Chapter 4. Collective bargaining in a changing world of work1

The functions of collective bargaining

Collective bargaining and, more generally workers’ voice (the collective expressions of workers’ interests with no proper bargaining prerogatives), aim at ensuring adequate conditions of employment (protective function), a fair share of the benefits of training, technology and productive growth (inclusive function) and social peace (conflict management function).3 Collective bargaining is also a key tool of market control, i.e. reining wage competition between companies or, on the opposite, limiting the so-called “monopsony power” of firms which in some cases may profit from a lack of bargaining power of workers. While often considered mainly as a wage setting institution, collective bargaining also plays an important role for setting other conditions of employment such as job security, working-time regulation, quality of the working environment, provision and access to training, etc.

Collective bargaining entails both benefits and costs for employers, workers, and society as a whole. Collective bargaining and workers’ voice can make labour markets function more efficiently by correcting market failures (asymmetry of information and bargaining power between workers and employers, possibly reflecting monopsony and other labour market frictions) and reducing transactions costs involved in individual bargaining. For instance, it can ensure that workers’ requests for pay to increase with productivity are heard, prevent excessive turnover of staff, and limit the extent of costly procedures in case of grievances and complaints. Collective bargaining can also improve the quality of the employment relationship between workers and firms, leading to more efficient allocation of resources, greater motivation and ultimately productivity. Finally, unions and employer organisations can also provide important services to their members. At the same time, however, collective bargaining and workers’ voice, especially when representation is weak, can also introduce market distortions (“rent seeking behaviour”), for instance by strengthening the power of insiders on both workers’ and employers’ side and excluding (or not considering enough) the outsiders (e.g. less-skilled, temporary or young workers or young/small firms). Moreover, while worker voice may help reduce turnover costs, excessive power to unions may lead to the so-called hold-up problem especially in most innovative or skill-intensive sectors where workers could extract excessive rents from their employers by threatening to leave after an irreversible investment has been made (for instance after a substantial training). Or on the opposite, companies may have fewer incentives toinvest in innovation when unions are weak as they can increase profits by simply reducing wages.

Collective bargaining can have an impact on wage dispersion and income inequalities more in general (e.g. by affecting employment but also through its influence on management pay at firm level and the tax and benefit system at country level), unemployment levels and competitiveness as well as the way labour market responds to unexpected shocks. It can thus affect labour market performance along all the dimensions of the OECD Jobs Strategy (see Chapter 1) – in terms of both quantity and quality of outcomes, but also in terms of resilience, adaptability and inclusiveness of labour markets. Moreover, it can represent a useful tool for self-regulation between workers and employers and bring more stable labour relations and industrial peace. Finally, collective bargaining, and more in general social dialogue, systems can constitute an efficient tool to promote effective consultation and implementation of structural reforms. When collective bargaining is well organised and representative, it can help manage and reduce the extent of any trade-offs between different policy objectives. The overall effect of collective bargaining on overall economic performance largely depends on the specific features of the system of each country, how they interact with other key parameters of labour market institutions, such as employment protection or minimum wage legislation, but also on prevailing macroeconomic and labour market conditions and policies.

The building blocks of collective bargaining

Characterising collective bargaining systems according to the (predominant) level at which collective agreements are negotiated (firm level, sector/branch level and the national/cross-sectoral level) and the degree of co-ordination within and between social partners as the sole variables of interest is not sufficient to reflect the granularity of the different systems, especially among those where bargaining predominantly takes place at sectoral level. Figure 4.1 sketches the main building blocks of collective bargaining to be taken into account for a comprehensive analysis and assessment of different national systems which are described and discussed in details in the rest of the chapter:

Figure 4.1. The main building blocks of collective bargaining

• First, the representativeness of trade unions and employer organisations, as well as the share of workers covered by collective agreements, are key (but not the only ones) indicators of the strength of social partners and the scope of the bargaining systems. The rules and the spread of administrative extensions beyond the signatory parties are also examined as being critical devices for assessing more accurately the reach of collective agreements.

• Second, while the predominant level of bargaining (e.g. mainly firm level, sector/branch level and the national/cross-sectoral level) defines where parties negotiate, it does not fully capture the actual degree of centralisation or decentralisation which hinges also on the rules governing the hierarchy between the different levels and the possibility for firms to derogate or to opt-out in case of economic difficulties from higher level agreements or from their own agreement. In particular, systems based on sector level and national/cross-sectoral level bargaining can be centralised when they leave no or little room to modify the terms of agreements to lower level agreements; or they can be decentralised but in an organised way when firm-level agreements have a significant role in determining the terms of employment but they are subject to specific conditions set either by law or social partners themselves.

• Third, the presence and degree of different forms of co-ordination within and between social partners is also very important for capturing whether more decentralised systems produce totally independent and atomised negotiations or if they ensure some synchronisation of different bargaining units when setting their strategy and targets.

• Finally, the enforcement capacity and the quality of labour relations, in particular the level of trust between social partners, the degree of enforcement of the terms set in collective agreements and the ability of employer organisations and trade unions to control the behaviour of their constituency at lower levels can make the difference between formally similar systems.

Trade unions density

Trade (or labour) unions are voluntary organisations of workers which are present in all OECD and accession countries. Seventeen per cent of employees are members of a union on average across OECD countries. However, trade union density varies considerably across OECD and accession countries, going from 4.5% in Estonia, to about 65% in Sweden, Denmark and Finland and 92% in Iceland. Trade union density has been declining steadily in most OECD and accession countries over the last three decades (Figure 4.2). Only Iceland, Belgium and Spain4 have experienced a (very) small increase in trade union density since 1985 and Italy in the recent years. Technological and organisational changes, the decline of the manufacturing and public sectors, but also the increasing spread of flexible forms of contracts and policy reforms in several countries are among the main drivers behind this marked decline of trade union density in almost all OECD and accession countries (Ebbinghaus and Visser, 1999; Visser, 2003; Blanchflower and Bryson, 2009). In Central and Eastern European countries, trends have been quite dramatic, as reflected by the collapse of the union affiliation rate after the fall of central planning (stabilised at 10% over the recent years). In all other OECD countries trade union density has been declining, though at a significantly lower rate. Currently, the union membership rate is above 50% only in the countries where unemployment benefits are administered by union-affiliated institutions (sometimes called the “Ghent system”, as found in Denmark, Finland, Iceland, Sweden and partly Belgium5) and in Norway. However, even theGhent system has been increasingly challenged and eroded by the development of private insurance funds offering unemployment insurance without requiring union membership (Bockerman and Uusitalo, 2006; and Høgedahl and Kongshøj, 2017) leading to a decrease in trade union density.

Figure 4.2. Trends in union density

Percentage of employees,a 1985-2015

Note: OECD is the weighted average of the 35 OECD member countries.

← a. For Costa Rica, figures do not include solidarity associations and refer to total employment. In Costa Rica, the law permits the formation of solidarity associations (the so-called Solidaristas) and allows worker unions and solidarity associations to co-exist within an enterprise. While Solidaristas are forbidden to engage in collective bargaining, there are some indications that they have contributed to weaken the role of trade unions in representing workers (OECD, 2017a). For Turkey, official statistics on trade union density published by the Ministry of Labour and Social Security refer to the number of workers covered by the social security institution and set it at 11.21% in 2015.

Source: J. Visser, ICTWSS Database Version 5.1. Amsterdam: Amsterdam Institute for Advanced Labour Studies (AIAS), University of Amsterdam, September 2016 for Austria, Belgium, the Czech Republic, Denmark, France (completed by estimates from the DARES based on the Enquête permanente sur les conditions de vie des ménages [EPCV] for 2008 and 2010 and on the Statistiques sur les ressources et les conditions de vie [SRCV] for 2013), Germany, Greece, Israel, Italy, Latvia, Lithuania, Luxembourg, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Switzerland and Turkey; national administrative data for Chile, Costa Rica, Finland, Japan, Korea and New Zealand; and estimates based on national Labour Force Surveys for Australia, Canada, Estonia, Hungary, Iceland, Ireland, Mexico, the Netherlands, Sweden, the United Kingdom and the United States.

 https://doi.org/10.1787/88933477964

Trade union density varies considerably across workforce groups (Figure 4.3). On average across OECD countries, public administrations workers are those most likely to be unionised (Figure 4.3, Panel A) but only represent 13% of total union members (Figure 4.3, Panel B). Those working in the good-producing sector (mining, manufacturing, constructions and energy and electricity supply) and in social and personal services (including education and health) respectively represent 25% and 35% of total union members. There are however significant differences in terms of composition across countries: correcting for the various sectors’ weight in the economy, employees in the good-producing sector still represent a much higher proportion of union members in Germany and the Netherlands than in Portugal or the United Kingdom (see Annex 4.A1).

Only 7% of employees in small firms belong to a union on average across OECD countries, as union members tend to work in large and medium firms. Yet patterns differ across countries: employees in small firms represent a larger share of trade union members in Belgium and Sweden while unions in Japan have no affiliates at all in small firms. Women and men show little difference in terms of their likelihood to be union members when employed (Panel A) but since employment rates are higher for men than women, unions have on average a more masculine membership (Panel B). In 15 OECD countries women outnumber men among union members (see Annex 4.A1). Prime age workers constitute the core of trade union affiliates but as a share of the working population, older workers are those more likely to be union members. Youth only represent 7% of total union members in the OECD area, and are the age group least likely to unionise in all countries. Union members tend to be medium or high skilled (around 40% of total union members in each group). Finally, union members in all OECD have overwhelmingly a permanent contract, with only 9% of them having a temporary contract.

Figure 4.3. Trade union density by group, 2013

OECD weighted averages, 2013

Note: Trade union density by group presented in this figure has been adjusted for the overall trade union density shown in Figure 4.2 by using the share of each individual group in total union membership and total number of employees. For further details on definition, country covered and data sources, see Annex Figures 4.A1.1 to 4.A1.7.

Source: Annex Figure 4.A1.1 to Figure 4.A1.7.

 https://doi.org/10.1787/888933477972

Employer and business organisations

Employers, business and employer organisations are the other key actors of collective bargaining, but much less is known about their membership and representativeness across OECD and accession countries. Representativeness, in particular, is very difficult to assess: official and up-to-date statistics on the number of workers covered, as distinct from the number of affiliated firms, are very limited and partial and often based only on self-reported data. Further difficulty in providing a precise assessment arises also from the possibility for firms to belong to several employer associations. Using available information, Figure 4.4 shows the share of employees in the private sector working in firms affiliated to an employer organisation. On average, employer organisation density in the 26 OECD countries for which data is available is 51%. Like trade union density, employer organisation density varies considerably across OECD and accession countries: it is very low in Central and Eastern European countries, Korea and Turkey, but up to about 80% in the Netherlands, Sweden, Belgium and Luxembourg (and at 100% in Austria due to compulsory affiliation for all firms). In most OECD countries outside Europe, employer associations represent the interests of business (i.e. lobby and voice) but do not bargain collective agreements, with most, if not all bargaining taking place at the firm level.

Figure 4.4. Employer organisation density

a. 2000 for Austria, Finland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Slovenia and Sweden; 2002 for Belgium, the Czech Republic, Denmark, Estonia, Latvia, Portugal, the Slovak Republic, Spain and the United Kingdom.

b. 2005 for Turkey; 2008 in Greece, Hungary, Spain and the United Kingdom; 2009 for Korea; 2010 for Denmark; 2011 for Estonia, Germany, Ireland and Portugal; 2012 for Belgium, France, Italy, Lithuania and Luxembourg; 2013 for Iceland, Latvia, the Slovak Republic and Slovenia; 2014 for the Austria, the Czech Republic, Finland, the Netherlands and Sweden; and 2015 for the Netherlands.

c. Statistics refer to establishments of the private sector with ten or more employees in all economic sectors except agriculture, activities of households as employers and activities of extraterritorial organisations. Unweighted average of 24 OECD countries (not including Australia, Canada, Chile, Israel, Japan, Korea, Mexico, New Zealand, Norway, Switzerland and the United States).

d. All sectors reported in Panel B refer to the private sector. Good-producing sector refers to manufacturing (including mining and utilities) and construction; business services refers to commerce and hospitality, transport and communication and financial services and real estate; other services refers to remaining social and personal services excepted activities of households as employers and activities of extraterritorial organisations.

e. “Small firms” refers to firms with fewer than 50 employees; “Medium-sized firms” to firms with 50 to 249 employees; and “Large firms” to firms with 250 employees or more.

Source: Panel A: J. Visser, ICTWSS Database version 5.1. Amsterdam: Amsterdam Institute for Advanced Labour Studies (AIAS), University of Amsterdam. September 2016, administrative data provided by national authorities for the Czech Republic, Finland, the Netherlands, Norway and Sweden and OECD estimates based on the third Eurofound European Company Survey (ECS 2013) for Iceland. Panel B: OECD estimates based on the third Eurofound European Company Survey (ECS 2013).

 https://doi.org/10.1787/888933477984

Differences across OECD countries in employer organisation density mirror partly those in trade union density even if not perfectly (the correlation between trade union density and employer organisation density is 0.55; see Annex 4.A1): in Austria, Finland, Sweden or Belgium both trade union and employer organisations display high rates, while in Central and Eastern European countries, Korea or Turkey both memberships rates are low. However, based on the number of employees covered, Denmark combines one of the highest unions’ densities among OECD countries with an average employer organisation density; and France has a high employer organisation density together with one of the lowest trade union densities among OECD countries.

In most countries, employer organisations tend to represent, in terms of employees, more firms in the good-producing sector than in the service sector. In most OECD countries, they generally are also more representative of medium and large firms.

Employer organisations density has been quite stable in the last decades. Most countries (at least for those for which time series are available) show a remarkable stability which sharply contrasts with the fall observed in trade union density. Brandl and Lehr (2016) argue that employer associations have been able to adapt their organisational structure as well as their activities to the changing needs of business (for instance by offering negotiation training, legal representation, industrial information, health and safety advice, wage surveys and marketing). The only exceptions are found in Slovenia (since 2006 membership is voluntary) and Portugal where employer organisations declined rapidly between 2000 and 2013. On the other hand, affiliates increased in Latvia and the Czech Republic.

Membership rates and membership composition are obviously not the (only) elements to gauge the influence and legitimacy of unions and employer organisations. In fact, these rates are closely interlinked with the labour relations system itself and often reflect long historical patterns. However, they are still good proxies to measure the ability of unions and employers to represent a broad base of workers and firms or, in contrast, merely a narrow segment of them.

Collective bargaining coverage

The share of employees covered by collective agreements (the collective bargaining coverage6) also declined significantly over the past 25 years. This indicator is key for comparing the relative strength of collective bargaining across countries since it captures the extent to which workers’ employment conditions are actually influenced by collective negotiation. On average across OECD countries, it shrunk by a fourth, from 45% in 1985 to 33% in 2013 (Figure 4.5). With the exception of some of the countries which passed major labour market reforms during the last five years, the recent economic crisis did not represent a particular turning point and coverage continued to decline.

As with trade union density, the decline was the strongest in Central and Eastern European countries where the collapse of the old regimes led to abrupt changes in the role of trade unions and collective bargaining. Steep decreases were also observed in Australia, New Zealand and the United Kingdom where deep reforms took place in the 1980s. Coverage has been relatively stable in most of continental European countries except for Germany and, more recently, Greece. The drop in collective bargaining coverage in Portugal over the last few years is the subject to methodological controversies which are discussed in Box 4.2.

All in all, collective bargaining coverage is high and stable only in countries where multi-employer agreements (mainly sectoral or national) are negotiated (even in several of the Southern European countries where trade union density is quite low). A second key element which matters for bargaining coverage is the relative strength, and willingness to negotiate, of employer organisations since they negotiate and sign collective agreements which in most countries then apply to all workers of their affiliated firms.7 Indeed in countries where employers’ density is high, coverage is also relatively broad and vice versa (with a correlation of 0.90; see Annex 4.A1). The relationship with trade union density is weaker (correlation of 0.64) and collective bargaining coverage is significantly higher than trade union density as in most countries agreements also apply to non-union members (see below the detailed discussion on erga omnes clauses and administrative extensions).

Figure 4.5. Trends in collective bargaining coverage rate

Percentage of employees with the right to bargain, 1985-2015

Note: OECD is the weighted average of the 35 OECD member countries.

Source: J. Visser, ICTWSS Database version 5.1. Amsterdam: Amsterdam Institute for Advanced Labour Studies (AIAS), University of Amsterdam. September 2016 completed with the OECD Policy Questionnaires and national administrative data for Costa Rica.

 https://doi.org/10.1787/888933477994

On average across OECD and accession countries, collective bargaining coverage is slightly higher in the good-producing sectors (manufacturing, constructions and energy and electricity supply) than in business services or other sectors (Figure 4.6). However, firm size matters: 26% of workers are covered by a collective agreement in small firms while 34% are covered in large firms. In small firms, the probability of being covered by a collective agreement is much lower in the absence of a multi-employer agreement at sectoral or national level as small firms are much less likely to negotiate and sign a firm-level agreement. Indeed, in Chile, Estonia or Turkey collective agreements cover a negligible share of small firms, contrary to what happens in Nordic or continental European countries.

Figure 4.6. Collective bargaining coverage rate by industry and firm size

Percentage of employees in the private sector, latest year availablea

Note: Statistics refer to the private sector only and to all firms for Australia and Canada excepted firms with less than five employees for Chile, firms with less than ten employees for Belgium, Greece, Italy, Slovenia and Sweden, and firms with less than 11 employees for other countries. OECD weighted average of 30 OECD countries (not including Israel, Japan, Korea, Mexico and New Zealand) for statistics by industry and 29 OECD countries (not including countries previously listed and the United States) for statistics by firm size.

← a. Statistics refer to 2013 for Belgium, Greece, Iceland, Ireland, Italy, Slovenia and Sweden; 2014 for Chile and all other European countries; 2015 for Canada and the United States; and 2016 for Australia.

b. Good-producing sector refers to manufacturing (including mining and utilities) and construction; business services refers to commerce and hospitality, transport and communication and financial services and real estate; other services refers to remaining social and personal services excepted activities of households as employers and activities of extraterritorial organisations.

c. “Small firms” refers to firms with fewer than 50 employees; “Medium-sized firms” to firms with 50 to 249 employees; and “Large firms” to firms with 250 employees or more.

Source: OECD calculations based on the Survey of Employee Earnings and Hours (EEH) for Australia, Labour Force Survey for Canada, administrative data for Chile, the Current Population Survey (CPS) for the United States, the third Eurofound European Company Survey (ECS 2013) for Belgium, Greece, Iceland, Ireland, Italy, Slovenia and Sweden, and the 2014 Structure of Earnings Survey (SES 2014) for all other European countries.

 https://doi.org/10.1787/888933478006

Extensions and erga omnes provisions

In many OECD countries, the share of workers covered by collective agreements is significantly higher than the share of workers who are member of a trade union. At the same time, collective bargaining coverage patterns have been much more stable than trade union membership. This difference is sometimes somewhat improperly referred to as “excess bargaining coverage” and used as a proxy for administrative extensions of collective agreements, while it is actually the result of both erga omnes (literally in Latin, “towards everybody”) clauses and administrative extensions.

In principle, an agreement between unions and an employer or employer organisations applies only to the signatory parties (“double affiliation principle”). Erga omnes clauses extend the terms set in a collective agreement to all workers, not only to the members of signatories unions. Erga omnes clauses are usually embedded in the law. However in most countries where agreements are legally binding only for members of the signatory trade unions (Table 4.1), employers often voluntarily provide the same or similar conditions for all employees within the company (sometimes because employers do not know who is a union member). Erga omnes clauses simplify the system (since the same terms apply to all workers), increase fairness, limit rivalries and help social peace and reduce transaction costs. However, erga omnes clauses may also represent a disincentive for workers to become members of a union (a typical free-rider problem).

Extensions (or administrative extensions) go one step further and cover workers in all firms within an industrial sector, including also firms that have not signed the agreement or are not affiliated to an employer organisation which signed the agreement. Extensions are usually an “act of public policy based on an explicit legislation mandating the government, a public agency or in some cases a court to apply the collective agreement beyond its signatories” (Visser, 2017). Extensions, or their functional equivalent,8 are present in two-thirds of OECD and accession countries. However, their specific functioning is extremely diverse: in some countries agreements are extended by default (e.g. in Iceland, Italy and Spain where agreements cover all firms), in some quasi automatic (e.g. in France), in others very rare (e.g. Japan or Central and Eastern European countries). In some countries they are subject to some criteria. In Germany, for instance, any extension decision has to pass a binding advice of the tripartite committee in the Labour Ministry (until 2015 there was also a threshold of 50% of workers covered by signing firms) and is de facto subject to a veto from employers. Table 4.2 summarises the frequency of extensions and the criteria used to grant them across OECD and accession countries. The figures in parenthesis refer to the additional coverage rate (as a percentage of employees) provided by extension measures.

Extensions are often issued out of fairness considerations to ensure the same treatment and standards to all workers in the same sector, in particular for workers for foreign firms or service providers, and migrant and posted workers (Hayter and Visser, 2017). By doing so, extensions can level the playing field across firms and ensure a fair competition.9 Extensions also reduce the transactions costs linked to lengthy and detailed negotiations over the terms of employment, especially for small firms that lack the resources (or do not have workers representation) to engage in firm-level bargaining in which case workers would never be covered by an agreement (Blanchard et al., 2014). In some cases, extensions are also issued in order to guarantee the stability of the collective bargaining system and the sustainability of some forms of “public goods” such as sectoral training and mobility schemes that are funded via collective agreements (De Ridder and Euwals, 2016; and Hayter and Visser, 2017). Finally, extensions also contribute to spread best practices in terms of personnel management, training, health and safety, technology usage, insurance, retirement packages, or performance-related incentives.

On the opposite, extensions can become a tool of unfair competition, for instance when extensions are used by “insider” firms to drive competitors out of the market (Haucap et al., 2001; Magruder, 2012; Martins, 2014). More in general, extensions may also have a negative impact when the terms set in the agreement do not account for the economic situation of a majority of firms in the sector: for instance, when the employer association is representative only of large and relatively more productive firms (and hence willing to pay higher wages), it may agree on wage floors and other components that are not sustainable for smaller and less productive firms. Finally, delayed extensions that require the payment of sizeable pay arrears can also severely affect the labour market during a period of liquidity constraints for firms (see Hijzen and Martins, 2016 for the case of Portugal).

In order to partly alleviate these concerns, extensions may be issued when the “collective agreement already covers a number of the employers and workers concerned which is, in the opinion of the competent authority, sufficiently representative”, as stated in the ILO Recommendation on collective agreements (No. 91). In several OECD countries administrative extensions are subject to threshold representativeness criteria (more details in the online annex at OECD, 2017c): collective agreements can only be extended if they are signed by employer organisations representing a minimal share of workers (most often the majority). A few countries also request that signing unions represent a majority of workers. However, while these criteria may be important, a more important concern is to ensure that signing employer organisations do not only represent a few selected firms. In most countries these thresholds are checked only at the moment of signing the agreement or issuing the extension. An exception is in Switzerland, where they must hold for the entire duration of the agreement; therefore if coverage drops below the 50% threshold, the extension must expire (Visser, 2017). Introducing representativeness criteria in countries where they do not exist is not straightforward. As the 2012 Portuguese reform shows, it is not easy to define criteria that are sufficiently strict to be meaningful, while easy to be fulfilled hence allowing an effective role for extensions. Hijzen et al. (2017) suggest opting for a gradual increase of the thresholds over time to ensure that non-representative extensions are eliminated and give time to employer associations to increase their membership levels, especially amongst smaller firms.

Having reliable and up-to-date statistics on trade unions’ and employer organisations’ membership is in all cases a necessary condition in order to have meaningful representativeness criteria. Portugal was able to swiftly introduce representativeness criteria thanks to the detailed information on firms’ membership of an employer organisation contained in the Quadros de Pessoal. However this is rather an exception across OECD and accession countries. Membership figures of both trade unions and employers, as well as other indicators such as, for instance, the votes obtained at social elections, can be used as an indicator of the relative bargaining power of social partners and influence government actions. Bargaining parties may thus have an incentive to inflate statistics in search of influence power, in particular since official, detailed and up-to-date statistics on unions, employer organisations and collective bargaining are not widespread. Therefore, enhancing the reliability and accessibility of such data would help inform and improve the policy debate on collective bargaining.

Representativeness criteria based on threshold may prove too rigid and unhelpful when the stability of the collective bargaining system or of common funds is at stake. Partly for these reasons, the threshold in Germany of 50% was dropped in 2015. Alternatively, a possibility to derogate from the representativeness criteria could be left open in certain circumstances. In Switzerland, for instance, when unions can prove to public authorities that in a specific sector it is particularly complicated to organise workers (for instance, because of a high presence of foreigners or because of security issues that restrain the possibility to reach and organise workers on their workplace) there is a possibility to derogate from the criterion requiring that signing unions represent a majority of workers.

OECD countries could also submit the extension of collective agreements to a test of public interest, by which extensions could be denied if the social and economic circumstances do not warrant extending the terms beyond the signatory parties or, on the opposite, issued to safeguard the public interest (for instance to stabilise the collective bargaining system or avoid free-riding in common funds such as for training). As argued in OECD (2017b), while the exact definition can vary, it is important that the criteria of public interest are announced well in advance by the government so that social partners can take them into account during the negotiation. Hijzen et al. (2017) report that in the Netherlands, political actors frequently call upon public interest concerns to limit extensions, but do not use it so much in practice, being reluctant to interfere in the bargaining process.10 In Norway, extensions are granted if it is proven that foreign workers work or could work under employment conditions that are worse than those set by national agreements for the trade or industry in question or what is common for the place and occupation. Public interest criteria could help introducing some degree of qualitative evaluation in the decision of granting or not an extension, above and beyond strictly threshold representativeness criteria, but may be more difficult to action and be more subject to partisan considerations. So far they are not used to any major extent in any of the OECD countries.

While representativeness criteria (and, if used, public interest clauses) aim to reflect as much as possible the situation of a wide set of firms, they cannot account for their full diversity. Few countries, therefore, also allow for exemptions from extensions. In the Netherlands clearly pre-defined criteria for exemptions are even a condition for extension. Moreover, firms can request an ad hoc exemption from the ministry if they can justify dispensation.11 Hijzen et al. (2017) report that, between 2007 and 2015, 191 requests of ad hoc exemptions were presented by Dutch firms, but only 58 were accepted. In Switzerland, although there are no formal rules for exemptions, in one case in 2012 firms with an annual turnover lower than 1.2 million Swiss francs (around EUR 1.2 million) were exempted (Visser, 2017). Another option to better reflect the heterogeneity of firms and avoid the “one-size-fit-all” limit of extensions would be to encourage a differentiation within agreements as is done in the Dutch metal industry where, in practice, two agreements are signed, and extended, one for firms with 35 and more employees and one for firms with less than 35 employees.

Finally, existing statistics on collective bargaining coverage may underestimate the real extent of coverage, with or without extensions, due to “orientation”, e.g. the possibility for firms to follow the terms set by the collective agreement of their reference sector while not being formally bound to it or to formally “opt-in”, to reduce transaction costs and reduce the risks of conflicts. Opt-in is even sometimes suggested as a better alternative than allowing firms to “opt-out” from collective agreements. This option would hold if the main and sole rationale for issuing extensions would be a reduction of transaction costs; however several other reasons motivate in practice the use of extensions (such as levelling the playing field) and, therefore, opting-in cannot be considered a perfect functional equivalent. Moreover, even in countries where opt-in is relatively common, such as Germany, it does not appear to be a brake to declining coverage of collective agreements.

Based on establishment data,12 Addison et al. (2016) show that half of the German establishments which are not covered by a sectoral agreement still orient themselves to it. This partly cushions the effects of a declining coverage of sector-level agreements: between 2000 and 2013, while coverage decreased by 10.7 percentage points, from 60% to 49.3% of establishments, orientation increased by 4.1 percentage points, from 16% of establishments to 20.1%. Orientation, however, is a weak policy tool as firms can withdraw from the terms set in the agreement at any time or just pick-and-choose the elements of the agreement they like (a formal opt-in is a stronger tool as firms cannot withdraw easily, but as a consequence it is also potentially less appealing for firms). Addison et al. (2016) find that wages in establishments not covered by sector-level agreements are indeed lower than those in covered firms. Orienting establishments pay better than non-orienting (and therefore fully uncovered) ones, but still not as much as covered establishments. Hence, orientation (or opt‐in) fills some of the gaps left by a decreasing coverage but far from completely.

Duration, ultra-activity and retroactivity

The duration of collective agreements, their validity beyond termination date (the so‐called “ultra-activity”) or before their entry into force in case of delays (the so-called “retroactivity”) also influence bargaining coverage as noted earlier. In some OECD countries, collective agreements do not expire until they get replaced by new ones. This ensures the continuity of the system and prevents voids when collective agreements expire. In countries where the law leaves large, or total, room to collective bargaining (for instance in countries with no statutory minimum wage), expiration without any replacement or ultra-activity effects would leave workers totally uncovered. Clearly, a long, and even indefinite, duration of agreements strengthens workers’ bargaining power by keeping them covered, even when employers are unwilling to negotiate new terms, and is ultimately contributing to increase stability and social peace. On the other hand, indefinite, or long, duration of agreements can make it more difficult for employers to renegotiate the terms of the agreement in times of crisis or deflation with potentially a negative effect on employment. Or they may lock workers in an outdated agreement (as pointed in the discussion on the estimation of the bargaining coverage in Portugal, Box 4.2), especially in times of higher inflation. Without co‐ordinated and swift actions, indefinite duration of collective agreements may thus ultimately reduce the resilience of the labour market to unexpected shocks.

Table 4.3 shows where the maximum duration is specified in the law, fixed by social partners or not specified. Collective agreements of indefinite duration are typically negotiated in France, but they are also common in Belgium (and before the economic crisis of 2008, agreements had an indefinite duration or long ultra-activity in Greece and Spain as well). Countries which set a maximum duration by law, typically limit it to 36 months. Table 4.3 also shows that most OECD countries do not specify a maximum duration for the ultra-activity of an expired agreement, but leave it for negotiation between social partners. Among OECD countries, Luxembourg, New Zealand, the Slovak Republic, Slovenia and Spain (unless agreed otherwise) limit ultra-activity to 12 months, Portugal to 18 months. Limits to the duration of agreements beyond their termination date also exist in Greece. In addition, collective agreements can be terminated unilaterally by one of the signatory parties, in some countries such as Chile, Estonia, Poland or Switzerland. In most other countries, the union or the employer can ask for the termination of an agreement within a predefined notice period and the agreement has to be renegotiated while the terms of the former agreement remain valid. Across OECD and accession countries, collective agreements are renewed on average every 12-24 months, or three years in Australia,13 Chile, and Sweden. Canada and Portugal are outstanding exceptions with an average duration exceeding 40 months (see online annex at OECD, 2017c).14

Finally, Table 4.3 also shows that collective agreements can be applied retrospectively, i.e. before their signature date, in order to ensure the continuation of rights and obligations in case of late renewal. Most OECD countries leave the decision on the payment of arrears to social partners. In some cases, retroactivity applies to all firms and workers, including those covered by administrative extensions (or their functional equivalent). For instance, this happens, to different extents, in Belgium, Italy and Spain. Including in the retroactivity of the agreement also firms subject to the extensions contributes to levelling the playing field (and this is consistent with the spirit of sector-level bargaining and the logic behind extensions as argued by Hijzen et al., 2017). Retroactivity is unlikely to have a significant economic effect in normal times as far as extensions can be anticipated. However, it may become a major burden for firms in case of liquidity constraints, by constraining them to pay sizeable arrears in a relatively short period of time. Hijzen and Martins (2016) suggest that the negative effects on employment of extensions in Portugal before the 2012 reform was probably driven by the burden posed by the payment of arrears by cash-strapped firms.

Centralised and decentralised bargaining systems

Levels of bargaining and favourability principle

The predominant level of bargaining as a proxy of the degree of centralisation occupied most of the attention of early studies on collective bargaining and macroeconomic performance. According to the corporatist view which dominated in the 1980s, performance would increase with centralisation, as centralised regimes would be able to internalise the potentially adverse effects of wage increases on unemployment and competitiveness (Cameron, 1984). The centralisation argument was however challenged by the “hump-shape” or “U-shape” thesis of Calmfors and Driffill (1988), which was very influential in the 1990s and early 2000s and argued that both centralisation and decentralisation could actually perform well in providing either aggregate flexibility or micro flexibility, since decentralisation would allow wages to adjust to productivity across firms. In any cases, sectoral bargaining was found to deliver the worst outcomes. Empirical studies have not provided much backing for this simplistic view, and showed that even seemingly similar bargaining structures work differently while the degree of co-ordination seems a more important variable in explaining different labour market outcomes across countries (OECD, 2004 and 2012). This suggests that a comprehensive discussion of centralised versus decentralised systems needs to go beyond the bargaining level as the sole variable of interest, and instead address the full complexity of bargaining structures.

Since the late 1980s, several reforms promoted the decentralisation of collective bargaining in many OECD countries, i.e. gave more space to negotiations at the level of the company, the establishment or the workplace. Decentralisation typically occurred in two ways: either directly through a replacement of national/sectoral agreements by enterprise agreements, or through a process of articulation/devolution within the national/sectoral agreements (Visser, 2016a and 2016b) allowing firm-level agreements to negotiate wage and working conditions within a general framework negotiated at higher level. Traxler (1995) first coined these configurations as respectively “disorganised decentralisation” and “organised decentralisation”.

Organised decentralisation (or controlled form of decentralised collective bargaining) takes two main forms in European countries. In a first case, national or sectoral agreements define the broad framework but leave large scope for bargaining at the firm/establishment level (notably in Scandinavian countries or the Netherlands): sectors can either set minimum or standard terms of employment which employers can complement or deviate from at firm level; or allow workers and employers to choose “à la carte” and trade-off, if they want, wages against working conditions. A second form of organised decentralisation is the one where national or sector agreements allow and define the conditions for deviations at lower levels via the so-called opening or opt-out clauses (Germany is probably the most notable example). However in other countries, formal regulatory changes in the bargaining structure have not resulted in a real shift of power15 to the firm level but rather in two-tier bargaining structures (Boeri, 2014): in this case higher level agreements still dominate, leaving to firm-level bargaining only the possibility to improve the standards set in national or sector level (“in melius”) agreements, firm-level agreements being subject to the “favourability principle” which states that a lower level agreement can only take precedence over a higher level agreement if it improves the terms of employment for workers.

Figure 4.7 provides a first suggestive overview of bargaining levels across OECD and accession countries. Sector or industry level bargaining continues to dominate in most continental Western European countries, while in Canada, Chile, Ireland, Japan, Korea, Mexico, Turkey, New Zealand, the United Kingdom, the United States, most Central and Eastern European countries, as well as the three OECD accession countries, bargaining predominantly takes place at firm or enterprise level. In Belgium, Finland and Norway, national unions and employer organisations engage predominantly in cross-sector bargaining at central level but, even if not always well reflected in the data, also at sector and company level. Finally, Israel, Luxembourg and the Slovak Republic are mixed cases with an almost equal combination of sector- and firm-level negotiations.16

While the predominant level of bargaining allows for a rapid characterisation of collective bargaining systems across OECD countries, it also risks conveying an overly simplistic picture. Figure 4.7 clearly shows that countries with the same predominant level of bargaining differ substantially in terms of their actual structure: even in countries where sectoral bargaining is the predominant level, firm level bargaining can have a very significant role and vice versa.

Figure 4.7. Detailed bargaining level

Percentage of employees covered by a collective agreementa in the private sectorb 2013 or latest year availablec

Note: Countries are ordered by ascending order of the proportion of employees covered by agreement taking place at the company level and company and higher level for each predominant level of collective bargaining. Collective agreements are only at company level in Chile, Colombia, Costa Rica, Japan, Korea, Mexico and the United States.

← a. Statistics based on the Structure of Earnings Survey (Norway and Switzerland) refer to the type of pay agreement covering at least 50% of the employees. This could be explained why data reported for Norway do not reflect the two-tiered bargaining system based on a hierarchical system (i.e. basic agreement covering several industries/sectors sector agreement and company level agreement). Statistics based on the third European Company Survey (all other European countries) refer to employees in firms with at least ten employees.

← b. Data for Australia include employees of the public sector and relates to the federal enterprise agreement system only.

← c. 2014 for Norway and Switzerland; June 2014 for Chile; 2015 for Australia; and 2015-16 for New Zealand.

d. Greece, Spain and Portugal undertook deep reforms of their collective bargaining systems around the year of observation of the data (see Box 4.3). The figures may therefore reflect a mix of the legacy of the previous system and the early effects of the new one.

e. Ten percent of private sector collective agreements in 2016 were multi-employer collective agreements. While such agreements are not sectoral or industry collectives, they do represent agreements that are with more than one company.

Source: OECD calculations based on the third Eurofound European Company Survey (ECS 2013) for all European countries except Norway and Switzerland, the Structure of Earnings Survey 2014 (SES 2014) for Norway and Switzerland, the Workplace Agreements Database for Australia, administrative data from the Labour Department of the Ministry of Labour for Chile and Bargaining Trends and Employment Law Update 2015/2016 for New Zealand and OECD questionnaires for Colombia, Costa Rica, Japan, Korea, Mexico and the United States.

 https://doi.org/10.1787/888933478011

A critical element which defines the hierarchy between bargaining levels and the difference among systems is the existence of the so-called “favourability principle” which states that lower-level agreements can only improve the standards set in higher level agreements.17 In most continental European countries (e.g. Austria, Belgium, Germany, Italy, etc.), the favourability principle has traditionally applied and in practice continues to be the rule (Table 4.4 and online annex at OECD, 2017c).18 In the Scandinavian countries, Hungary, Korea, Latvia and the Netherlands, it is left to the negotiating parties which are then free to set lower standards if necessary. The 2012 reform in Spain, and to a lesser extent with a series of reforms starting in the 1980s in France, particularly in 2004 and 2008, the favourability principle has been inverted, i.e. giving precedence to firm-level agreements (in France, this is limited to specific topics as working time). In Greece, the favourability principle was abolished in 2012 following the adjustment programme that reversed the hierarchy of agreements. In all other countries with single-level bargaining, it does not apply (e.g. Australia,19 Canada,20 Chile, Colombia, Costa Rica, Japan and the United States).

Table 4.4. Use of the favourability principle, 2015
Favourability principle always applies	Application of the favourability principle is entirely a matter for the bargainers	Favourability principle does not apply
Austria	Denmark	Greece
Belgium	Finland	Spain
Czech Republic	France*
Estonia	Hungary
Germany	Korea
Ireland	Latvia
Israel	Netherlands
Italy	Norway
Mexico	Portugal
Poland	Sweden
Slovak Republic
Slovenia
Switzerland
← * On wages, occupations, complementary social security and training funds the favourability principle always applies.
Favourability principle is not relevant for the following countries: Australia, Canada, Chile, Colombia, Costa Rica, Iceland, Japan, Lithuania, Luxembourg, New Zealand, Turkey, the United Kingdom and the United States.
Source: OECD Policy Questionnaires.

Co-ordination, enforceability and the quality of labour relations

Enforcement of collective agreements and the quality of labour relations

The ability of the employer organisations and trade unions to control the behaviour of their constituency at lower levels is key for ensuring that decisions taken at higher levels are actually reflected at lower levels and effectively implemented. Co-ordination and centralisation without compliance and enforcement are simply ineffective (Nickell and Layard, 1999; Traxler, 2003). The evidence discussed in Box 4.5 shows that, for countries where estimates are available, even compliance to the lowest levels of the negotiated wage floors is far from perfect.

Box 4.5. Compliance and enforcement of collective agreements

Primarily a legal issue, the actual level of enforcement of the standards set by collective agreements is critical to judge the effectiveness of the bargaining systems, notably in terms of fairness for workers and level-playing field for firms. However, available empirical evidence on compliance to labour market regulations is quite scarce and almost inexistent for collective bargaining. In fact, measuring the extent of non-compliance is very difficult to do in a practical way, given data limitations and measurement error. Garnero et al. (2015) provide a first estimate of non-compliance to wage floors fixed by collective agreements in seven European countries. They find that on average in 2007-09, the share of workers paid less than the negotiated wage floors was 13% in Italy, 8% in Germany, 4% in Austria and Belgium, and around 2% in Finland and Denmark.

More recent estimates on the incidence and depth of non-compliance to minimum wages fixed by collective agreements in Italy between 2008 and 2015 using a range of survey and administrative data are provided by Garnero (2017). He finds that non-compliance is indeed non-negligible: on average, using Labour Force Survey data, around 10% of workers in the country are paid one fifth less than the reference hourly wage floor (7% using data declared by employers themselves in the Structure of Earnings Survey which however excludes micro firms and the agriculture sector; and 2.7% using social security data which however are unlikely to report non-compliance as they are based on official company records and limited to monthly wages, therefore not considering extra unpaid time, and to full-time full-month employees only). Not surprisingly, all data sources show that non-compliance is particularly high in the south of Italy and in micro and small firms and it affects especially women and temporary workers. Moreover, all data sources show that wages in the bottom of the distribution in Italy appear to be largely unaffected by wage floor increases. The exact estimates vary according to the data used but all show that non-compliance significant and pervasive.

In addition to more effective labour inspections, Garnero (2017) suggests a series of relatively cost-free tools for improving compliance to negotiated wage floors, and to the terms of collective agreements more in general. In countries where the number of collective agreements is very high, a smaller number of collective agreements and minimum wages would make the system more transparent for both employers and workers. Where it is not the case, ensuring that agreements are signed by representative unions and employer organisations is key to avoid that complacent, poorly representative social partners or “yellow” unions (unions dominated or heavily influenced by an employer) undermine existing standards.

Making the text of collective agreements and a summary of its main elements publicly and easily available is an essential precondition to ensure that workers and employers are well informed about their rights and duties. In most countries it is difficult to get access to the text of collective agreements. Finally, awareness and “name and shame” campaigns have been proven quite effective in increasing compliance with the statutory minimum wage in Costa Rica (Gindling et al., 2014) and the United Kingdom (Benassi, 2011) and could be used as a relatively cost-effective tool also in the case of collective agreements.

There are no comparable indicators on the level of enforcement across countries. However, the capacity of enforcement of each system – sometimes also referred to as “governability” (see Traxler, 2003; and OECD, 2004)24 – is likely to be related to the functioning of collective bargaining, historical developments and overall trust among social partners. The “enforceability” of agreements can also be fostered by regulating industrial actions with “peace clauses” ruling that unions which have signed an agreement, and their members, cannot lawfully strike on issues regulated in the agreement). In some countries peace clauses are not or rarely used (for instance, Belgium and France, Mexico, Chile) on the grounds that a peace obligation would interfere with the right to strike. In other countries (e.g. Italy and Spain), peace clauses are common but given that the strike is an individual right, workers can always strike as the agreement is binding only for the collective signatory parties. Therefore, even a small group of workers is enough to limit the enforcement of the agreement undermining the governability of the system. In other countries (typically the Nordic countries) peace clauses are used and enforced thanks to the strong role of unions and relatively high level of trust between and in social partners.

Mediation and arbitration procedures can also play a significant role in smoothing conflicts and helping finding an agreement within the framework of collective bargaining and therefore contribute to strengthen the overall governability of the system. Mediation and arbitration procedures in sector-level and firm-level agreements are present in about half of OECD and accession countries and in around two-thirds of the cases a mediation procedure is compulsory. In other countries, for instance in Norway, mediation mechanisms exist outside the agreements. The Norwegian National Mediator mediates in conflicts of interests between employer and employee organisations, i.e. when the negotiations on renewal or establishment of an agreement have broken down. The purpose of mediation is to avoid work conflict which, in fact, cannot legally be started before mediation has been tried. The Labour Court of Norway is a special court for resolving labour disputes concerning the interpretation, validity and existence of collective agreements, cases of breach of collective agreements and the peace obligation and cases of claims for damages arising from such breaches and unlawful industrial action.

Table 4.7. The enforcement of collective agreements, 2015
		Sector-level agreements
		Nothing or not applicable	Peace clause	Mediation	Both
Firm-level agreements	Nothing	Canada (AB) Korea Poland Slovak Republic		Austria* Slovenia	Denmark* Latvia*
	Peace clause	Japan	Iceland Luxembourg Norway		Estonia Greece* Lithuania* Netherlands Switzerland
	Mediation	Australia Chile Colombia* United Kingdom		Czech Republic France Hungary Mexico Portugal
	Both	Canada (BC* , ON* and QC) Costa Rica New Zealand Turkey United States*		Ireland*	Australia Belgium* Finland Germany Israel* Italy* Spain* Sweden*
← * Compulsory mediation.
AB: Alberta; BC: British Columbia; ON: Ontario; QC: Québec.
Source: OECD Policy Questionnaires.

Figure 4.8 shows the trends in industrial disputes (strikes and lock-outs) across OECD and accession countries. Data should be interpreted however with caution as the number of strikes is likely to be affected by how they are regulated at national level and may thus not reflect the actual level of strife on the workplace. Furthermore, existing statistics are plagued by considerable differences in definitions and measurement which severely limit the comparability of the data (see note under Figure 4.8 and, for further details, see online annex at OECD, 2017c). Notwithstanding these caveats, Figure 4.8 shows that industrial disputes as well as the degree of variation across countries have gone down considerably since the 1990s (a notable exception is only Belgium where days lost because of strikes have steadily increased since the 1990s).

Figure 4.8. Trends in industrial disputes

Annual averages of work days lost per 1 000 salaried employees

Note: International comparability of data on strikes is affected by differences in definitions and measurement. Many countries exclude from their official records small work stoppages, and use different thresholds relating to the number of workers involved and/or the number of days lost. Strikes statistics in some countries may also exclude stoppages in particular industries, such as the public sector (as in Austria, Belgium, France, Germany, Latvia, Portugal and Turkey) or of a particular type, such as political and unauthorised strikes (as in Chile, Costa Rica, Estonia, Hungary, Israel, Korea, Latvia, Lithuania, Mexico, Turkey, the United Kingdom and the United States). Conversely, some countries may include workers indirectly involved (i.e. those who are unable to work because others at their workplace are on strike) as in Costa Rica, Denmark, Estonia, Finland, France, Hungary, Ireland, Lithuania, the Netherlands, New Zealand, Poland, the Slovak Republic, Switzerland, Turkey, the United Kingdom and the United States or work stoppages caused by the shortage of materials supplied by firms involved in strike. In general, forms of industrial action that do not involve full-work stoppages, such as “go-slows”, silent and other protests on the workplace are not included. For further details, see online annex at OECD (2017c).

a. The statistics concern strikes at establishments and enterprises covered by federal jurisdiction. As a result, strikes at enterprises under local jurisdiction are not included.

b. Average in 2008-14 is mainly driven by a strike in 2014 taking place in the Ministry of Education and involving 75 000 workers during 29 days. The annual average set at 33 days lost per 1 000 employees otherwise.

c. The following branches of economic activity or sectors are excluded: life or property saving, funeral and mortuary, production, refining and distribution of city water, electricity, natural gas and petroleum as well as petrochemical works, production of which starts from naphtha or natural gas; banking services; in workplaces operated directly by the Ministry of National Defence, General Command of Gendarmerie and Coast Guard Command, firefighting and urban public transportation services carried out by public institutions and in hospitals.

Source: ILOSTAT and national statistical offices for working days not worked and OECD Annual Labour Force Statistics Database and national statistical offices for total number of employees.

 https://doi.org/10.1787/888933478025

Since Blanchard and Philippon (2006) tried to establish a link between conflictual labour relations and high unemployment, there has been an increasing focus on the quality of labour relations and trust among social partners. Blanchard et al. (2014) argued that “trust appears to be just as important in bringing macro flexibility as the structure of collective bargaining” as the effectiveness of co-ordination, in particular, is likely to be closely linked to relatively peaceful and co-operative industrial relations. IMF (2016) shows that unemployment rose less following the global financial crisis in those countries where trust was high.

Panel A in Figure 4.9 shows the degree of co-operation in labour relations as assessed by senior business executives in a survey published by the World Economic Forum. Among OECD and accession countries, managers consider labour relations most co-operative in Switzerland and least co-operative in Italy. The degree of perceived co-operation appears to have been largely unaffected by the crisis: if anything, labour relations have slightly deteriorated in countries where they were already relatively poorer.

Figure 4.9. Quality of labour relations

a. Average weighted national score based on a scale from 1 (“generally confrontational”) to 7 (“generally co-operative”) to the following question: “In your country, how would you characterise labour-employer relations?”.

b. Unweighted average of the 35 OECD countries shown.

c. Percentage of persons (aged 15 or over) tending to trust trade unions for the European countries excepted Norway and Switzerland and percentage of persons (aged 15 or more) who are greatly or quit a lot confident in trade unions for all other countries, Norway and Switzerland.

d. Unweighted average of 31 OECD countries (not including Hungary, Iceland and Japan and also Canada, Norway and Switzerland for which data are not available in 2010).

Source: Panel A: The Global Competitiveness Index Historical Dataset © 2005-2014 World Economic Forum. Panel B: Eurobarometer for all European countries (not including Norway and Switzerland) and World Values Survey (www.worldvaluessurvey.org/WVSOnline.jsp) for all other countries.

 https://doi.org/10.1787/888933478032

The trust that citizens have in unions also varies considerably across countries (data on trust in employer organisations are not available) and is correlated with the national level of trust in institutions more generally. In 2010 on average, 40% of respondents across OECD and accession countries declare that they trust trade unions, but the share of people trusting unions varies from 65% in Finland and Denmark to 25% in the United States, Slovenia and Mexico. Between 2000 and 2010 trust in unions has increased markedly in Central and Eastern European countries where it was initially very low while it has decreased quite significantly in countries that have been deeply hit by the crisis, Greece, Ireland and Spain.

The quality of labour relations as assessed by senior executives and the degree of trust in trade unions by the general population are positively, yet not perfectly, correlated. In some countries such as Belgium executives report a low quality of labour relations, but 55% of people trust unions (a similar gap is found also in France and Korea, ranked among the lowest by executives and close to, or even above in the case of France, the OECD average by people). The opposite case is found in Mexico, where executives consider labour relations to be close to the OECD average, while only 25% people declare that they trust unions.

The quality of labour relations and trust in unions, in line with the findings by Blanchard and Philippon (2006), are found to be negatively correlated with the unemployment rate and with earnings inequality: on average across OECD countries, higher trust goes hand in hand (but the direction of the causality is not clear) with lower unemployment and lower earnings inequality25 (see online annex at OECD, 2017c).

The level of co-operation and trust is the result of decades of history and is deeply rooted into broader societal and cultural factors. The evidence on the issue is very limited (see Addison, 2016 for a summary), but some of the features of collective bargaining systems themselves can help promoting more co-operative relations. Fragmented and poorly representative social partners are likely to be less inclusive and increase the level of strife. Therefore promoting co-operation between social partners (or at least not incentivising excessive competition) could have a positive effect on the quality of labour relations. More in general co-operation in a range of areas, involvement in committees, reforms, and institutions at higher levels, together with employee involvement and co-operation at the firm level can help building trust and a common understanding of challenges, solutions, and positions. Moreover, objective criteria, in particular with respect to opt out and extension requests, the availability of accurate information on the representativeness of social partners (see Section 1) and the presence of an independent body to mediate and settle disagreements, can also contribute to improve labour relations. Hijzen et al. (2017) also suggest that incentives for regular renegotiation might enhance trust (unless they force the conclusion of an agreement when there is no shared willingness to reach it). Mechanisms that ensure the actual enforcement of the terms of collective agreements (see Box 4.5) are also likely to strengthen the accountability of social partners and therefore reciprocal trust. Finally, institutional stability usually helps social partners by creating shared and mutual expectations (Brandl and Ibsen, 2016). Repeated piecemeal reforms are likely to increase adaptationcosts and shorten the outlook over which social partners plan their negotiation strategies. Generally, ensuring the autonomy of social partners is likely to enhance trust between them.

Workers’ voice and representation at firm level

As outlined before, collective bargaining takes place in many forms and can occur between trade unions and an individual firm (single-employer bargaining) or between union federations and employer associations (multi-employer bargaining). These levels are however not mutually exclusive, and different topics can be handled at different levels. Investigating in depth which specific issues may have shifted from one level to another in different OECD countries is beyond the scope of this analysis. Instead this section focuses on the presence and the role of the various forms of workers’ voice (i.e. the collective expressions of workers’ interests) and representation at firm or establishment level26 as key pillars of single-employer bargaining.

Worker representation differs considerably across OECD and accession countries both in terms of the nature and prerogatives of the representing entities and the share of workers they represent. Several bodies may indeed co-exist at the workplace level: local trade union representatives (either appointed by the trade union or elected by the employees); work councils which are usually a legally established body elected or appointed by all employees in the firm irrespective of their membership of a trade union;27 or worker representatives, elected or appointed among the employees (either union members or independent). Moreover, in several OECD countries, occupational health and safety bodies/councils are present on the workplace, in charge of the implementation and control of safety and health conditions. Eurofound (2011), Van Gyes (2016) and Forth et al. (2017) provide a comprehensive picture of employee representation at firm level.

In most OECD and accession countries more than one form of worker representation can be found, often depending on the firm’s size. France is an extreme case, as firms with more than 50 employees combine a work council (comité d’entreprise), union representatives (délégué syndical and/or représentant de la section syndicale), worker representatives (délégué du personnel) and a relatively powerful health and safety committee (see Askenazy and Breda, 2017 for more details). In other countries only one of these structures is present (Table 4.8). This is the case in Austria, Germany, Luxembourg, the Netherlands and Switzerland, where work councils are the sole eligible employee representative structure; this does not however prevent unions from playing any role, and even have a large influence or reserved seats in the work councils. In Canada, the United States, Sweden or Turkey trade unions are the sole representative body.

Figure 4.10 displays the share of employees covered by the different forms of worker representation as reported in the European Company Survey. The results show that on average, at least for European countries, the coverage of firm-level representation is not particularly higher in countries where firm-level bargaining dominates; instead it tends to be relatively high in multi-employer bargaining systems, with complementary effects between the two levels (notably in the Nordic countries, Germany or the Netherlands). On the other hand, the coverage of employees’ representation is low in countries where firm-level bargaining is very limited, like in Greece or Portugal even after the recent reforms. Box 4.6 delves into the role of employees’ expression and representation on the workplace and their impact on the “voice or exit” behaviour of workers.

Figure 4.10. Employee representation coverage in Europe

Percentage of employees, 2015

Source: OECD calculations based on the Sixth European Working Conditions Survey 2015 (EWCS 2015).

 https://doi.org/10.1787/888933478040

Finally, in some OECD countries workers can also be represented on company boards. As such, board level worker representation is not collective bargaining, but it nevertheless can contribute to increase workers’ voice, strengthen their bargaining power and potentially enhance co-operative attitudes by allowing workers to engage in the strategic choices of the company.28 Among OECD countries (for more details see online annex at OECD, 2017c), Austria, Denmark, Finland, France, Germany, Hungary, Luxembourg, Netherlands, Norway, Poland, the Slovak Republic, Slovenia, and Sweden have such provisions, allowing worker representatives to sit on the boards of private companies in firms above a certain size.29 In Chile, Greece, Ireland, Israel, Poland, Portugal and Spain worker representatives can sit on the boards only of state-owned enterprises.