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Unions 21
| Blog post

The why and how of multi-employer bargaining

By Stan De Spiegelaere, Policy and Research Director, UNI Europa | 6 min

In recent years, we’ve seen a renewed interest in multi-employer and sectoral collective bargaining. This makes sense as there is much to say about its advantages, but to get there you need an enabling and facilitating policy framework.

Being from Belgium, I was quite surprised when reading David Madland’s book “Re-Union”. I’m used to Belgium being ignored or criticised, but here was an American expert praising the Belgian institutions and putting us in the same basket as the Scandinavian countries. The point Madland makes is that the US needs sectoral bargaining, and that it should look at countries like Belgium for inspiration. This point equally applies to countries as the UK where unions generally negotiate for single companies while there are massive advantages about multi-employer or sectoral bargaining.

The case for multi-employer bargaining.

Compared to collective bargaining for single companies, or worse, no bargaining at all, multi- employer and sectoral bargaining have a number of benefits. For workers, it guarantees a form of equal pay, independent of whether they happen to work for company X or Y in a certain sector. Trade unions can much better coordinate their bargaining demands and cover much more workers.

Economically, multi-employer bargaining ‘takes wages out of competition’. Through sectoral minimum wages and working conditions, companies can no longer undercut each other by making their workers work harder for less. Instead they need to focus on improving efficiency, innovation, quality etc. This kind of competition is beneficial compared to a race-to-the bottom and benefits employers just as the employees.

No wonder that in a number of countries there is an renewed interest in such structures of collective bargaining. Australia and New Zealand recently adopted ground braking legislation installing a framework for sectoral fair pay agreements. The European Union just last year adopted a new directive for the promotion of (sectoral) collective bargaining and Romania this year passed a law facilitating multi-employer deals.

But how to get there? Enable and facilitate

Time, therefore, to have a look at how one can enable (and promote) multi-employer and sectoral bargaining. The first step is enabling sectoral collective agreements legally. In many countries such agreements are practically impossible to reach legally because of strict rules about the bargaining unit, or the impossibility of having two collective agreements (a sectoral and company level one) applying to workers.

Next the scientific literature suggests two main necessary conditions for multi-employer bargaining: organised employers and workers. Without the parties to negotiate an agreement covering multiple companies, the likelihood from it happening is virtually zero. In the Romanian banking sector which re-introduced multi-employee bargaining in 2018, the first step was to create an employer organisation of those banks that were willing and able to bargain.

Enabling multi-employer bargaining is often not enough. Policy also needs to facilitate multi- employer bargaining, because there are free-rider problems abound. At the side of the workers multi-employer bargaining might decrease the incentive for individual employees to join a union if they get the benefits from the higher-level agreement anyway. Employers too might want to save on membership fees of employer organisations and investing resources in bargaining, if they can free- ride on the effort of others.

Therefore, any country with strong multi-employer bargaining system has a policy framework that facilitates in different ways the actors to organise and the bargaining to occur. This can happen in a variety of ways.

First of all, countries might facilitate worker and employer organising. In the Scandinavian countries (and Belgium) so-called Ghent systems involve unions in the payment of unemployment benefits and therefore gives the unions a high-road to recruitment and organising. Other countries make company level voice mechanisms (such as works councils, union delegations) obligatory for companies of a certain size or provide unions with ample rights (e.g. to access the workers) and protection in organising workers.

Second, policy often makes ‘opportunity structures’ which facilitate sectoral bargaining. This can be through obligatory sectoral social dialogue organised by the state. While these institutions are not bargaining institution per-se, they bring the bargaining parties regularly together and provide incentives to bargain and conclude agreements.

Third, quite a number of countries strongly support multi-employer bargaining through ‘extension mechanisms’. An agreement which answers to a number of conditions in terms of representativeness can be given the power of law and apply to all companies in a sector, whether or not these companies are member of the employer organisation. These extension mechanisms put a turbo on the effect of multi-employer agreements to regulate the economy and the market and effectively takes wages out of competition for the whole sector.

Fourth, policy can install a mechanism that provides fall-back options when negotiations fail (or don’t start up). In Austria, this happens through the obligatory membership of employers to the chamber commerce which negotiates collective agreements with the unions. Australia and New Zealand recently put up a system of Fair Pay agreements which obliges negotiations and if these fail, sectoral standards can be imposed.

Fifth, bargaining can also be stimulated by attaching some benefits to the presence of a multi- employer collective agreement. In Belgium, for example, companies can diverge from some working time regulation if, and only if, there is a sectoral and company agreement on those topics.

And last but not least, countries can use their spending power to support sectoral bargaining. Public contracts can have ‘prevailing wages’ clauses like in the US that require the contractor to pay wages in line with the (collectively agreed) standard of the sector and thus pushes companies to join the negotiation. Similar policies exist in countries like Germany, Sweden, Denmark and Malta.

Political window of opportunity

The recent changes in legislation in Australia, New Zealand and Romania show that reimagining social dialogue and industrial relations is possible and feasible. Even the European Union, which was at the forefront of the demise of much of the collective bargaining in member states, has now changed course and pushes countries to invest in strengthening collective bargaining. Surely a country like the UK, with its rich history of sectoral bargaining and industrial relations, can follow suit.

Stan writes this contribution in his own name.

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