Gerhard Bosch Reducing inequality by collective bargaining INEQUALITIES, NEOLIBERALISM AND EUROPEAN INTEGRATION: PROGRESSIVE ANSWERS Athens, 23 rd - 25 th November 2017, MEGARON, The Athens Concert Hall, Nikos Skalkotas Hall Vass. Sophias & Kokkali Prof. Dr. Gerhard Bosch Universität Duisburg Essen Institut Arbeit und Qualifikation Forsthausweg 2, LE, 47057 Duisburg Telefon: +49 (0)203 / 379-1339; Fax: +49 (0)203 / 379-1809 Email: gerhard.bosch@uni-due.de; www.iaq.uni-due.de Institut Arbeit und Qualifikation
Structure of presentation 1. Impact of neoliberal LM deregulation 2. Inclusive CB - Powerful instrument to reduce inequality 3. Impact of wage restraint on other EUcountries 4. Weakening of democratic institutions
1.1 The Neoliberal Labor Market Model (NLMM) Basic assumptions equilibrium through - micro- and macro-wage-flexibility - no negative macro-economic effects - neglectable trade-offs LM-institutions like Collective Bargaining - a barrier to micro and macro-flexibility (especially industry wide bargaining, extension of agreements, favorability principle, aftereffects) - no other functions like democratic rights, balancing power relations in society
1.2 Impact of NLMM on Ranking Example: The Global Competitive Index of the World Economic Form Source: World Economic Forum, The Global Competitiveness Report 2016 2017
1.4 Deregulation of Greek LM show case Abolition of inclusive LM-institutions Abolition of extension of CA s and favorability principle; reduction of time extension and after effect to 3 months; maximum of duration 3 years; easy exit options: deviating firm agreements by associations of persons Impact: deepening of economic crisis optimistic prognosis of institutions all wrong ongoing erosion of CB (MW becoming the going rate) ongoing increase of income inequality and weakening of social dialogue Cynical recommendation of OECD to Greece to make economic growth more inclusive by urgently adopting policies to reduce poverty and inequality (OECD: Economic survey of Greece 2016)
1.5 Forecast Errors on Greek GDP by EU Commission 6 4 2 0-2 -4-6 -8 Fall 2014 Spring 2008 Spring 2015 Fall 2016 Spring 2014 Fall 2008 Spring 2017 Fall 2017 Spring 2011 Fall 2009 Spring 2009 2007 2008 2009 2010 2011 2012 2013 Spring 2012 2014 2015 2016 2017 2018 2019 Spring 2010 Fall 2015 Spring 2013 Fall 2012 Spring 2008 Fall 2008 Spring 2009 Fall 2009 Spring 2010 Fall 2010 Spring 2011 Fall 2011 Spring 2012 Fall 2012 Spring 2013 Fall 2013 Spring 2014 Fall 2014 Spring 2015 Fall 2015 Spring 2016 Fall 2016 Spring 2017 Fall 2017-10 Source: EU Commission, own compilation
1.6 Collective bargaining coverage (2009, 2013) 120 100 80 60 2009 2013 40 20 0 FR ES EL Source: ICTWSS Database
Source: OECD (2016),5In: It Together: Why Less Inequality Benefits All. http://www.oecd.org/eco/surveys/economic-survey-greece.htm
Structure of presentation 1. Impact of neoliberal LM deregulation 2. Inclusive CB - Powerful instrument to reduce inequality 3. Impact of wage restraint on other EUcountries 4. Weakening of democratic institutions
2.1 Rate of coverage by collective agreements and share of low-wage work (2014) Source: Visser 2015, Eurostat, own calculations
2.2 Wage distribution in a liberal market economy with MW and in coordinated market economy with high coverage by collective agreements :
2.3 Two real cases: UK 2014 and Germany 1995 1995 below 3 3,00 until < 4,00 4,00 until < 5,00 5,00 until < 6,00 6,00 until < 7,00 7,00 until < 8,00 8,00 until < 9,00 9,00 until < 10,00 10,00 until < 11,00 11,00 until < 12,00 12,00 until < 13,00 13,00 until < 14,00 14,00 until < 15,00 15,00 until < 16,00 16,00 until < 17,00 17,00 until < 18,00 18,00 until < 19,00 19,00 until < 20,00 20,00 until < 21,00 21,00 until < 22,00 22,00 until < 23,00 23,00 until < 24,00 24,00 until < 25,00 25,00 until < 30,00 30,00 and more Germany Source: : SOEP 2012, own calculations; Dickens (2015): The Low Pay Commission and the National Minimum Wage. Presentation to NEDLAC
Increasing efficiency Micro-flexibility encourages low-road business-models Research shows clearly benefits of co-ordinated CB: - Extension of scope and time horizon of CB: negotiations on internal flexibility (skills, w-time) - Reduction of transaction costs for companies highly important for SME s - Levelled playing fields for companies: Encourages investments in skills - Reduction of bureaucracy creation of labour standards according to the needs of industries unburden the state from interventions
Structure of presentation 1. Impact of neoliberal LM deregulation 2. Inclusive CB - Powerful instrument to reduce inequality 3. Impact of wage restraint on other EUcountries 4. Weakening of democratic institutions
3.1 Unit Labor Costs (2000 = 100) Source:
3.2 Increasing imbalances of payments in EU (in billion ) Ireland Italy Portugal Spain Austria Belgium Germany Netherlands Greece France Source: Albu et al. (2017) IMK Report 128.
3.3 Development of domestic demand 2000q1=100 (1) Finland Belgium France Netherlands Germany Source: Albu et al. (2017). IMK Report 128. Euro zone
3.3 Development of domestic demand 2000q1=100 (2) Spain Greece Italy Euro zone Source: Albu et al. (2017) IMK Report 128..
3.4 Drivers of trade imbalances Germany trade surplus 8,5% of GDP in 2016 - Reduction of surplus by higher wage increases in DE? Different views - EU-Commission Overall there is no evidence that wage developments are at the root of the development (European Economy 9/2012: 91) Why then the dictate of the institutions? - German government: Low price elasticity of German exports, ageing society needs savings for the future - IMK: yes low price elasticity but German wage restraint reduced domestic demand and therefore imports a combination of wage increases and investments programs would help Also weak price elasticity of Greek exports depend on growth strategies focus on the quality of exports
Impacts of the Neoliberal Labor Market Model 1. Increase of social inequality erosion of the middle class 2. Undermining built-in-stabilizers in economic crisis 3. Reduction of efficiency 4. Weakening of democratic institutions
4.Weakening of democratic institutions - Trade-unions give employees a voice in political decisions - Fragmentation of CB marginalizes unions - Increasing inequality reduces participation in political life like in voting in political elections Result: - No countervailing power to business lobbying - easier for special interests to influence political decisions
Decreasing voters participation in Bundestagelections 1980 to 2012 Abgebildet sind die aus einer logistischen Regression ermittelten Wahlwahrscheinlichkeiten unterschiedlicher sozialer Gruppen, wenn Alter, Geschlecht, Bildung und politisches Interesse konstant gehalten werden. Source: Bundesregierung,, Armuts- und Reichtumsbericht 2017.
Conclusion Clearly negative impacts of labor market deregulation and need for implementing proposal of the expert group of the Greek government and the institutions But caution: - Opposition to neo-liberalism not sufficient - Resistance to all reforms support demands for deregulation - Continuous need to reform collective agreements - The positive impacts of co-ordinated CB do not come automatically require trust between social partners and modernization of CA (for example w- time flexibility for employees as well as for employers)
Annex
(1) Development of hourly gross wages in selected countries - 2000q1=100 France Finland Netherlands Germany Belgium Euro zone Source: Albu et al. (2017) IMK Report 128