Industrial relations in Poland: the emergence of a new model of labour relations?
This feature reviews the transformation of the Polish economy in the 1990s and examines the linkages between the processes of privatisation and "marketisation" and the emergence of a new model of labour relations. In particular, it explores the role of trade unions in the transformation process, and the implications for the industrial relations system. Poland is one of the countries currently pursuing accession negotiations with the European Union.
This is the latest in a series of articles examining the industrial relations systems of the Central and Eastern European countries which are due to start European Union accession negotiations in 1998 - see EU9708143F, EU9709146F and EU9710152F. Here we focus on Poland, drawing on recent literature.
Agenda 2000, the European Commission's July 1997 programme for EU enlargement, affords only limited importance to cohesion in the areas of social and employment policy. Nevertheless, the development of such policies and the constructive cooperation between the social partners are among the key determinants of a successful cohesion policy. Poland has recently undergone a "shock therapy" of privatisation and "marketisation" leading to high unemployment and significant hardship. The trade union movement in Poland played a crucial role in the political revolution as well as in political leadership in its aftermath, which has led to a complex situation. Labour relations are now characterised by centralised tripartite bodies, which effectively operate an incomes policy tied in with macroeconomic priorities, and by weak enterprise-level structures, because of the increase in the number of small and medium-sized enterprises (SME s) and the compartmentalisation of larger business units.
In the 1970s and 1980s, Poland suffered a series of economic and political crises. These were further exacerbated by economic reliance on the West, which resulted in the accumulation of severe debt problems and the political revolts of 1980 and 1989. By 1979, the burden of debt-servicing accounted for 75% of export earnings.
By the late 1980s a political consensus had been established in favour of pursuing market-based reforms. In 1989, Solidarity was successful in the general elections and gained all the seats it was allowed to compete for, and subsequently went on to advocate free market reforms and publicly support the first non-Communist Government led by Prime Minister Tadeusz Mazowiecki. It has been argued ("Desperately seeking capitalism: Solidarity and Polish industrial relations in the 1990s", Al Rainnie and Jane Hardy, Industrial Relations Journal, Volume 26 No. 4, December 1995)) that it is vital to recognise Solidarity's role not only as a trade union, but also as a quasi-political party and a social movement. The tensions deriving from Solidarity's multifaceted role will be outlined below.
The Balcerowitz plan and the impact of marketisation
Once in power, the Mazowiecki Government implemented macroeconomic reforms based on the so-called "Balcerowitz plan" (named after the finance minister). The plan established a foundation for a market economy by establishing a break with the state protection of the economy. This was achieved through: the withdrawal of state subsidies; the privatisation of previously state-owned industries; and the encouragement of foreign direct investment.
This programme of shock therapy had numerous implications for enterprises and workers. Enterprises lost their monopolistic position in the market and found themselves having to compete against foreign companies. This led to the loss of a significant proportion of their market share, and subsequently to redundancies and increased levels of unemployment. Unemployment varied between 18% and 30% over the early 1990s, a situation which was exacerbated by the shedding of 4.2 million public sector jobs between 1989 and 1993.
The high levels of unemployment also resulted from "rationalisation" processes within enterprises which had previously been overstaffed by around 20%. The recession thus encouraged the internal restructuring of enterprises to cut costs and increase productivity. As a result, many previously large enterprises were either "divisionalised" into smaller structures whereby cost centres could be controlled more efficiently, or sections were sold to foreign companies. The impact of the reforms was harsh and even those who stayed in employment suffered deteriorating income levels, as real wages almost halved in periods of hyper-inflation. Until 1990, unemployment was not officially recognised and there were no forms of social protection to compensate for this. However despite this, levels of social protest and strike action were relatively low.
This can be explained by the protective role Solidarity played in respect of the government reforms - for example, it called for a six-month strike moratorium and urged workers who sought wage rises not to use the strike weapon. This role as protector took primacy over the trade union and employee representation function. Essentially, Solidarity's role was crucial in legitimising the government reforms in the context of a weak political structure. The trade union played a significant political role as it represented a large section of society, with trade union density at 90%.
The implications for labour relations
Industrial relations in Poland were crucially influenced by the multifaceted and often contradictory role played by Solidarity ("Labour relations in transition in Eastern Europe", John Thirkwell, Richard Scase and Sarah Vickerstaff, Industrial Relations Journal, Volume 25 No.2, June 1994 and Rainnie and Hardy). In its political role, it supported macroeconomic reform which caused great hardship; as a trade union it sought to represent the interests of workers at enterprise level. This contradictory position caused significant tension between the leadership and the rank and file and led to a decline in membership.
It has been argued that the political role played by Solidarity led to the supremacy of tripartite institutions at the expense of trade union functions at branch and enterprise level. With this reliance upon tripartite negotiations, it has been argued by Thirkwell et al, a weak regulatory regime was created.
The weakness of employers' associations calls into question whether trade unions will be able to make agreements enforceable, particularly as increasing proportions of the workforce work in private and small-scale enterprises in which union membership tends to be low or non-existent. Rainnie and Hardy argue that trade unions have been unable to cope with the rapid growth of SMEs, as surveys indicate that only around 20% of workers in these firms believe trade union membership would be favourable. Also, in organisations privatised through liquidation, trade union presence fell from a figure of nearly 90% to just over 40% after privatisation.
The problem of a weak regulatory regime has been exacerbated further by the fact that enterprise councils (works councils) have been eroded in the transition. Enterprise councils were maintained in many enterprises to facilitate the transformation of the legal status of the enterprise but, once this transition had occurred, the basis for worker participation often disappeared. Instead, some of the workers attained a more individualised involvement as shareholders. Solidarity supported the consolidation of representation channels, and is in favour of maintaining the trade union as the sole bargaining agent at enterprise level. Hungary is the only Central and Eastern European accession state that has made legal provisions for works councils.
Another weakness in the system that has resulted from Poland's transition is the decline in centralised collective bargaining. This is firstly to do with the prominence of SMEs, resulting from restructuring, which are un-unionised and thus exist outside of collective bargaining. Secondly, wage bargaining in enterprises that are unionised is tightly constrained by macroeconomic frameworks. Therefore developments in collective bargaining are conditional upon national mechanisms of economic management.
The present system of industrial relations can thus be characterised by the predominance of SMEs with low levels of unionisation, plus larger enterprises that are divisionalised into business units, where labour relations consequently become individualised as wage negotiations are reduced to the divisional level, thus reducing the coverage and scope of agreements. This essentially creates a weak regulatory framework governing workers and reduces the level of involvement workers have in the enterprise, in comparison with what existed in the past.
Clearly the economic reforms have had a substantial impact upon the Polish model of labour relations. It has been argued ("Poland - Marketisation and the formation of industrial relations", W Kozek, W Morawski and M Federowicz (1995)) that due to the reforms, institutions of employee representation have suffered in many ways. Trade unions have weakened their position rather than strengthening it as they have taken on a political role, which has followed a defensive approach to transformation, instead of pursuing an approach that widens the scope for interest representation and negotiation. Kozek, Morawski and Federowicz argue that transformation will suffer as a result of this, as they believe that transformation could be assisted and stabilised with greater involvement from below and that until the industrial relations system is effectively institutionalised, the structural transformation of the economy will be delayed. Similarly, Thirkwell et al have argued that privatisation, combined with the supportive role played by Solidarity, is foreclosing or limiting the institutional framework for present and future labour relations. It therefore appears that Poland is currently moving further away from, rather than closer to, the "European social model". (Peter Foster, ECOTEC Research and Consulting Ltd)
"Labour markets, wages and social security in Central and Eastern Europe", Jean-Jacques Danis, European Trade Union Institute (1995)