Jon Erik Dølvik, Fafo, Institute for Labour and Social Research
Introduction
Since the heyday of the Swedish model in the 1970s, discussion of the crisis and possible demise of the allegedly sclerotic Nordic labour regimes has been an ongoing exercise in international academic circles. In the 1990s, this debate took a new twist associated with the challenges of globalisation and European integration, which many observers (both on the right and the left) assumed would imply dismantling of the Nordic labour regimes and a radical weakening of their powerful unions. Expected was, in line with mainstream economic thought, a convergence towards the Anglo-American model of labour market deregulation, decentralisation and union decline (Katz 1993). The most infamous evidence that this scenario was coming through was the withdrawal of the Swedish employer confederation (SAF) from peak-level negotiations during the economic crisis in the early 90s, which in wide circles were taken as the ultimate proof that centralised collective bargaining was incompatible with the interests of powerful internationalised companies.
Largely overlooked, however, were the simultaneous reshaping of the labour market regime in Denmark through centralised decentralisation; the revitalisation of tripartite incomes policies in Finland and Norway, and the eventual renewal and strengthening of bargaining coordination at sector level in Sweden. Decentralisation tendencies are found in all countries, but in various ways the Nordic actors maintained capacity for coordination at the sector or peak levels during the 1990s (Dølvik and Vartiainen 2002). While the revival of centralised concertation in Finland went together with one of the most remarkable sequences of economic recovery and industrial innovation in recent time, and Denmark eventually became hailed as one of the European employment miracles, Sweden managed, after a period of painful adjustment, to rebalance the economy, restore growth and bring down unemployment during the 90s. Thus, contrary to the predictions of labour market sclerosis, the Nordic countries have retained their position among the OECD countries with highest employment rates (see figure 1), while at the same time maintaining high levels of trade union density and collective bargaining coverage (see figure 2). Despite the breakdown of the Norwegian Solidarity Alternative during the recent years of economic bonanza – conforming with a longstanding national pattern of cyclical oscillations between concerted wage restraint and uncoordinated wage hikes[10] – these developments suggest that the Nordic regimes of collective bargaining over the past decade, through divergent responses, have shown surprising resilience and capacity for adjustment and renewal.
Worth noting is that these developments, in contrast to predictions of neo-liberal convergence, have taken place during a period when the institutional impact of European integration and globalisation supposedly should have been hard felt and the Nordic countries have gone through severe economic crises, restructuring and significant changes in their regimes of monetary policies and macro-economic governance. In this view, why do Nordic labour and employer associations in particular – in spite of enhanced capital mobility, company exit options, technological change, and social differentiation which are supposed to undermine trade unions, boost corporate power and propel decentralisation – continue to participate in nation-wide forms of collective bargaining co-ordination?
Casting doubts on the assumptions underlying much current debate about the relationship between economic internationalisation and domestic change in labour market institutions and power-relations, these issues invite a closer comparative analysis of the actual adjustments in Nordic collective bargaining regimes in recent years. Are the Nordic regimes converging or diverging and how do the tendencies of change compare with trends in other OECD countries? How can we account for the observed changes, which role have the shifts in macro-economic and monetary policy in particular played in this context, and how have the adjustments influenced actual labour market outcomes? What is the impact of changing external constraints versus shifts in domestic configurations of actors, interests and power-relations? And how do cyclical factors condition the effects of structural change on national institutions and actor responses? Given the different approaches the Nordic countries have chosen towards EU membership, the euro, and monetary policies[11], such comparative analyses might also shed light on the respective influence of financial globalisation and European monetary integration on national wage-setting systems and the leeway left for strategic choice at the national level.
These were the kind of issues we wanted to explore when initiating the seminar on which this collection of articles is based. The remaining part of this (overview) article will sketch some of the main challenges the actors of the Nordic collective bargaining regimes are facing and indicate some of the differences in the institutional responses they have undertaken. Doing so, I will not go into the wide range of substantial problems that have to be resolved in working life, but focus on the institutional conditions for achieving the best possible trade-off between employment and wage growth.
Challenges from without and within
When analysing the challenges facing national institutions of collective bargaining, it is in principle useful to distinguish between the impact of
- External changes in the international environment;
- Domestic transformations in the social and economic fabric and politics;
- Shifts in the social actors’ interpretations, perceptions of interests, and strategies for coping with those changes.
Such distinctions are not always easy to make, however, in a world of growing transnational interdependence, where external and internal change is becoming more closely intertwined. Sometimes domestic change arises from deliberate political externalisation of certain policy instruments – a typical example being the attempts in the 1980-90s to establish external anchors for national wage setting through the pegging of Nordic currencies to DM, various ‘snakes’, ECU, euro and so on – while e.g. the impact of EU/EEA labour market regulations becomes ‘domesticated’. Nevertheless, to sort out the issues, figure 3 (below) indicates the main dynamics of change affecting Nordic collective bargaining regimes.
Changing external constraints
If we start looking at the changes from ‘without’, the broader exposure to fiercer competitive pressures – stemming from liberalisation of trade, capital mobility, exit options, foreign direct investment flows, multinational companies, and alike – has had a profound disciplining effect on wage setting. Accordingly, all the West European countries, including the Nordic, saw a marked shift to wage moderation during the 1990s (Mermet 2001). Internationalised product market competition thus seems to flatten the assumed ‘hump-shaped’ relationship between the degree of collective bargaining centralisation and macro-economic performance (Calmfors 2002, Traxler et al. 2001). Less leeway for passing cost increases onto prices in domestic branches probably also reduces the scope for wage equalisation across sectors, whereas international changes in the mode of production strengthen differentiation of work and demands for decentralised control over labour costs and flexibility (Streeck 1998). On the other hand, the rise in sheltered service employment has, especially in tight labour markets, reinforced the incentives for actors in the exposed industries to maintain control over wage formation through economy-wide co-ordination (Dølvik and Martin 2000), which was in fact the overarching rationale of the ‘traditional’ Nordic models (Aukrust 1977). Accordingly, the leading collective actors in the Nordic countries have during the past decades – despite salient tendencies of decentralisation – undertaken significant efforts to restore and renew the capacity for co-ordinated wage moderation. In Denmark and Sweden this objective was pursued by returning to the ‘classical’ mode of wage co-ordination through pattern bargaining at the industry/sectoral level, whereas Finland and Norway, by contrast, obtained the same effect through revival of tripartite incomes policies (see country studies in this volume). My first thesis is thus that the main impact of the contradictory external dynamics of change has been to spur stabilising adjustments of the Nordic collective bargaining regimes. At the same time the international restructuring of markets and production are transforming the social foundations of these regimes and making wage co-ordination more demanding, causing uncertainty about the longer term prospects.
Also the emergence of inherently instable global finance markets and the virtually universal shift to anti-inflationary macro-economic policies in the 1980s have, paradoxically, contributed to the relative stabilisation of the Nordic collective bargaining regimes. The liberalisation of credit-markets did, through different national sequences of boom and bust, prompt significant reforms in the Nordic monetary policy regimes (Tranøy 2001). An important aspect of the shift from the past pattern of competitive devaluations to ‘hard currency’-regimes (in Denmark 1982, in Norway 1986, and in Sweden and Finland 1990), was to establish external anchors for domestic wage setting (Iversen 1999).[12] Be it through stable exchange rates or inflation-targets, the effective consequence was to force the collective actors to take the external effects of collective bargaining on inflation, interest rates and employment directly into account, thus further strengthening incentives to maintain capacity for coordinated wage restraint. If not, the independent Central Banks are likely to retaliate with higher interest rates. This shift in the interaction between monetary policies and wage setting – which is often overlooked in debates on bargaining systems – was apparently of great importance for the return to low inflation and moderate wage growth in the Nordic countries in the 1990s. In the same vein, the weakened capacity of the state has strengthened its dependence on the social partners in achieving employment goals, thereby also increasing the state’s interest in preserving and improving the ability to reach economically viable, coordinated solutions. Various forms of state pressure and intervention were thus instrumental in forging the shift in wage setting in Denmark in the mid-80s, and later on in Norway, Finland and Sweden (Elvander 2002).
Membership of the EMU/euro further reinforces the need for domestic ‘shock absorbers’ in the labour market, and is essential to understand the resurgence of Social Pacts in Europe and the creation of ‘buffer-funds’ in Finland in recent years (Pekkarinen 2001; Alho, this volume). The idea behind these funds is to develop means for adjustment of employers’ indirect labour costs in case of national economic shocks and thereby reduce the pressures for nominal wage flexibility under EMU. This issue is currently also under discussion in Sweden associated with the debate on EMU-membership (Calmfors 2002). The reason is that without capacity to adjust national interest rates and/or exchange rates, the labour market actors are deemed to play a more central role in cushioning national economic ‘shocks’ and preventing rising unemployment. Although this aspect of the EMU has spurred initiatives to strengthen wage co-ordination in most member states, uncertainty remains as to how disappearance of the deterrent function of national Central Banks will influence the actual behaviour of wage-bargainers (Dølvik 2002).
The development of European labour market regulations and social dialogue has so far had modest impact on collective bargaining in the Nordic countries. Apart from filling loopholes in Nordic worker rights and providing arenas for employee voice in transnational companies, the main institutional effect has been to compel the Danes to accept certain elements of statutory employment regulation. A possible issue for the future, however, is how Nordic collective bargaining actors – who are proud protectors of their sovereignty – will respond if (or when) worker representatives in transnational companies start negotiating cross-border agreements on pay-related issues, or if the European trade union initiatives to co-ordinate national wage-policies under EMU gain momentum (Dølvik and Vartiainen 2002).
Internal pressures for change
Contrary to the current obsession with external threats, my second thesis is that the most profound challenges facing the Nordic collective bargaining actors are coming from ‘within’, stemming from endogenous changes in the structure of industries, employment and work. Engendering transformations in the pattern of organised actors, interests and power-relations in collective bargaining, these changes tend to increase the complexity of wage co-ordination and challenge the egalitarian ethos of wage setting in the Nordic countries. Associated with the shift towards a post-industrial working life, suffice it here to mention the decline in manufacturing employment and growth in services; rising education and professional skills; blurring of industrial, occupational and collective agreement boundaries; deployment of tasks; performance-based pay systems; rise in small, fluid companies, franchising, chains, outsourcing, networks, triangular employment relationships, flexibility, and search for self-determination, and so on (Dølvik 2001). The main effect of all this is to shift the numerical weight away from the traditionally dominant, export-based actors of the Nordic collective bargaining regimes and to strengthen the size of challenging organisations based in the domestic sectors. Combined with the growing differentiation of company and employee interests alike, the result is that interest intermediation becomes more demanding both within and among associations on either side of the bargaining tables. While inherited perceptions of fairness and social justice become contested, the classical sources of functional, numerical and market-based bargaining power have to be complemented by ability to master customer-relations and win public support through tabloid media-battles.
The question is thus, in short, whether the collective actors under these circumstances can maintain their capacity for co-ordinated interest intermediation and encompassing compromise? Can they develop new modes of articulation between different levels of collective bargaining, which can enable them to reconcile conflicting sectoral interests with demands for greater autonomy at decentralised level and improved coordination at the macro-level? And can they mobilise members and muster public legitimacy around coordinated solutions?
Organisational structures in flux
Contrary to the view that structural change renders co-ordination impossible, my third thesis is that the answer to the questions above primarily hinges on the collective actors’ internal capacity to adjust their organisational structures, agendas, and modes of co-operation. Coping with heterogeneity, countering free-riding and handling conflicting external and internal interests has been an inherent problem of collective bargaining since its very rise some hundred years ago. In that sense, the current challenges are not entirely new, although the growing diversity of interests has added to their complexity (Hyman 1999). In facing these challenges, the two main sides of the bargaining tables are bound together in a common destiny – which is sometimes overlooked – whereas within-class rivalries are often harder to resolve. Yet, the organisational picture and the boundaries of bargaining domains in the Nordic countries are currently undergoing significant changes. While the blurring of industrial, occupational and collective bargaining domains favours establishment of larger, vertical entities (concentration) in traditional areas, the demand for diversified solutions, professional identity, and democratic accountability leads to specialisation in other areas (Dølvik and Waddington 2002). In many instances, attempts are made to bridge between these contradictory dynamics by forming greater bargaining entities and allowing more leeway for decentralised settlement of specific issues. Efforts to improve the recruiting and retaining of members through better membership services and support have spurred a variety of responses depending on the target groups. Besides the rise in mergers and amalgamations of associations on either side, new forms of alliances, bargaining cartels, and other kinds of cooperation are flourishing, often cutting across former confederate divisions. Hence, the actors of collective bargaining in the Nordic countries seem to be in the midst of hectic processes of associational realignment and reform. Whether these processes will add to organisational fragmentation and competition (in Norway there are currently four union confederations) or eventually will lead to patterns that are more coherent and consistent with the changing environment of collective bargaining remains to be seen. But the range of change do show that the willingness to adjust is there, indicating that the collective actors may prove less antiquated than many like to believe.
State-dependency
To what extent the social actors will succeed in reforming their modus operandi is not simply a matter of their own choice, but will – and that is my fourth thesis – be decisively influenced by the political willingness to provide support in maintaining and improving existing legal and institutional frameworks that facilitate collective organisation and co-ordinated interest intermediation. Comparative evidence is strong that persistence of social institutions for collective self-regulation of the employment relationship and distribution of the fruits of productive work is critically contingent on a supportive state third party (Crouch 1993; Traxler 1998). Such support can take a variety of forms, ranging from employment legislation that encourages agreements and mechanisms for mediation, dispute settlement and recognition of agreements, to economic contributions in tripartite exchange. In Finland, co-ordinated solutions have been enhanced by state contributions in incomes policies and underpinned by mechanisms for extension of agreements. In Denmark and Norway, the strong mediating institutions (in Denmark including the right for the mediator to couple ballot votes across bargaining domains) and the longstanding traditions for state-intervention in settling disputes have enabled encompassing co-ordination. By contrast, such state intervention has been regarded utterly illegitimate within the Swedish legacy of self-regulation (Stokke 1998). However, recent institutional innovations associated with the Industry Agreement, alongside political reforms in the prerogatives of the public mediator in Sweden, have brought important changes with respect to third-party facilitation of social compromise (Stokke and Thörnquist 2001; Ohlsson, this volume). Taking also into account the strong support for social partnership emanating from the EU, prospects for radical change in the role of the state do not appear likely in the short run. The new Danish government’s plea for a ‘free labour market’ and the Norwegian centre-right government’s ambiguous approach towards the trade unions, may, however, bode for more strained relationships in the years to come.
Conclusion: Divergence and convergence?
In view of the referred shifts in the external conditions and monetary policy regimes, together with the reforms in national bargaining orders and patterns of organisation, I will for the matter of discussion suggest a tentative fifth thesis: Contrary to their predicted withering, the Nordic collective bargaining regimes (except the Norwegian) have during the past decades been subject to adaptations and institutional innovations of such a significance that they have become substantially better equipped to manage the conflicting demands for decentralised flexibility, sector specific adjustment, and macro-economic concertation.
Contrary to the view that the Nordic collective bargaining regimes belatedly are converging towards the decentralised Anglo-American model, the Nordic countries have chosen quite different paths of adjustment. Yet, leaving aside the divergent fates of peak-level bargaining, there are important common characteristics, which may point towards the emergence of a new mode of articulated, multi-tiered collective bargaining systems. The increasing leeway for decentralised wage setting is counterbalanced by renewed forms of co-ordinated framework agreements on the industry/sector level, which are bound together through various processes of norm building and creation of common understandings at the cross-sectoral level. Whether the latter take the form of pattern bargaining at industry/sector level (Sweden and Denmark), informal talks within and among peak confederations that supervise their affiliates’ agreements and decisions to take industrial action (Denmark),[13] or explicit income-political settlements at peak level (Finland, and perhaps again in Norway) seem less important. The essential point is that the leading actors apparently have maintained their capacity to influence aggregate wage formation and thereby can play their role in signalling exchange, tacit interaction and/or overt concertation with the fiscal and monetary authorities. A major strength of such a multi-tiered system is that it allows for flexible adjustments and shifts in the level of emphasis with fluctuating economic circumstances. The potential weakness is the risk that actors at different levels start acting on their own, requiring that effective mechanisms of co-ordination are in place at the decisive industrial/sectoral level. The critical point here is, of course, the common Nordic experience that domestic sectors under favourable economic circumstances may be tempted to break ranks, as recently witnessed in Norway.
With the loss of monetary instruments under the euro-regime, the capacity for flexible wage co-ordination becomes even more critical, as illustrated by the Finnish case. Although the above analysis may suggest that the Swedish and Danish regimes of collective bargaining have become reasonably well equipped for euro-membership, it is probably no overstatement that such a choice will imply a permanent challenge in maintaining and improving the stability and ‘shock-absorbing’ capacity of national wage-setting institutions. For the trade unions, such a shift will also strengthen the quest for taking a more pro-active role in the European trade union initiatives to co-ordinate national wage policies. The aim of these initiatives is to ensure that the aggregate externalities of national wage setting are neither producing a spiral of competitive wage-bidding (beggar your neighbour policies), nor unleashing a spiral of wage-price inflation that will prompt the European Central Bank to raise interest rates and thus reduce growth, employment, and income for all (including those outside).
Although the Nordic collective bargaining regimes have shown divergent responses to the challenges facing them, they have in a broader perspective moved in the same direction. They have become more similar to Continental European models, or more rightly, the traditional German model built on close interaction between a strong, independent Central Bank and co-ordinated pattern-bargaining on industry level (Iversen and Pontusson 2000; Hall 1994). As known, that model worked quite well until the German reunification crisis and it has worked well in Denmark and Sweden during the 1990s. Whether it is a model for a Nordic future in the shadow of the euro-zone remains, however, to be seen. While the broader exposure to international product market competition will probably strengthen its viability, the volatility of small currencies in this context may, as indicated in Norway these days, pose stronger demands on the systems of wage setting. Whether such considerations will eventually tempt Sweden and Denmark to join the euro is not an issue to speculate about here, but the subsequent presentations of recent experiences in our Nordic neighbour countries will definitely be of great interest for the actors in the stumbling Norwegian regime of collective bargaining. In contrast to the analysis of the Norwegian situation presented by Høgsnes (this volume), which seems to suggest that changes in labour market structures, attitudes, and power-relations have rendered decentralisation inevitable, the experiences of the other Nordic countries do indeed indicate that collective learning, adjustment and co-ordination is still possible.
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[10] The rise in oil revenues, wage growth, interest rates and the exchange rate in recent years has, after the frivol 2002 pay round, sparked off a serious crisis in Norwegian manufacturing. This has prompted high-level efforts to reconstruct the frameworks for incomes-political co-ordination, the result of which remains to be seen yet.[]
11 While Denmark joined the European Community in 1972, and Finland and Sweden followed in 1995, Norway became part of the Single Market through the European Economic Area agreement from 1994. Finland has so far been the only Nordic country joining EMU and the euro. Denmark has long maintained a fixed exchange rate vis-à-vis ECU/euro, whereas Sweden and Norway eventually adopted floating exchange rate regimes during the 1990s. Both Sweden and Denmark are now heading towards new referenda on EMU/euro membership.[]
12 In certain respects, this implied a return to the ‘old deeds’ prevailing under the Bretton Woods system with fixed exchange rates vis-à-vis US dollars, when the competitiveness of the internationally exposed sectors determined the parameters for domestic wage setting.[]
13 In 1999, the Danish confederations also signed a so-called Climate agreement, according to which they commit themselves to take part in joint deliberations concerning the economic situation and the room for manoeuvre before each pay round.