Presentation on theme: "Collective Bargaining and Harmonious Social Economy"— Presentation transcript:
1Collective Bargaining and Harmonious Social Economy Chang-Hee LeeSenior Specialist on Industrial Relations and Social DialogueILOACFTU/ILO Workshop on Collective Bargaining and Wage NegotiationAugust 2006, Yinchuan, Ningxia
2PART 1: LABOUR RELATIONS AND HARMONIOUS SOCIETY IN A MARKET ECONOMY
3Industrial relations in a market economy Move towards what kind of market economy?Industrial relations influence on the relations between market and its stakeholders, and therefore define nature of a market economy (next slide).What kind of society does ACFTU with more than 100 million members want to build for the future of China?Sound IR system is a key to ensuring a harmony between economic efficiency and social justice, leading to social harmony.
4Union Density and Collective Bargaining Coverage (2001)
5Union Members in China“Where there is a worker, there should be a union”Campaign for union membership has contributed to increase of union membership since 1999Recent breakthrough of union organizing in Wal Mart!
6Industrial Relations and Social Policy Challenges in a Market Economy Labor is not a commodity: a fundamental principle of IR and ILOCan we leave wage determination to the market alone?Workers who possess labor power needs to support not only his/her living but also their family’s living as well. Workers are a source of productivity and progress.Under individual contracts alone, workers are too weak to get equal contract with employers, because workers are desperate to find jobsBirth of trade union in 19th century and gradual spread of collective bargaining in 20th century. “Take wage out of competition” was a goal of trade unions. Collective IR emerged…IR is one of major social policy areas to reconcile social justice/equity and economic efficiency in a market economy since 19th century…
7Importance of autonomous industrial relations Pure market forces (in the absence of collective representation)Competition based upon sub-standard working conditions, undercutting living standardsSocial legitimacy eroded, social stability underminedGovernment regulation:Government tends to lack information required for wage determination in a market economyBy its nature, government regulation tends to be rigid and uniform, unable to consider specific conditions of enterprise and business sectorsCollective bargaining:Workers (represented usually by trade unions) and employers negotiate working conditions including wagesConsidering specific business conditions of the enterprise: unreasonably high wage will lead to loss of competitiveness, damaging workers as well; too low wage will lead to high turn-over of workers.Bound to find an equilibrium suitable both for workers and employersBut bad relations between two parties may lead to sub-optimal solution
8PART 2RECENT DEVELOPMENT OF INDUSTRIAL RELATIONS IN CHINA
9Past achievements and future challenges in China Opening of the economy in late 1970s; rural reform in 1980s; urban reform in 1980s and 1990s including SOE restructuring; accession to WTO; highest economic growth of largest country in the world combined with successful records of poverty reduction.At the same time, widening gap between the rich and poor, and urban and rural areas.Explosion of various forms of labour disputes and growing concern on social stability.Great and urgent need for balanced development and social harmony.IR institutions intersects society and economy, reconcile social equity and economic efficiency.Building sound IR is a key condition to harmonious society.
10Major Industrial Relations Development Established tripartite consultative committees at all levelsUnion membership campaignAnd recent breakthrough of union organizing at Wal Mart branchesPromotion of collective bargainingPromotion of wage negotiation
11Tripartite consultation mechanisms National tripartite consultation committee set up in 2001All provinces and most municipalities completed TCC establishment, and moving down to district levelInstrumental in spreading collective bargaining and coordinating IRIssues:Employers’ representationScope of agenda for consultation: IR or broader social and labor policy issuesFeedback from constituents at enterprise level
12Spread of Collective Agreements Since adoption of the Labor Law in 1995, collective bargaining has been rapidly introducedTripartite consultation mechanism further accelerated spread of collective agreementsExperiments of industrial/territorial agreements underway
13Wage negotiationWage negotiation has been actively promoted since early 2000s. More than 30 million workers are covered by wage agreements.By its nature wage negotiation involves negotiation over new interests and new conditions of work instead of legal minimum.Until recently, wage negotiation used to deal only with total wage bill of enterprises without negotiation of further distribution of wage bills among different groups of workers.Wage negotiation creates an incentive for workers to actively participate in union activities and collective bargaining and therefore provides a momentum for unions to become more accountable and representative to their members.
14Labour DisputesBoth individual and collective disputes are on rapid rise (three times higher than GDP growth rate)Spread of CA does not help to reduce the number of disputes
15Challenges 1: Improving quality and process of collective bargaining Quantity achieved.Need to improve quality of collective agreementsNeed to improve process of collective bargainingNeed to improve representational structure of trade unions at the workplaceInternal coordination among different categories of workers/members within trade union is as important as labour-management relationsNeed to find a solution to break the deadlock in collective bargaining
16Challenges 2 Wage negotiations Policy consideration on relationship between local minimum wages, municipal wage guidelines, negotiated wages at sectoral (district) and enterprise level.Also, more active participation in local MW setting and municipal wage guideline formulation is important.
17Challenges 3: protecting migrant workers and reversing the trend of widening income gap Developing a strategy to organize migrant workers and representing them effectively through democratic process of collective bargainingDeveloping a union strategies, including wage negotiation and social protection strategies, to reverse the trend of widening income gap
18Part 3: Three Models of Collective Bargaining Note: This part was prepared for a workshop for Vietnam General Confederation of Labour in early 2006.
19Model 1: Purely enterprise bargaining Practices in many East Asian countries (Japan, most sectors in Korea, China?, Thailand, the Philippines etc). Vietnamese labour law and practices appear to be based on this model.Advantage: flexibility and adaptability for setting enterprise specific working conditions suitable for workers and management in the enterprises concernedDisadvantage: disparity between companiesDisadvantages in Vietnamese context: enterprises trade unions are too weak to negotiate with their employers at the workplace.
20Model 2: enterprise bargaining, assisted by professional negotiators of trade unions (and if agreeable, employers’ organizations) at higher levelPractices in USA, some sectors in Malaysia, a few sectors in Korea.Same advantage as pure enterprise bargaining modelDisparity between companies may be less, as trade unions (and employers’ organizations) at higher level (usually at industry/regional level) may have desire to produce more or less similar bargaining outcome across the companies in the sector concerned.Advantages in Vietnamese context: trade unions at higher level are independent from the management of specific companies, while enterprise union leaders are close to the management rather than workers.Still, there is a need to establish strong and direct link between trade unions at enterprise and higher level, and rank-and-file members, through prior consultation before entering into CB and approval of tentative agreements by union members.
21Model 3: industry bargaining between trade unions and employers’ organizations at industry level Practices in most continental European countries (Germany, Italy, France, Belgium, Sweden etc), two sectors in Korea, port workers in Japan, some sectors in USAAdvantages: better solidarity among workers, less bargaining costs, enterprises are relatively free from hassle of negotiation and therefore conflicts.Disadvantages: less flexibility and adaptability for each enterpriseTrend: decentralization more towards enterprise bargaining (globalization)In Vietnamese context, it runs the same danger of disconnection between trade unions at higher level and their members at the enterprise level. Without democratic linkage between unions and employers organizations at higher level, and their members at enterprise level, this system may not function.
22Note and QuestionsModel 2 can be a stepping stone for a transition towards model 3.It may be also conceivable that model 2 may gradually strengthen the capacity of enterprise unions to negotiate with their employers at the enterprise level.QuestionsAny relevance for China?What is current situation in China?Share your experiences of industrial or district bargainingWhat is your view about three models?
23Part 4: Wage negotiation in a broader IR context: wage negotiation, minimum wage policy and tripartite consultation
24Union strategy on wage negotiation and income distribution in a market economy Union as balancer in a market economyTrade unions are a crucial social actor and institution in a market economy, ensuring social cohesion and harmony, representing voices of workers’ legitimate desire for decent work as a human being, against and within the force of a market.Union’s strategy on wage negotiation and income distribution has a critical importance in ensuring decent work and harmonious society.Specific model of a market economy is to be shaped not only by ‘market force’ but also by interaction between various economic and social actors – particularly unions.
25Contradiction is a driving force of progress of history Contradiction is a driving force of progress of history. And history is not straightforward.
26Factors for Wage Increase: ACFTU Collective Consultation Text Book (1996) External factorsInflationEconomic growth in the localityDemand & supply of labourInterest ratesLocal wage guideline issued by governmentInternal factorsEnterprise profitsProductivityLabour costsBalance sheet of the enterprisesDebt/Asset ratioWage level of other companies in the same sector and region
27Different Priority Factors When Each Party Decide Their Bargaining Policy GovernmentGDP growthInflationLabor market situationInterest ratesEmployerProfitProductivityBalance sheetLabor costs etcUnion at regional levelSurvey of average working family’s expenditure for decent livingInflationLabour market and economic situation of the localityEnterprise unionAsk its members how much they need and want!Fair sharing of profits as workers are main contributors to the profitProductivity
28Unions do not need to internalize all factors which are main concerns of other parties in the beginning of the negotiation process.In any case, other parties will bring those factors in the consultation and negotiation, and therefore final outcome will be produced based upon consideration of all factors.
29Case of Korea and JapanBefore annual wage negotiation, nation centres of trade unions announce its demand.Their demands are formulated in the form of standard living costs for standard workers family, through a union survey.While also considering GDP and productivity growth, they place importance on the concept of living wages for standard working family.Employers’ organizations (Korean Employers’ Federation and Japan Business Federation) formulate their response based upon GDP growth, competitiveness, profitability of industries.The proposals by both unions and collective employers at national level set the parameter for negotiators at lower level.Lower level negotiators will consider the guideline set by higher level social partners, but not necessarily bound by them.
30Other models Singapore: National Wage Council Wage guidelinesFrom a non-binding recommendation on wage increase rate until mi 1980sTo a recommendation on flexible wage modelIreland: wage negotiation in a broader economic policyFrom decentralized enterprise bargaining on wageTo centralized social dialogue on income policies (tax, income, training, wages and HR innovation)
31From simple living wage concept to combination of different factors As a staring point, the concept of living wage is important for trade unionsComposition of wages:Invariable and variable components of wagesOr basic wages and other benefitsWhat to be negotiated at enterprise, sectoral/regional and national level?Direct wage and social wage componentsAs unions get mature and get involved in various policy formulation, other factors come into play more and more important role
32Wage negotiation in a broader IR context At enterprise levelAt higher levels (sectoral and/or district)Minimum wageWage guidelines at municipal levelTripartite consultation systemWhat are ideal relations between different IR processes regarding wage determination?What are the policies and approaches of ACFTU?What are respective roles of each process?What are the implications of these processes for harmonious society?
33Minimum wage : Policy Goals Ideally, MW instrument designed to protect the most at-risk workers as a social protection measure.Social purpose of MW: to prevent labour exploitation and avoid poverty; i.e., the minimum wage should provide sufficient purchasing power to enable a worker to have a basic standard of living.However, no single formula for MW policyClosely related with other factors such as collective bargaining, income policy and social protection measures.
34Labor shortage and its impact on minimum wage adjustments in major cities Locality2004 (yuan)2003 (yuan)increase rate北京54549510.10%上海63557011.40%廣州 廣東省68451034.12%成都 四川省45034032.35%This suggests that wage negotiation does not function properlyThis indicates that local MW is close to actual wages for unskilled workers.RigidityLow wage- low productivity trapMW is not ideal tool for actual wage determination, economically and socially…
35Wage negotiation and MW process What is the policy of municipal trade unions regarding the relations between MW and wage negotiation?Ratio of MW to average wageIdea of living wages for standard workers’ familyHow do municipal trade unions participate in MW determination process?What is – should be - the role of municipal wage guideline in the context of local MW and enterprise bargaining?
36Consultation with and participation of social partners 2 Government fixes MWNo obligation to consult social partners: LaoFollowing direct consultation with W&E: China, NZ, Czech, RussiaFollowing advice or recommendation of specialized body: Cambodia, Thailand, Japan, Ireland, UK etcSpecialized body sets MWAustralia, Korea, Turkey, Poland etcCollective bargaining and other proceduresAustria, Germany, Greece, Belgium etc
37Minimum Wage : Criteria for adjustment Different ways of applying the criteriaIn some countries, strictInflation automatically linked MW adjustment in some countriesIn others, looseConsideration of general economic condition leaves plenty of scope for interpretationAccording to ILO survey, most frequently cited criteria for MW fixing areInflation/cost of livingGeneral economic conditionWage levelsWorkers’ needProductivityEmployment rate
38Questions: Municipal unions’ participation in MW determination and municipal wage guideline You are the leaders of municipal union federation. Your city has recently experienced labour shortage and workers are not happy with current wage levels.How do you see respective roles of enterprise wage negotiation, municipal wage guideline and MW?What would you do regarding MW determination and formulation of municipal wage guideline?