TURI-seminar IRES, Paris 28 September 2015 Structure of presentation: 1.) Broader political context of the public-private pay debate: in particular the role public sector wages within the current crisis management 2.) Look at the underlying assumptions of the current interpretation of the role of public sector wages 3.) Findings of previous studies and why these should be treated with caution 4.) Results of our own investigation of public and private sector pay developments 5.) Policy implications of our findings You can read all of this in more detail in the report which we put together for this conference. TURI-seminar IRES, Paris 28 September 2015

Output of CAWIE II Project Collectively Agreed Wages in Europe Grant: European Commission (DG Employment) Coordination KULeuven-HIVA (Belgium) and WSI (Germany) Research group: 14 Institutes from the TURI-Network AIAS (Netherlands) FAFO (Norway) AK (Austria) FAOS (Denmark) Associazione Bruno Trentin (Italy) IRES (France) Fundacion 1 de Mayo (Spain ESRITU (Hungary) Instituto Ruben Rolo (Portugal) ETUI (EU) Labour Institute for LRD (UK) Economic Research (Finland) Guy Van Gyes & Thorsten Schulten 28.09.2015

Main argument built-up in the book Critique of the dominating view on wages and its policy implications Negative implications of this dominating view Building an alternative strategy: coordinating inclusive growth Guy Van Gyes & Thorsten Schulten 28.09.2015

Wages in the crisis – Dominating European policy view Crisis is essentially seen as a crisis of cost competitiveness Imbalances are the result of divergent unit labour costs development Asymmetric view: Wage developments in the deficit countries were “too high” so that they lost competitiveness Symmetric view: Wage developments in the surplus countries were “too low” (wage-dumping hypothesis) Guy Van Gyes & Thorsten Schulten 28.09.2015

Wages and the crisis – Empirical critique of the dominating view Noélie Delahaie, Sem Vandekerckhove and Catherine Vincent Chapter 2 Wages and collective bargaining systems in Europe during the crisis TURI database of 10 countries with statistics on collectively-agreed wages Dominant story based on evolutions of nominal unit labour costs (Real) wage trends different (certainly when making abstraction of Germany) Wages (agreed and actual) grew in line with price increases Prior to the crisis: almost all countries modest wage growth since the early 2000s when also taking productivity increases into account Thus: Forgetting the demand-side: diminishing labour share in national income Plus: Need to take better into account the composition effect of a crisis period (cf. Spanish wage development in the first crisis period => rise in unemployment is not evenly distributed over the wage curve) Guy Van Gyes & Thorsten Schulten 28.09.2015

Wages and the crisis – Conceptual critique of the dominating view Torsten Müller, Thorsten Schulten and Sepp Zuckerstätter Chapter 7 Wages and economic performance in Europe Narrow concept of competitiveness: exclusive focus on labour costs regardless of the structure of real economy regardless of non-price factors loose relation between wages and export performance Narrow treatment of wages as cost factor: Ignorance of the role of wages for domestic demand – wage-led demand growth model = Eurozone Overestimation of the export sector for the overall economic development Guy Van Gyes & Thorsten Schulten 28.09.2015 6

Policy implications of dominating view on wages New European Interventionism: Economic Governance: European Semester/European Imbalances procedure Half of the EU Member States got already recommendations since 2011 Troika /Memorandum of Understanding Policy measures: Direct intervention into wage developments by cutting and freezing public sector and minimum wages Structural reforms of wage setting institutions to increase downward flexibility of wages Guy Van Gyes & Thorsten Schulten 28.09.2015

Main argument built-up in the book Critique of the dominating view on wages and its policy implications Negative implications of this dominating view Building an alternative strategy: coordinating inclusive growth Guy Van Gyes & Thorsten Schulten 28.09.2015

Implications of current wage policy Radical decentralisation and deconstruction of collective bargaining: Many countries of Southern and Eastern Europe Decrease of real wages in a majority of European countries: Internal devaluation in the South German shadow in the North (Social) Cost(ly) strategy in the East Guy Van Gyes & Thorsten Schulten 28.09.2015

Changes in collective bargaining systems in EU countries under EU, ECB and/or IMF surveillance Abolition/termination of national collective agreements Ireland, Romania   Facilitating derogation of firm-level agreements from sectoral agreements or legislative (minimum) provisions Greece, Portugal, Hungary, Italy, Spain General priority of company agreements/ abolition of the favourability principle Greece, Spain More restrictive criteria for extension of collective agreements Greece, Portugal, Romania Reduction of the ‘after-effect’ of expired collective agreements Possibilities to conclude company agreements by non-union employees Greece, Hungary, Portugal, Romania, Spain  Guy Van Gyes & Thorsten Schulten 28.09.2015

Deconstruction/decentralisation Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo Leonardi Chapter 3 Impact of the euro crisis on wages and collective bargaining in southern Europe – a comparison of Italy, Portugal and Spain Portugal Spain 2008 2013 Agreements 295 94 5987 3161 Of which company 95 48 4539 2274 Extension 137 9 Workers covered 1,8 million 242 thousand 12 million 8.5 million Guy Van Gyes & Thorsten Schulten 28.09.2015

Real compensation in the EU 2010-2014 Guy Van Gyes & Thorsten Schulten 28.09.2015

Low-cost strategy in the East – Non-developing wage bargaining Szilvia Borbély and László Neumann Chapter 5 Similarities and diversity in the development of wages and collective bargaining in central and eastern European countries – a comparison of Hungary, Slovakia and the Czech Republic Low-wage countries Wage and social harmonisation with rest of Europe fading Income policy = government prerogative Taxes, minimum wage, social transfer Tripartite dialogue but political domination of agenda Mainly decentralised collective bargaining Decreasing organisational strength unions and employers’ organisations Key example = Hungary Guy Van Gyes & Thorsten Schulten 28.09.2015

Shadow of Germany in the North Søren Kaj Andersen, Christian Lyhne Ibsen, Kristin Alsos, Kristine Nergaard and Pekka Sauramo Chapter 4 Changes in wage policy and collective bargaining in the Nordic countries – a comparison of Denmark, Finland, Norway and Sweden Table 1 Mechanisms for determining wages in the Nordic countries Coverage of collective agreements in the private sector* Extension of collective agreements Regime Denmark 74% No Autonomous Collective bargaining model Sweden 85% Norway 50% Yes, some since 2004 Mixed model Finland Yes, widespread Statutory regulations (and strong unions Iceland 95% Figure 1. Developments of average wages and collectively agreed wages in Finland and in Germany 2001-2013: manufacturing (%). + Social dumping in the liberalising labour mobility (construction, transport, food industry) Guy Van Gyes & Thorsten Schulten 28.09.2015

Growing divergence in demand, inequality, poverty between countries Non-convergence: internal and external imbalances/inequalities => less social inclusion Maarten Keune Chapter 8 Less governance capacity and more inequality: the effects of the assault on collective bargaining in the EU Odile Chagny and Michel Husson Chapter 9 Looking for an ‘optimal wage regime’ for the euro zone Growing divergence in demand, inequality, poverty between countries Pre-crisis: see next presentation for details Non-convergence in productivity; real wages in the service sector, inflation Since the crisis Deflation popping up around the corner; sluggish growth Increased ‘beggar-thy-neighbour’ => high social cost Loss of a governance instrument Guy Van Gyes & Thorsten Schulten 28.09.2015

Main argument built-up in the book Critique of the dominating view on wages and its policy implications Negative implications of this dominating view Building an alternative strategy: coordinating inclusive growth Guy Van Gyes & Thorsten Schulten 28.09.2015

What kind of wage policy for inclusive growth? Thorsten Schulten and Guy Van Gyes Concluding remarks A transnational coordinated reconstruction of collective bargaining as a precondition for inclusive growth in Europe Inclusive growth strategy Reference in new economic discourse (EU 2020, OECD etc) Everyone should participate in economic development Reduction of inequality Better economic performance What role for wage policy? Everybody a fair share Wage-led demand growth Unions and organised wage bargaining as countervailing power to market/capital forces Coordinated wage bargaining (multi-employer, institutionally supported, coordination by centralisation) = Belief in the own European model of a social market economy Guy Van Gyes & Thorsten Schulten 28.09.2015

Towards an alternative view on wages? Torsten Müller, Thorsten Schulten and Sepp Zuckerstätter Chapter 7 Wages and economic performance in Europe Stabilising and enforcing wage developments: counter deflationary price developments stabilise and increase private demand counter income inequality Pushing ‘smart’ productivity growth Requires … stop of wage cuts and wage freezes wages increase at least in line with productivity and target inflation more expansive wage developments in the surplus countries Requires … as STRUCTURAL REFORM Strengthening/reconstruction of wage setting institutions Guy Van Gyes & Thorsten Schulten 28.09.2015 18

Towards an alternative view on wages? Reconstruction of wage-setting institutions in Europe requires as structural reform … No more restrictions and interventions in autonomous collective bargaining Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo Leonardi Chapter 3 Impact of the euro crisis on wages and collective bargaining in southern Europe – a comparison of Italy, Portugal and Spain Promotion of a higher bargaining coverage Maarten Keune Chapter 8 Less governance capacity and more inequality: the effects of the assault on collective bargaining in the EU Promotion of multi-employer bargaining “The impulse to collective industrial relations in the UK private sector has not entirely disappeared and might be re-kindled under the right circumstances” Lewis Emery Chapter 6 Multi-employer bargaining in the UK – does it have a future? Guy Van Gyes & Thorsten Schulten 28.09.2015 19

Reconstruction: European minimum Wage Policy Thorsten Schulten, Torsten Müller and Line Eldring Chapter 10 Prospects and obstacles of a European minimum wage policy Current situation: rather low MWs at rather low level Future: 60% of the median wage 28 million workers in the EU ! (2010) Guy Van Gyes & Thorsten Schulten 28.09.2015

Institutional support: Can extension mechanisms support the reconstruction of collective bargaining ? Thorsten Schulten, Line Eldring and Reinhard Naumann Chapter 11 The role of extension for the strength and stability of collective bargaining in Europe A high bargaining coverage usually requires some form of state support through extension or functional equivalents Current attempts at national and European level to reduce or even to abolish extensions lead to a strong decline of the bargaining coverage European policy to strengthen collective bargaining would require a European initative to promote extension Guy Van Gyes & Thorsten Schulten 28.09.2015

What next? Macro-economic challenges Political challenges A European Solidaristic Wage Policy: Is there an optimal wage coördination (rule) beyond the national? Macroeconomic Coordination: How to coordinate Wage with Monetary and Fiscal Policy? Political challenges How to strengthen European wage coördination? What actors? What instituions? How to bring economic democracy in European governance Guy Van Gyes & Thorsten Schulten 28.09.2015

Thank you very much for your attention ! Free download: http://www.etui.org/Publications2/Books/Wage-bargaining-under-the-new-European-Economic-Governance Thorsten Schulten Guy Van Gyes WSI HIVA Guy Van Gyes & Thorsten Schulten 28.09.2015