Positive outcome for measures to combat social dumping

Schemes to combat social dumping in the Norwegian labour market have succeeded, especially in areas where there are collective agreements, according to recent research. The Norwegian government decided to take action after the EU enlargements, in 2004 and 2007, led to a large influx of workers and subcontractors from Eastern Europe. The results of the research were published in December 2011, and extra measures are now being discussed by the government and social partners.

Background

The EU enlargements in 2004 and 2007 coincided with a sharp growth in demand for workers in the Norwegian labour market. These workers mostly came from Eastern Europe, but this influx led to social dumping; - the problem of poor pay and conditions, breaches of health and safety rules, and unfair competition. The government launched two action plans in 2006 and 2008 to combat this. Many of the measures were initiated by the trade unions, Fellesforbundet and The Norwegian Confederation of Trade Unions (LO), who demanded that collective agreements be made generally applicable – a new measure that would have substantial effects on parts of the industrial relations system. This idea was met with scepticism by employers.

In 2010 the research institute Fafo was commissioned to evaluate several of the measures. The key questions were to what extent they had worked, and whether they had helped to reduce social dumping. The research also included assessments of:

Implementation of measures

Role of the Inspection Authority

The new measures led to the Labour Inspection Authority being given greater resources and better means to monitor and control social dumping. This has led to more inspections, which yielded immediate results and generated increased media attention. However, the authority’s ability to follow up these cases, once uncovered, seems to have been inadequate. The cases are often complex and have connections abroad, which require a lot of expertise and resources. The authority’s ability to halt work which is violating extended collective agreements, has fulfilled expectations, but the authority needs greater powers, such as the ability to impose fines on the spot.

ID-cards in the building and construction sector

A scheme obliging construction workers to carry ID-card has worked well against social dumping, requiring that companies must be publicly registered, in several ways, in order to acquire ID-cards for their employees (NO0705019I). The scheme was originally brought in to improve health and safety, and although there are substantial doubts as to whether this has been accomplished, it has at least indirectly succeeded, by making it easier to account for workers on site. In May 2011, 283,000 cards were being used. Nearly 25% had been issued to foreign nationals, with 13% going to employees from the new EU countries. A survey carried out among Polish workers in the Oslo area, however, showed that more than 33% did not possess an ID card.

Extending collective agreements

Making collective agreements generally applicable is the most important line of defence against low-wage competition, and many of the measures outlined in the action plans aimed to do this. As of March 2008 employers were obliged to make information available and to ensure that contractors complied with the generally applicable collective agreements (NO0705019I). From January 2010 joint and several liability was also introduced, making contracting companies responsible for the pay and conditions of employees in subcontracting companies (NO0906019I, NO0902039I). The Fafo survey shows that of the contractors/commissioners covered by extended agreements, 20% rarely or never require their subcontractors to adhere to certain wage and working conditions. In a survey of Norwegian companies, only 50% of the respondents said they get any such demands from main contractors. The Fafo researchers therefore concluded that the 2008 regulations are of little practical value in parts of this industry.

Half the shop stewards in the building and shipyard industry state that they always, or at least regularly, demanded access to information about the working conditions in supplier companies. The main impression is that this right of access is used when shop stewards feel the need for such access, but that there is still a substantial potential for shop steward involvement in this regard.

Joint and several liability is a relatively new mechanism, and as such is too early to evaluate. The evaluation nevertheless revealed that the mechanism is relatively well known both among managers and shop stewards, and that it probably encourages companies to oblige their sub-contractors to obey the law. The scheme seems, however, to be most effective in contracting companies where the workforce is unionised, because employees have access to help in making any claims.

Effects of extension on pay

Few workers covered by extended collective agreements are, according to Statistics Norway (SSB), paid less than the lowest pay rates in these collective agreements. It is difficult to tell whether the extension of collective agreements to subcontracted workers has made any difference. Eastern Europeans in the construction industry, and in shipyards, are generally paid less than the average Norwegian worker but, on the whole, get more than the agreed minimum pay rate. The labour force and living conditions survey carried out among Polish workers in 2010 shows that the vast majority of Polish labour immigrants in Oslo are paid low wages. Some 80% are paid at or above the minimum pay rates. Those who earned less than this were mostly involved in:

  • unregistered work;
  • foreign subcontracting firms;
  • a loose and temporary association with the labour market.

Notification and registration duty of temporary work agencies

In January 2009 employment agencies in Norway were obliged to register their business activities (NO0808039I). To do this, companies have to meet demands regarding their organisation, as well as registering with the national company register and the national tax authorities. This is to ensure that they can be properly monitored, the authorities get an overview of the industry, and that they abide by the law. Foreign companies must also have a representative stationed in Norway. However, the evaluation shows that the registry does not provide a sufficient overview of the industry, and that there is substantial uncertainty as to whether this has improved working conditions.

Information and consultation

Consultation and information have been key to the authority’s efforts against social dumping. The measures introduced range from the establishment of service centres for foreign workers to information distributed through the internet and in brochures. The service centres are considered to be a success. They are based on cooperation between tax authorities, the Labour Inspection Authority, the Norwegian Directorate of Immigration (UDI) and the police, and are well known and well attended. However, they suffer to some degree from the fact that they do not have input from the Norwegian Labour and Welfare Service (NAV).

Information made available has been praised for its quality of translation and accessibility, but has been criticised for tending to be out of date, or failing to address new groups of immigrants.

Overall evaluation

Overall, the evaluation concludes that the measures have had a positive effect, and that the problems associated with social dumping would have been greater without them. The measures have succeeded most in areas where collective agreements have been made generally applicable – and where both regulations and monitoring capabilities have been greatly enhanced. They have not been so effective in areas where there is no extended collective agreement combined with significant labour immigration and service mobility. As long as the extension mechanism is not in use, and the authorities do not have supplemental means to fix minimum salaries, there is still a substantial risk of low-wage competition and wage dumping.

Commentary

Even though the government measures to combat social dumping have had a positive effect, further measures are being discussed by social partners and the government. These are related to the implementation of the EU directive on temporary agency work, strengthening the responsibility of the hiring company, increased focus on low-wage competition in the service sector, and decisions on whether to make collective agreements generally binding.

Kristin Alsos, Fafo

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