1. International and comparative employment relations: An introduction
CHAPTER 1
International and comparative employment relations:
An introduction
Nick Wailes, Greg J. Bamber and Russell D. Lansbury

2. Lecture outline International and Comparative Employment Relations
Definitions
Objectives of the field of study
Research challenges
Theories of convergence and divergence in employment relations systems
Views on the impact of globalisation and employment relations (ER)
The Varieties of Capitalism (VoC) approach
Main features of the approach
Applying the VoC approach to ER
VoC, globalisation, and the convergence/divergence debate
Limitations of the approach
Transnational employment relations
Capital and labour as transnational actors
International labour organisations
International employer organisations
Multinational corporations (MNCs)
Transnational regulatory bodies
International Labour Organization (ILO)
World Trade Organization (WTO)

3. What is ‘employment relations’?
Employment relations (ER) can be seen as encompassing the study of all aspects of people at work.
It is concerned with the relationship between employers and employees and their interaction at the workplace.
It is also concerned with employers’ and employees’ representative bodies, such as trade unions and employer associations, and with how they interact at the workplace, industry, national and international levels.
It encompasses both industrial relations and human resource management.

4. Industrial relations and human resource management
Industrial relations (IR) traditionally focuses on formal and informal institutions of job regulation.
Human resources management (HRM) focuses on the level of the individual organisation and is concerned with issues such as recruitment, selection, pay, performance and human resource development.

5. Key elements of industrial relations
The Parties include:
Employers
Employees
Unions and professional associations
Government and state agencies
The Processes include:
Collective bargaining between unions and employers or employer associations
Industrial disputes and dispute resolution mechanisms
Employee participation at the workplace
The Outcomes include:
A collective agreement between employees (and their unions) and employers (and their associations)
A decision by a tribunal or conciliation committee that resolves a dispute
An agreement between employees and an employer on an issue at the workplace

6. What is international and comparative ER?
International ER
Transnational: institutions and phenomena which cross national boundaries, e.g. multinational corporations (MNCs); international labour movement; European Union; International Labour Organization (ILO)
Foreign: studying employment relations systems in other countries
Comparative ER
A systematic method of investigating ER in two or more countries which is analytic rather than descriptive

7. Objectives of international and comparative ER as a field of study
To learn about ER in different countries
To provide insights into our own system of ER
To develop theories and explanations for different patterns of ER
To guide policy-making by learning from successful ER systems

8. Challenges in comparative ER research
There are important international differences in ER
The meanings and significance of key ER terms differ across countries (e.g. differences in the nature and role of unions)
Data is collected in different ways (e.g. differences in how industrial disputes are defined, categorised and how their incidence is recorded)
Therefore, effective comparisons require detailed understanding of each national context
Researchers choose a comparative research design:
Most similar cases: two or more countries that are similar in as many respects as possible except for phenomenon under study
Most different cases: two or more countries that differ in almost every respect except the phenomenon under examination

9. Convergence and divergence in national patterns of ER
One of the most enduring debates in international comparative ER is:
whether national patterns of ER are converging (becoming more similar)
whether they are diverging (becoming more different)
whether a more complex pattern of convergence and divergence is taking place

10. Convergence theories of comparative ER
Convergence theories assume that there are common pressures across societies to adopt a particular (‘best practice’) ER system
Original convergence thesis was developed by Kerr et al. in Industrialism and Industrial Man (1960)
Logic of Industrialism: industrialisation creates pressures across societies to adopt a certain, American-style ER system.
Critique of this argument: technological determinism; American perspective
Later revised by Clark Kerr: convergence as a tendency among democratic industrialised societies
Dore (1973) suggested convergence may be towards the Japanese ER model rather than an American one. He argued that countries which industrialised at later stages were able to develop ER institutions that are well suited to industrialisation

11. Divergence or partial convergence theories
Comparative ER research has found that:
Some country differences persist and some even increase
But overall there may be convergence towards 2 or more patterns of ER
Some aspects of ER are converging while others are diverging
Common trends don’t necessarily result in common outcomes
There is increasing variation in ER practices within countries

12. Globalisation
Globalisation is used to characterise changes in the international economy
It normally refers to growing interconnectedness of the international economy
It is associated with growth in:
Cross-national trade
Foreign direct investment (FDI)
Growth in international financial transactions
It is argued that globalisation has created a common set of economic pressures across all markets (products and factors) which may impact on ER

13. Globalisation and ER
Two views on how globalisation impacts on employment relations:
Simple globalisation approach
economic pressures associated with globalisation will result in a convergence of employment relations policies and practices
“race to the bottom” in terms of wages and labour standards as mobile capital seeks lowest labour costs
governments lose autonomy in policy making and can no longer guarantee labour rights
Instead, legislation to accelerate decentralisation and deregulation of the labour market and to attract capital investment
Institutionalist approach
Despite common economic pressures associated with globalisation, diversity in national patterns of ER will persist
existing ER institutions mediate and filter those pressures, and will do so differently in different countries

14. The Varieties of Capitalism approach
Main features of the approach
Applying the VoC approach to ER
VoC, globalisation, and the convergence/divergence debate
Limitations of the approach

15. Main features of VoC 1 There are two ideal-typical forms of capitalism
Liberal market economies (LMEs)
Coordinated market economies (CMEs)
Each of these forms of capitalism include a set of ‘complementary’ institutions that form the basis of a country’s economic competitiveness and lead to good economic outcomes
The firm is at the centre of their analysis
In order to develop, produce and distribute goods and services profitably, a firm must effectively coordinate with a wide range of actors e.g. investors, employees, unions, the state, suppliers, buyers.

16. Main features 2 A firm must coordinate with other actors in 5 spheres:
Industrial relations
Vocational training and education
Corporate governance
Inter-firm relations
Relations with its own employees
The relations with actors in these spheres are problematic
Firms can resolve coordination problems
Internally within the firm (hierarchies)
Externally (market or non-market institutions)

17. Main features 3
National institutions shape how firms resolve these coordination problems
In LMEs, firms resolve coordination problems mainly through hierarchies and markets – i.e. arm’s length relations and high levels of competition
In CMEs, firms resolve coordination problems not only through hierarchies and markets but also through non-market institutions – i.e. strategic interaction
Both these solutions to coordination problems form institutional equilibria which have comparative advantage
In LMEs, the comparative advantage arises from the flexibility of these coordination arrangements
In CMEs, the comparative advantage arises from cooperative behaviour among actors, based on information exchange, monitoring and sanctioning of defections

18. Liberal market economies
Classic example: United States
Corporate governance: outsider shareholder dominated; performance represented by current earnings and share prices; management agency controlled by shareholder exit
Employee relations: short term, market relations between employee and employer; top management has unilateral control of the firm
Industrial relations: employer organisations and unions relatively weak; decentralised wage setting; insecure employment (hire and fire; fluid labour markets)
Vocational training/ education: vocational education offered on market; labour force has high general skills
Inter-firm relations: market relations, competition; use of formal contracting and subcontracting relationships.
LMEs – USA, Australia, Britain, Canada, New Zeland, Ireland

19. Coordinated market economies
Classic example: Germany
Corporate governance: long-term bank-dominated insider systems; cross-directorships; cross-shareholding; management agency controlled through ‘network reputational monitoring’
Employee relations: long term, formalised participation of employees; consensus decision-making with management
Industrial relations: trade unions and employers organised; industry-wide collective bargaining and pay determination; employment relatively secure
Vocational training: elaborate industry-based training schemes; labour force has high industry-specific and firm-specific skills
Inter-firm relations: development of collaborative networks; cooperation among firms in diffusing technologies
CME: Germany, Japan, Switzerland, the Netherlands, Belgium, Sweden, Norway, Denmark, Finland and Austria
OECD countries that don’t fit – France, Italy, Spain, Portugal, Greece and Turkey.

20. Institutional complementarity
Complementarity occurs where the presence of one institution enhances the returns from another institution
In this way comparative advantage arises from the ‘bundling’ of complementary institutions
Hence, countries cluster around bundles of complementary institutions – two distinct clusters are LMEs and CMEs
This important departure from comparative IR studies which sought to link single features (e.g. collective bargaining structure) with economic performance
The effect of single institutions may be misleading as performance may arise from a constellation of institutional arrangements
Implications for ‘bolt on’ policy responses
Comparative institutional advantage: the institutional frameworks (either LME or CME) provide nations with comparative advantages in performing certain activities and producing certain kinds of goods and services

21. Applying the VoC approach to ER
ER concerns are a central feature of the VoC model (e.g. collective bargaining, unions and employer associations, skill development, relations with employees at the workplace)
VoC approach places ER in a broader political economy context
Focus on institutional complementarity overcomes tendency to treat ER institutions in isolation
VoC approach brings firms and employers into the centre of analysis

22. VoC, globalisation, and the convergence/divergence debate
VoC approach emphasises the importance of institutions (‘institutions matter’)
Different sets of institutions will mediate and refract the pressures associated with globalisation in different ways
Regarding ER:
in LMEs, we can expect deregulation and a ‘race to the bottom’ as outlined in the ‘simple globalisation approach’
in CMEs, we can expect firms and workers to resist deregulation as that threatens comparative institutional advantages
This results in a bifurcated response to globalisation; globalisation will have a different impact on IR in LMEs than in CMEs

23. Limitations of VoC approach
There is a large literature criticising the VoC approach, in part because it has been so influential.
1. Not enough variety
LME/ CME distinction doesn’t capture all of the diversity of market economies (several OECD countries that don’t fit)
2. Ignores differences within varieties
Especially among CMEs
3. Static and Determinist
Compares two countries at the same point of time
Only 2 varieties of capitalism are viable; change to other category is impossible
Makes it difficult to explain change
Downplays role of agency, conflict, power, politics
4. Downplays or ignores international factors
Neglects linkages between nation states

24. International industrial relations
Capital and labour as transnational actors
International labour organisations
International employer organisations
Multinational companies MNCs
Transnational regulatory bodies
International Labour Organization ILO
World Trade Organization WTO

25. Labour internationalism
Labour as a passive victim of globalisation or as a global actor?
International union confederations
Global confederations e.g. International Trade Union Confederation ITUC (was ICFTU)
Regional confederations e.g. European Trade Union Confederation ETUC
Global union federations which link together national unions from a particular trade or industry e.g. International Metalworkers’ Federation IMF
European works councils

26. Activities of international union organisations
Representational activities at ILO and other international forums
Services to member unions, especially in less developed and newly industrialising countries
Information sharing
International campaigns
International Framework Agreements IFAs on minimum labour standards between global union federations and MNCs

27. Employers – international dimensions
International Employers’ Associations, e.g.
International Organisation of Employers IOE represents employers at ILO
BUSINESSEUROPE (formerly Union of Industrial and Employers' Confederations of Europe UNICE) represents employers in EU institutions
Multinational companies
Country of origin/home country effect and host country effect shape ER practices in subsidiaries
Current questions about ER in MNCs:
Do ER practices of MNCs spill over into other (local) companies in the industry?
Is there any reverse diffusion, i.e. transfer of ER practices from foreign subsidiaries to the headquarters of MNCs?

28. The International Labour Organization (ILO)
Established in 1919 in association with the League of Nations
In 1946 became first UN agency
Has a unique tripartite structure - government, employers and union representatives
Key contribution is a series of Conventions and Recommendations which set international labour standards
Major source of international labour law: 181 conventions, 188 recommendations
Important role in technical advice and assistance to less developed countries (LDCs) and newly industrialising economies (NIEs)

29. International Core Labour Standards
Ratification of conventions by member states of the ILO create binding obligations to put their provision into effect (181 conventions ratified so far).
REPLACE WITH TABLE 1.1
Source: Hughes, S (2005) ‘The International Labour Organisation’, New Political Economy, 10 (3):

30. Criticisms of the ILO
Bureaucratic structures and procedures which are resistant to reform
Inadequate monitoring of compliance and ‘policing’ of conventions
The tripartite model of governance of the ILO is outdated and impotent.
The governing body of the ILO is dominated by the advanced industrialised economies although less developed economies comprise the majority of ILO members
It has lower status and is weaker than many other international bodies, e.g. WTO and the World Bank (which are competing with the ILO is some areas)

31. Proposals for reform of the ILO
The adoption of more innovative and pragmatic approaches to issues (e.g. the current campaign for ‘Decent Work’)
Focus on fewer issues on which it can have a major impact
Build stronger linkages with other international bodies e.g. non-governmental organisations (NGOs)
Place more emphasis on technical assistance to the less developed economies
Provide for greater representation of third world countries on the governing body of the ILO

32. World Trade Organization
Established 1996
United Nations agency
Aim is to promote free trade and provide mechanisms for the resolution of trade disputes
There was debate around whether labour standards should be included in the rules of the WTO – not included

33. Conclusion
Globalisation is having a profound influence on the way that work is regulated.
Studying internationally comparative employment relations allows us to develop an understanding of our own and other employment relations systems.
The Varieties of Capitalism approach is a useful framework for studying internationally comparative employment relations. It allows us to study employment relations within a broader institutional context.