Globalization and Convergence of National Patterns of Employment Relations - Essay Example

Globalization and Convergence of National Patterns of Employment Relations An ever-changing world, a deluge of information at the click of a mouse,search for better opportunities: all these and more have made the territorial boundaries of countries seem insignificant. Emigration and Immigration across borders have been going on since the last few decades and it is now that governments are waking up to the growing problem of varying patterns of employment relations. Technological developments take place everyday, which lead to change in consumption patterns across the globe. All these issues are indirectly related to employment in a country. In this report, I will try to analyze globalization and convergence of national patterns of employment relations in two countries, namely Sweden and Germany. A peek into their social and political structure from the beginning of the twentieth century to today's fast paced world and also a study of the hypothesis of convergence will help us in making definite conclusions about the subject. Katz evaluates three hypotheses that have been suggested to explain the trend towards decentralized bargaining: first, shifts in bargaining power from unions to employers; second, the emergence of new forms of work organization, which put a premium on flexibility and employee participation; and third, the decentralization of corporate structures and diversification of worker preferences. Katz concludes that the second hypothesis is the most convincing, on the grounds that labour and management appear to have gained distinct advantages from work restructuring that accomplished decentralization. However, shifts in bargaining power, as well as the diversification of corporate and worker interests, are important contributing factors to the decentralization process. Sweden Sweden became an industrial society later when compared to most other countries in Europe. At the start of the 20th century, Sweden was a poor agrarian society with high emigration rate. It is now a relatively wealthy, welfare-oriented, service society. Sweden has 25% of its civilian workforce employed in industry, only 2.4% are still in agriculture, while 73% are in services, partly as a result of the strong growth of local and regional government since the 1960s. Swedish employment relations have long fascinated foreign observers. With a total population of 9 million and with 4.4 million in labour force, Sweden is the smallest of the countries in Europe. However, 76% of its women are in the labour force which is the highest female participation rate of any OECD country. Employment relations in Sweden have passed through three broad stages since the nineteenth century. The beginning of the union movement was the first stage, which lasted from the 1890s to 1930s.Unions were established during this period and there were disputes between the capitalists and the laborers. The government was either passive or supported the capitalists. The second stage was approximately from mid-1930s to the early 1970s. The 'Swedish model' was established during this period, with a low level of industrial conflict, a 'solidaristic' wage policy, an active labour market policy and labour-management cooperation. An economic policy reliant on economic growth subsumed many of the pay-related problems for the unions and paved way for a pattern of employment relations with few industrial disputes. Emergence of a third stage can be traced to the 1970s. More radical union ambitions, the election of a non-socialist government in 1976 severe economic problems, and a strategy based on free enterprise and a market economy, on the employer side, represented significant changes. The 1980 dispute symbolized these developments. Wage earner funds were introduced after a bitter conflict, but were not seen as a complete victory by the unions. The wage earner fund system became a political burden for the Social Democratic Party and did not result in a basic change in Sweden's economic system. The employers tried to reverse the trend as much as was practical. Their prime aim was to deregulate Sweden and facilitate more market influences. Their policy initiatives included fragmentation of the bargaining structures, more flexible working-time arrangements, profit-sharing and payment-by-results systems. During the 1900s a new collective bargaining structure emerged. The centralized bargaining structure which had been dominant during the 1960s and 70s, was replaced by a more fragmented and decentralized bargaining structure. This development was led by the Engineering Employers' Association, despite opposition from most unions and some of the employers' organizations. The SAF's 1991 decision to withdraw from the central bargaining process marked the end of the bargaining pattern that had begun in 1956. The 1991-93 agreement was reached only after pressure from a special government commission. Since then, wage negotiations have taken place at industry level. During the 1980s, the SAF withdrew from most of the cooperative institutions that had been established during earlier decades. Yet there were still some cooperative approaches that focused on work organization, technological change and competence development. However, arrangements in the non-pay areas were hampered by disagreements between employers and unions about the locus of wage negotiations. After the Social Democratic Party returned to government in 1982, the direction of economic policy changed. Devaluations led towards an expansionist, export- led recovery. This proved successful for a few years but it delayed tougher structural decisions that the government was forced to make after 1989. Sweden subsequently reduced its budget deficit and restored balance to its foreign trade. The unemployment rate, which was already low by international standards, was cut to a very low level(1.2% in mid 1989). The government gave high priority to measures to restructure industry and stimulate labour force flexibility. By 1990, however, fighting inflation had become the government's main priority, and unemployment grew dramatically during the early 1990s. It was not until the early 21st century that the unemployment was again cut to less than 4%. There was a slightly higher level of industrial disputes in the 1980s than in previous decades. A new element was that white-collar workers accounted for the majority of the working days lost in stoppages. White-collar unions, particularly those organizing public-sector employees, were more often involved in industrial disputes. Groups that have participated in major disputes include nurses, fire-fighters and physicians. The involvement of public sector employees in industrial conflict resulted in the government playing a larger role in industrial relations. However, the Social Democratic government did not attempt to change or interfere with the basic rules. Unions and employees still took primary responsibility for negotiating agreements and settling disputes. Germany The 'dual system' of German industrial relations, which has been called 'the paradigm of the highly regulated industrial relations system', has not ceased to exist but is in deeper and more serious difficulties than ever before. Since the early 1990s, fundamental processes of gradual disintegration have taken place and partially replaced the formerly integrated system. This development has been caused by internal factors as well as external developments, including Europeanisation and globalisation. The consequences of unification in Germany have accelerated the already existing trends towards destabilizing the system of employment relations. The system of German employment relations that developed in the decades after World War II have not collapsed or disintegrated. However, institutional arrangements can change. The 'German model' is in the midst of a transformation of its key institutions and procedural rules, and in some ways, is developing similarities to the Anglo-American model. Gradual development towards a larger degree of disintegration, if not dualisation between core and periphery, is looking more likely. Furthermore, the neo-liberal orientation towards short-term maximization of shareholder interests, dominating in the UK and the USA, appears to be gradually replacing the more long-term multiple stakeholder interests approach that formerly dominated the German version of capitalism. This gradual erosion of the key institutions that supported the 'dual system' in Germany is leading to an uncertain future, with less coordinated decentralization, less legal interference and institutional constraints, more heterogeneity and fragmentation. There is increasing differentiation between sectors as well as between enterprises of different sizes. We are witnessing the decline of the 'German model of negotiated adjustment' or 'negotiated approach to industrial adjustment', with its emphasis on long-term cooperation. Controversies about Convergence The most relevant conceptual tools for examining the impact of globalzation on national patterns of employment relations are still associated with convergence and divergence. Reviewing the convergence and divergence debate helps reveal potential limitations in the study of globalization and employment. Kerr, Dunlop, Harbison and Myers in their book Industrialism and Industrial Man developed the convergence thesis. The core proposition in this theory is that there is a global tendency for technological and market forces associated with industrialization to push national industrial relations systems towards uniformity or convergence.They however agree that total convergence is not possible due to political, cultural, social and ideological differences between societies. Piore suggested an alternate theory for convergence, which puts the focus on the role of the regulatory institutions in the industrial relations between two societies. He argued that capitalist economies pass through a distinct series of regulatory systems in the course of their historical development. As technology and industry change, they outgrow the regulatory systems initially adopted, and give rise to the need for a new system of regulatory institutions. Industrialisation appears to be occurring more rapidly in some of the newly industrializing economies (NIEs) than has been the case in the past; therefore, industrial relations institutions there have developed more quickly than in DMEs. An example of this is the weak state of unions in most of the first four Asian 'tigers'-Hong Kong, Korea, Singapore and Taiwan. However, the growth of unions (official and unofficial) in south Korea since 1987 provides an exceptional case in the Asian region and South Korea in 21st century is regarded as a DME. Kerr later modified his views, to take into account some of these criticisms. Kerr argues that convergence is a tendency that is not likely to precipitate identical systems among industrialized countries. He also notes that while DMEs at the macro level might appear to be similar, differences at the micro level could be quite profound. Further, industrialization on a world scale is never likely to be total because the barriers to it in many less developed economies (LDEs) are insurmountable. Nevertheless, he still holds the central assumptions of the original study: namely, that the basic tensions inherent in the process of industrialization had been overcome by modern industrial societies and that there would be a growing consensus around liberal-democratic institutions and the pluralist mixed economy. Relations between 'mangers and the managed' would be increasingly embedded in a web of rules agreed to by both parties, so that industrial conflict would 'wither away'. Late Development Ronald Dore makes an important contribution to the debate about convergence. Drawing on a comparison of Britain and Japan, he argues that while there may be a tendency towards convergence in national patterns of employment relations, the tendency is towards convergence on Japan and not the USA. Dore places less emphasis onb technology than Kerr et al., and highlights the importance of other factors: the emergence of giant corporations and the spread of democratic ideals of egalitarianism. In examining Japanese industrial relations, Dore identifies a 'late-comer' effect. As Japan began to industrialise relatively late, it was able to learn from the experience of the countries that had already been through that process. He argues that late developers had been able to adopt organizational forms and institutions better suited to industrialization than those of countries that industrialized very early. There have been general criticisms of Dore' thesis and specific criticisms of some of his detailed interpretation, including the narrow basis of his empirical research; however, his approach has considerable potential in this field: 'By concentrating on only two country cases and dealing with these cases in a consistently and systematically comparitive fashion, Dore succeeded in minimizing the danger of lapsing into either vacuous description or superficial comparison'. Dore concludes that employment arrangements are becoming more alike, then, but that Japan, rather than any Western country, is the model on which other countries are converging. Support for this argument can be found in the so-called 'Japanese management practices', which have been incorporated under the umbrella of 'world bext practice' in management and work organization. Conclusion After a thorough study of the contemporary employment relations system of Sweden and Germany, we can safely come to a few conclusions. The 'German model' is in the midst of a transformation of its key institutions and procedural rules, and in some ways, is developing similarities to the Anglo-American model. Gradual development towards a larger degree of disintegration, if not dualisation between core and periphery, is looking more likely. Furthermore, the neo-liberal orientation towards short-term maximization of shareholder interests, dominating in the UK and the USA, appears to be gradually replacing the more long-term multiple stakeholder interests approach that formerly dominated the German version of capitalism. This gradual erosion of the key institutions that supported the 'dual system' in Germany is leading to an uncertain future, with less coordinated decentralization, less legal interference and institutional constraints, more heterogeneity and fragmentation. As a contrast, Sweden, saw the rise and popularity of the trade unions, passive participation from the government's side and later setting up of active regulatory bodies to act as a go-between for the employees and the employers. However,the wage earner fund system became a political burden for the Social Democratic Party and did not result in a basic change in Sweden's economic system. The employers tried to reverse the trend as much as was practical. Their prime aim was to deregulate Sweden and facilitate more market influences. Their policy initiatives included fragmentation of the bargaining structures, more flexible working-time arrangements, profit-sharing and payment-by-results systems. In short, I do agree with the hypothesis regarding convergence in national patters of employment relations. This is in line with Katz's hypothesis that labour and management appear to have gained distinct advantages from work restructuring that accomplished decentralization. However, shifts in bargaining power, as well as the diversification of corporate and worker interests, are important contributing factors to the decentralization process. References 1. Olle Hammarstorm, Tony Huzzard, Tommy Nilsson, Employment Relations in Sweden. 2. Olsson,1989, Labour Economics : Self-employment and risk aversion 3. Brulin & Nilsson,1991A New Regime Class Representation within the Swedish State 4. Erixon ,2000, CASE-Current Awareness Service 5. Huzzard,2000, Membership Interface Unionism: A Swedish White-Collar Union 6. Kjellberg,1992, Social democracy and full employment. 7. Elvander,2001., A New Swedish Regime for Collective Bargaining and Conflict 8. Berndt K. Keller Relations in Germany, Employment 9. Traxler, 2001,Bargaining Decentralization 10. Weiss& Schmidt,2001, web.njit.edu/jerry/CIS-677/Article-Presentations/Schmidt-DS-2001.pp 11 .Keller, 1993, Concordia - John Molson School Of Business - Centre for Business 12. Thelen, 1991, AICGS Seminar Papers 13. Wever, 1995, The Comparative Political Economy of Industrial Relations Read More