An Analysis of Collective Bargaining in Companies

A Great Social Invention?”There’s strength in numbers”This is a clich, or could even be called a proverb that most of us have heard at some stagein our lives. It also lies at the heart of collective bargaining, and it provides areasonable, although simplistic reason for the use of collective bargaining, and also givesus an indication of where and for whom it is most useful. Collective bargaining’s origins lie in one of man’s primary instincts; defence. In anindustrial relations context this is defence of proper working conditions, secure employmentand proper pay.

Collective bargaining allowed this by gaining pay increases through theincreased power of the workers as a joint force. In this context I see collective bargainingas more of an economic and political invention which has had an influence on the socialaspects of employment and living. Because of this I would have to say that collectivebargaining is not a great social invention simply because it was not a social invention.

Butit does have social benefits, by providing more economic stability for those who partake init among other things which I will discuss in this essay. Collective bargaining also has itsdisadvantages which will also discuss.

These advantages and disadvantages fall on bothsides of the collective bargaining fence; the employees and employers. But what exactly is collective bargaining? The answer to that depends on ones viewpoint. What are the social benefits of collective bargaining? And who do these benefits affect? These are but a few of the questions I intend to answer in the course of the next 2000 or sowords.

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To put this essay in context I must say what I feel collective bargaining is and what itspurposes are.I see collective bargaining, in its most basic form, as the process by which an organisedgroup of employees, in the form of trade unions, negotiate with employers, theirrepresentatives or their associations in relation to any aspect of employment within theemployers organisation. The reason that collective bargaining and trade unions are used isthe reason cited in the first paragraph; “There’s strength in numbers”. The individualthreat by a single employee to withhold labour is not very great. But when the majority of aworkforce in an organisation threaten to strike, or threaten any other form of industrialaction this threat becomes altogether more substantial.

Collective bargaining gives redressto the imbalance of power between individual workers and employers (Gunnigle et al, 1995). This is the main purpose that collective bargaining is used in industrial relations, andessentially gives collective bargaining a political purpose; the equalisation of power. Oncethis extra power is attained, collective bargaining is then used for primarily economicpurposes. It is only in recent times that social issues have been included in thenegotiations in collective bargaining. As this process tends to lead to equal pay for allworkers doing the same work, there is as a consequence a social benefit; equality amongstthe workforce. While this can have its downside, namely complacency among the employees asthere is little incentive to do better in work, this disadvantage has been partly eroded inrecent times with the advent of productivity deals, which I will discuss in more detaillater in this essay.Collective bargaining is also a political institution in that it regulates and defines theinteraction between trade unions and management. In a social context, the consequences ofthis is a system for regulating industrial conflict. This can help ensure that anyindustrial conflict is kept within reasonable bounds, and that in most cases the moremilitant elements in trade unions are kept under control by virtue of the fact that themajority of the workforce see an alternative avenue of dealing with disputes.

I believe thatthis consequence of collective bargaining contradicts the optimistic Marxist view that tradeunions and collective bargaining are a school for socialism and a potential revolutionaryforce. It does confirm the pessimistic view that it ensures that trade unions will never beany more than trade unions, and that collective bargaining oils the wheels of capitalism. But that’s not a bad thing at all, and is one of the great social benefits of collectivebargaining. So how exactly does collective bargaining oil the wheels of capitalism? Collective bargaining provides management with a method for dealing with employees in anequitable way. But not only equitable, but also seen to be equitable. If areas of commoninterest are maximised, and stressed in the collective bargaining process, this canreinforce a an acceptance of common interest by the workforce (Purcell, 1979).

The processor collective bargaining also legitimises trade unions within the company or employingorganisation. Purcell also contends that this legitimacy can give trade union members asense of belonging to the organisation (1979). These three things; the sense of equality, common interest and belonging will make workers more content, minimise conflict and create afeeling of stability within the company. Collective bargaining, when agreements that comefrom it are for set time periods, can allow management to plan for the future based on thoseagreements and the knowledge that the unions are likely to cooperate. All of the above oilthe wheels of a capitalist society. And as I both live in and believe in a largelycapitalist society, this has to be a good social influence. Collective bargaining also has its disadvantages as far as capitalism is concerned. In caseswhere radicals have managed to hijack the union’s side of collective bargaining thenunreasonable demands can lead to severe conflict. The same can be said of the employer side. Inflexible and uncompromising employers can cause severe disharmony, and possibly causeirreversible damage to the employee-employer relationship. But this will only occur in aminority

of situations. The greatest disadvantages of collective bargaining in a capitalistsociety lie mainly in the financial arena. Collective bargaining in the form of wage roundsleads to both wage and grade drift. Wage drift leads to higher wage costs for employers andhigher inflation within the economy, which in turn leads to higher interest rates and lowerinvestment. Lower investment means that fewer jobs are created, unemployment rises, socialwelfare payments increase and possibly an increase in the national debt. Following theseconsequences there would be less money in the economy overall in real terms. Grade drift isa problem for employers which is linked to wage drift. Grade drift occurs where secure jobsare one of the trade unions aims in collective bargaining. As jobs become more automatedwith the advance of technology, employers are forced to keep staff to keep to previousagreements. As companies no longer need as many staff the workforce tends to get older, withrising wage costs and mainly static skill levels. In Ireland over the last 25 years, the focus of collective bargaining has been widened to anation-wide one from localised and industry level, with various degrees of success. Thisfocus on the nation-wide picture has led to 7 national wage agreements, 2 nationalunderstandings, and three other agreements or programmes; the Programme for NationalRecovery (PNR), The Programme for Economic and Social Progress and the Programme forCompetitiveness and Work. It is my opinion that centralised collective bargaining hasevolved in much the same manner as collective bargaining itself; focusing on purely economic

issues, and then steadily including more social issues. While the national wage agreementsecured certain pay increases, the real value of those wages dropped. It was during the eraof the National Wage Agreements that inflation rose to 20%, days lost through strikesincreased and unofficial strikes increased (Gunnigle et al, 1995). Although this may seemthat this type of collective bargaining had a bad social influence, it must be noted thatthe OPEC recessions of the 1970’s would have had been a contributing factor to all of theabove. In 1987 the government, trade unions and the FUE negotiated the PNR. Other than theprovisions for pay increases, social issues were taken into consideration: ‘The programmewas to cover the period up to the end of 1990 and entailed the following provisions: -Thecreation of a fiscal, exchange and monetary climate conducive to economic growth. Thisincluded a commitment that the ration of debt to GNP should be reduced to between 5 and 7percent; -movement towards greater equity and fairness in the tax system -measures togenerate employment opportunities -Reduction of social inequalities” (Gunnigle et al, 1995, 191..192)

Overall the PNR proved to be a successful venture, although it was helped along by the boomperiod of the late 80’s. There was substantial economic growth, a reduction in the debt toGNP ratio and a decline in strike levels (Gunnigle et al, 1995). The PESP contained similar, but widened social commitments to the PNR. While not as entirelysuccessful as the PNR, the PESP had its positive social influences in the form of lowinterest rates and low inflation, in spite of the recession of the early 1990’s. Industrialpeace also continued throughout this period. The PCW, like the two programmes before it, focused on social issues in increasing strength. As this programme is still running, we can say little about its success or otherwise, otherthan to say that there is still relative industrial peace, sustained economic growth and lowinflation and interest rates. In the above discussions on the three programmes, I have only considered the more obvioussocial benefits, i.e.. those which the programmes set out to achieve. There are other socialbenefits which follow on from those discussed above. One of the most important of these isconfidence in the Irish economy. With industrial harmony, low interest rates, low inflationand sustained growth comes confidence in the economy. One indicator of the fact that the programmes inspire confidence is this: In 1987, when the PNR was being negotiated, the Federated Union of Employers had to be coerced into the negotiations. Yet in 1993, 95% ofsenior personnel managers were in favour of a further PESP style agreement. (

Gunnigle et al, 1995). The stability of the agreements has provided management with a situation where theycan be reasonably sure of what is coming and can plan ahead based on that. The programmeshave also allowed successive governments to plan ahead, something normally unheard of. Previously, governments had tended to plan for one fiscal year in the form of the budget, but now we have a situation where they are planning for three years with the programmes. Theprogrammes have also provided a sense of continuity, as successive governments from allpolitical parties have continued the programmes. This form of planning ahead has allowedsignificant progress in the areas of debt reduction, social welfare and taxation. It is not only in an Irish context that collective bargaining has been seen as desiring aneffect on social aspects of the economy. In the UK, where there has been little, if anycentralised collective bargaining, Fox states: “(Collective bargaining] has often been seenas, though not by all pluralists, not only as levelling up employee power to an acceptableapproximation of that of management, but also as reinforcing government social welfare andredistributive policies in gradually reducing class difference.” (Fox, 1985:22) But it wouldseem that the lack of any centralised bargaining has reduced this impact of collectivebargaining; “Collective bargaining has not substantially shifted the proportion of thenational product going to wages and lower salaries, nor have welfare and other so-calledredistributive policies had the equalising effects imputed on them” (Fox, 1985;22)

Inlreland, while there have been few dramatic changes with regard to social welfare, therehave been significant cuts in the effective tax rate in favour of the lower paid. If we takethe 1994 budget as one example, the effective tax rate for a single person earning 120 perweek was cut by 3% from 20.6% to 17.6%. For the higher paid, if we take the example ofsomeone earning 600 per week, the effective tax rate was only cut by 1.5% (McCarthy and Tansey, 1994). While this cannot be directly attributed to the success or otherwise of Collective bargaining, I maintain that the stabilising effect of the three agreements, alongwith the commitment therein would have had a distinct influence. This reduction in taxationwill have a social influence: “to re integrate larger numbers of the unemployed back intothe labour market, it is clearly desirable that the taxation burden on earned income bereduced” (McCarthy and Tansey, 1994;67) Centralised collective bargaining didn’t actually do away with localised collectivebargaining. Instead it changed the focus of collective bargaining. Gunnigle and Floodcontend that the focus changed from pay increases towards employment conditions, payanomalies and productivity. (1995). This is another of the good social influences ofcollective bargaining in Ireland. Now, rather than haggling over minimal wage increases, localised collective bargaining is instead working at improving working conditions, reducinggrievances and increasing productivity. This change in focus has led collective bargainingaway from the adversarial win-lose situation to a more cooperative model, with managementand unions working together to achieve common goals.

While management have had to pay outmore to improve working conditions and fund productivity deals, they have gained increasesin productivity, worker flexibility and industrial harmony. In the negotiation of these’win-win’ deals, one added bonus is the extension of trust. Where both parties to thenegotiation stand to gain, communications between them tend to be more open than would occurin an adversarial situation. If agreements are made under good faith, both parties to thenegotiation may feel a moral obligation to follow the agreement. This can cause dualloyalties in staff, that is loyalty to both the Union and the company. This can become aproblem should the good relationship between management and unions break down. (Fox 1985).I must say that although I believe that collective bargaining’s origins lie mainly in aneconomic arena, had it been a social invention it would have been a good one. In an Irishcontext, where the prevailing ideology and public opinion has allowed collective bargainingto flourish, its social impact, while not as great as some would have hoped, has been forthe better. When collective bargaining addresses a range of issues which are inter-related, and addresses the interactions between them, the benefits can be great. But when collectivebargaining focuses on one issue, without regard for its effects on other issues that theeffects can be disastrous, as seen in the case of the national wage agreements.. Collective bargaining is not however, and never will be, a revolutionary force. As Fox wrote in 1985:”Collective bargaining… emerges as a process through which employee collectives aspire,not to transform their work situation, but to bend it somewhat in their favour” (Fox, 1985;153) In conclusion then, while | believe that collective bargaining has many goodsocial influences, it cannot hope to change society in any dramatic way.