, the outlook brightened as 1994 progressed, and inflationary pressures proved manageable. Unemployment, however, was forecast to rise to 8.5% in the countries of the Organisation for Economic Co-operation and Development (OECD) by the end of the year. In June the OECD published the results of a two-year study of jobs, putting forward a number of recommendations that stressed the importance of technological know-how and of increasing the flexibility of working time, encouraging an entrepreneurial climate, making wages and labour costs more flexible, reforming restrictions on employment security, improving labour market policies and skills, and reforming unemployment benefit systems.

      In the closing stages of the Uruguay round of international trade negotiations, the U.S., with support from others, proposed confining the advantages of the General Agreement on Tariffs and Trade (GATT) to countries observing fair labour standards. The proposal was strongly opposed by less developed countries, which saw it as protectionism on the part of rich countries and as likely to hurt their trade and their efforts to build an industrial base. The proposal was not accepted for inclusion in GATT, but it was agreed that it could be discussed in the committee charged with setting up the World Trade Organization.

Europe.

      In the European Union, action on labour matters was relatively low-key in 1994. The most notable event was the finalization of the long-discussed directive concerning establishment of European-level works councils, procedures under which management would discuss the progress and prospects of the company with workers' representatives at least once a year. The directive was approved by 11 of the 12 member states, the U.K. exercising its right to opt out. The European Commission issued a white paper on labour in July. It argued that Europe needed a broadly based, innovative, and forward-looking social policy to meet the challenges ahead. Defeating unemployment was given pride of place, but the Commission also stressed the importance of improving productivity, a high rate of investment in new technology, and promoting a well-educated, highly motivated, and adaptable working population.

      In June the European Court of Justice issued two significant judgments against the U.K., one concerning a 1977 directive on the safeguarding of workers' rights in the transfer of a company and the other a 1975 directive on collective dismissals. In both cases the court found that U.K. law did not make adequate provision for workers' representatives to be consulted in reaching an agreement. Further, effective sanctions had not been provided against employers failing to inform and consult. In the 1977 case the U.K. had also wrongly excluded non-profit-making firms. In fact, the U.K. had anticipated nearly all the points covered by the rulings by amending its legislation. In September the court ruled on six British and Dutch cases concerning occupational pension plans. Notable aspects of the rulings dealt with the calculation of women's pensions, considering their longer life expectancy, and the right of part-time workers to be covered by an employer's plan.

      The most prominent event in British labour-management relations during the year concerned railway signal personnel. Under the changes in the structure of railway operation, rail tracks, railway stations, and signaling became the responsibility of Railtrack, a state-owned company, while other enterprises were designated to run the trains. The Rail, Maritime and Transport Union lodged a claim, largely based on productivity improvements in recent years, for an 11% pay increase. In negotiations in early June the union understood the company to have proposed a 5.7% increase, but when the formal offer was made, it was for 2.5%. The government allegedly had intervened to stop the 5.7% offer. A strike ballot showed strong support for action, and a series of one- and two-day strikes were called, continuing into September. The strikes caused considerable disruption, though as time went by, the company made it possible for an appreciable proportion of normal services to operate on strike days. Agreement was reached at the end of September on a deal estimated to cost 3.7%, with a basic pay increase of 2.5%.

      British union membership continued its 15-year decline, though polls suggested that unions were gaining favour in public opinion. The Trades Union Congress, under the leadership of John Monks, its new general secretary, embarked on its most radical internal reorganization in more than 70 years, replacing its network of committees with a tighter structure, reducing the frequency of its general meetings, and stepping up its campaigning and service activities.

      In February a new, three-year central agreement was arrived at in Ireland, covering pay and social and economic issues for both the public and the private sector. The comprehensive agreement provided staged wage increases, over the three years, of 8% in the private and parallel increases in the public sector.

      When the year started, German economic prospects appeared gloomy as the country coped not only with recession but also with the continuing high cost of helping the former communist sector. Unemployment, at around four million, was at a long-term high. Under these circumstances collective bargaining produced only moderate settlements, with wage increases that resulted in small reductions in real earnings and with provisions for increasing flexibility in working time. Thus, in the chemical industry an agreement reached in January provided a 2% pay rise, with newly hired workers being paid lower rates than those for existing workers. There could, by agreement between the employer and the works council, be a variation in working time, with a minimum of 35 hours a week and a maximum of 40 hours without payment of overtime, though the average of 37.5 hours had to apply over the course of a year. In the engineering industry an agreement gave a pay rise of 2% and restricted holiday pay and Christmas bonuses and also allowed shorter and more flexible working hours. A comprehensive law on working time came into force on July 1. While it retained restrictions on work on Sundays and public holidays for most employees, it also contained a number of provisions to increase flexibility. Legal vacation time was increased to 24 days a year (though in practice a majority of employees already enjoyed six weeks of vacation).

      The French government launched a substantial and wide-ranging program aimed at encouraging employment. One of its provisions, allowing companies to take on certain workers under the age of 26 at 80% of the national minimum wage for a limited period, produced not only strong opposition from trade unions but also massive street demonstrations. In the end Prime Minister Édouard Balladur agreed to suspend the proposal (it was later withdrawn). In a postscript to the Air France strike of 1993, the new chairman of the company produced a restructuring plan, including job cuts, a wage freeze, and longer working hours. The plan was rejected by a majority of the unions, but when the chairman put it directly to the 40,000 workers concerned, 81% voted to accept it.

      Pensions were the big issue in Italian industrial relations in 1994. It was apparent that the costs of the extravagant and much-abused national pension system (under which, for example, women in the public sector could retire on 80% of pay after 15 years of service) could no longer be afforded. The government's efforts to reduce the cost of pensions were strongly resisted by trade unions, and a four-hour stoppage on October 14 was supported by an estimated three million people. A general strike called for December 2 was canceled when the government made sufficient concessions to placate the unions. Among numerous disputes during the year, a proposal by Fiat, Italy's largest private employer, to dismiss up to 12,000 workers led to a series of strikes and demonstrations until agreement was reached on a restructuring plan with financial support from the government.

      The Spanish government continued its efforts to reform the labour market against stiff union opposition marked by a general strike on January 27. The government's program included removing impediments to part-time employment, allowing unqualified people between the ages of 18 and 25 to work for a limited time at between 70% and 80% of the national minimum wage, facilitating layoffs for organizational and production or technical reasons, and replacing statutory ordinances made under the Franco dictatorship with collective agreements. In Portugal in June the prime minister mooted the idea of a social contract that would run to the end of the century, and discussions were started on the proposal.

      A lengthy period of discussion between government, unions, and employers having failed to reach agreement in 1993, a Belgian royal decree authorized implementation of the government's plan for employment, competitiveness, and social security. With a few exceptions, until Jan. 23, 1995, there would be no pay increases, individual or collective, beyond those due under a system based on a price index excluding gasoline, cigarettes, and alcohol, with increases being triggered when the index reached a threshold figure. An employer breaching the rules would be liable to substantial penalties. On November 21 employers and unions reached agreement on proposals for a central agreement for 1995-96.

The United States.

      The Dunlop Commission on the Future of Worker-Management Relations issued a preliminary fact-finding report in June. The report concluded that a number of aspects of U.S. labour law were inadequate for present conditions. It also laid considerable stress on the value of employee participation. A bill to outlaw the permanent replacement of strikers—strongly backed by unions—was thrown out by the U.S. Senate in July when its backers failed to muster enough support to overcome a Republican filibuster.

      The strike that attracted the most attention in the U.S. during the year was in baseball's major leagues. The players struck after the games of August 11, and the World Series was canceled. (See Sidebar (Baseball: Baseball Strikes Out ).)

Asia and Africa.

      In Japan there were signs in 1994 of recovery from the prolonged recession. Even so, unemployment was still high by Japanese standards (though it did not quite reach 3%), and many firms reduced their labour force. Japan's economic realities were reflected in the fact that wage increases averaged little more than 3%.

      Not the least of the many problems facing the new South African government was how to satisfy the expectations of black South Africans for rapid improvement in living standards while retaining, and if possible increasing, competitiveness. In addition, the government placed high importance on reassuring the business community and offering investors a stable business environment and low inflation. Although the year passed without major labour problems, strike activity was high. (R.O. CLARKE)

      See also Business and Industry (Business and Industry Review ); World Economy (Economic Affairs ).

      This updates the articles labour economics; organized labour: trade unionism (organized labour).

▪ 1994

Introduction

International.

      In 1993 recession was a dominant force in nearly all of the industrialized market economies, even in Japan and Germany, where it was necessary to go back a long way to find such economic malaise. Unemployment was high in most countries—averaging over 10% in the countries of the European Community (EC).

      The main concerns of governments in regard to labour were how to counter the high unemployment, how to ensure that increases in labour costs did not damage national competitiveness or stimulate inflation, and how to restrain the high costs of social security. Governments in Belgium, Greece, Ireland, Italy, Portugal, and Spain engaged in talks with labour unions and employers, with a view toward resolving these problems.

      Created on the basis of two existing international teachers organizations, a new international trade secretariat, Education International, with charter members including 210 organizations from 114 countries and representing about 18 million people in the education sector, was launched in Stockholm in January. It was expected to move to Brussels in 1994.

      In the EC, progress was made on two contentious proposals, the directives on working time and the European works council. The directive on working time was approved by the European Parliament after a second reading on November 23. Among other things, it prescribed, in general terms, rest periods, a normal maximum working week of 48 hours, and four weeks of paid vacation each year. Night workers were limited to an average of eight hours per shift. In regard to the second proposal, the United Kingdom continued its opposition to the works council directive, but in November the other 11 ministers decided to move forward with it under the procedure laid out in the Maastricht Treaty, whereby a proposal could be approved by 11 governments; it would then be operative throughout the Community except in the U.K.

      An EC directive of 1977 guaranteeing employment rights for workers affected by mergers and acquisitions had repercussions in Britain during the year. As put into British law by the Transfer of Undertakings (Protection of Employment) Regulations, 1981, it was assumed that the directive applied to the private sector. However, recent judgments by the European Court of Justice suggested that it could also apply to the public sector. The matter was important for Britain because of the ongoing program for the privatization of many public services—it being assumed that in many cases private contractors would be inhibited from taking over services if they had to continue to employ the existing workforce and observe the wages and working conditions provided by the public employer. The British government's response was to insert a clause in the Trade Union Reform and Employment Rights Bill, enacted in July, bringing the U.K. in line with the European Court's decisions.

      In January the U.S.-owned domestic appliance group Hoover, faced with a need to close either its factory in Scotland or one in the Dijon region of France, chose to transfer the production of the French plant to Scotland after workers there had agreed to a wage freeze and a ban on strikes . The French workers and their government reacted angrily, arguing that what was involved was a British attempt to compete on low labour costs and unfair government aid. At the same time, however, in an unusual move, the Swiss chocolate manufacturer Nestlé announced that it planned to transfer part of its operations from Scotland to France.

Britain.

      The Trade Union Reform and Employment Rights Act was enacted in July. It covered a wide variety of subjects, of which some of the most important concerned an individual's right to join the union of his or her choice, specific authorization to be required for deduction from paychecks of union dues, written notice to be required seven days before official industrial action was taken, a "citizen's right" to restrain unlawfully organized strikes, and the abolition of the remaining wages councils (bodies dating back to 1909 that set legally enforceable minimum hourly rates of pay in particular industries). Unions representing local government, health service, and other public employees merged on July 1 to form Britain's biggest trade union, UNISON, with some 1.4 million members.

      The British trade union movement had long sought to advance its members' interests through support for the Labour Party, which it had founded and substantially financed and on the policies of which it exercised a powerful influence. In recent years, however, the party leadership had come to see this close link as an electoral disadvantage and sought to distance itself from the unions and to decrease union influence in its policy making. A proposed reform of party voting procedures met with strong opposition from powerful unions, but at the annual conference in September the leadership managed (by a small majority) to achieve its objective. Even so, it was estimated that the unions would still wield 70% of the total number of votes at the conference.

United States.

      In March the U.S. government announced the establishment of the Commission for the Future of Worker-Management Relations, to be chaired by former secretary of labour John Dunlop, emeritus professor, Harvard University. The commission would, among other things, examine the application of labour law and the history of labour-management cooperation.

      The North American Free Trade Agreement was signed by Pres. Bill Clinton on December 8. There had been considerable antagonism toward the pact among the unions, based on their fear that large numbers of jobs would be lost to low-wage Mexico. To assuage fears of unfair practices, in September the Clinton administration negotiated a side agreement with Canada and Mexico creating a commission composed of the labour ministers of all three countries, serviced by a secretariat. The unions were unimpressed.

      Potentially the most important event of the year for labour relations—the negotiations between the "big three" automobile manufacturers and the United Auto Workers—passed almost without incident. The union targeted Ford Motor Co. for the first negotiation, which yielded a three-year agreement that provided increased pay and retirement benefits and renewed layoff provisions. The company secured an arrangement providing for lower pay for beginning workers. Similar contracts were later reached with Chrysler Corp. and General Motors Corp.

      A series of six-year deals between the United Steelworkers and major steel producers included restricted pay increases, strengthened job-security measures, improvements in pensions, flexibility in manpower utilization, and—the surprising innovation—a union representative to serve on the company board and participate in joint meetings with management on corporate actions that affected employees.

Continental Europe.

      The economic situation in Germany was poor, particularly in the former East Germany, where unemployment was high and productivity still fell far short of levels in the western states. This led the engineering employers federations in the east to terminate the agreements made in 1991, under which basic wage parity with the west was to have been achieved in April 1994. A 26% installment toward parity was due on April 1, 1993, in place of which the employers offered 9%. The union, IG Metall, responded first with warning strikes and then with large-scale strikes in the east. The dispute was resolved on May 14, when the engineering employers of Saxony reached agreement with the union on the basis of delaying parity until July 1996 after staged interim increases. A "hardship" clause permitted individual enterprises to make a case to the employers federation and the union jointly that they could not meet the contractual obligation and should be allowed to pay less in order to save jobs. Essentially a decision would be made by a joint arbitration body. Parallel agreements were made in the other eastern states, and a similar settlement was made in the steel industry in the east. In September the engineering employers in the western states served formal notice of termination of their agreements with IG Metall on pay and holidays. The union reacted angrily and later put forward its own claim for pay raises of up to 6% and a moratorium on job cuts.

      The economic situation in France was also difficult throughout the year, and unions were much preoccupied with responding to job cuts, privatization plans, and the new government's objective of achieving greater employment flexibility. A significant dispute arose in October when unions struck against a plan by the state-owned airline, Air France, that envisioned the loss of 4,000 jobs by the end of 1994. The major Paris airports—and at times other airports—were almost paralyzed by striking ground staff blocking the runways and, for a time, the main access roads. After a difficult week the government, which at first had described the airline's plan as indispensable, announced that a new recovery plan would be negotiated.

      There was considerable legislative activity in Italy during the year. In January a decree law on pensions foreshadowed a gradual increase in retirement age from 60 to 65 for men and 55 to 60 for women. Favourable early-retirement arrangements for civil servants were to be phased out over 10 years. A second law placed public-sector employment under civil law and established an agency that would act as the bargaining agent for the state as employer.

      The three-year-long talks in Italy on a new collective bargaining structure and worker representation culminated in agreement on July 3. The agreement provided that each year the government, unions, and employers should devise a policy that would limit inflation and favour economic development and employment. In collective bargaining, national agreements concerning wages for each business sector would be made for two years and those for working conditions for four years.

      The Swedish economy provided a bleak background to industrial relations. Reporting on the situation in March, a government-appointed commission, headed by the eminent economist Assar Lindbeck, announced a 113-point program that stated unequivocally that wages should be decided at one level only—that of the business enterprise. The commission also suggested that professional lawyers would be more appropriate to serve on labour courts than the employer and union lay members who currently served with the legally qualified chairpersons. (R.O. CLARKE)

      See also World Economy (Economic Affairs ); Industrial Review .

      This updates the articles industrial and organizational relations (industrial relations); labour economics; organized labour: trade unionism (organized labour).

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