Pacts for Employment and Competitiveness analysed

Download article in original language : IT0003265FIT.DOC

Recent years have seen a growing number of collective agreements across Europe at all levels addressing employment and competitiveness in a coordinated way. In February 2000, a conference was held in Rome on the experience of such "Pacts for Employment and Competitiveness", with a special focus on the transport sector. A research study conducted by the European Foundation for the Improvement of Living and Working Conditions was presented during the two days of the conference, and workshops and round-tables examined the cases of the airline and railway sectors.

On 18-19 February 2000, the European Foundation for the Improvement of Living and Working Conditions (EFILWC) and the Friedrich Ebert Foundation, in conjunction with the Italian Ministry of Labour and Ministry of Transport, the National Council for Economic Affairs and Labour (Consiglio Nazionale dell'Economia e del Lavoro, Cnel) and Aisri (the Italian association for the study of industrial relations) organised a conference in Rome on Pacts for Employment and Competitiveness. The experience in Europe and in the transport sector. During the conference, a study on "Pacts for Employment and Competitiveness" (PEC s) commissioned by the European Foundation ("Pacts for Employment and Competitiveness. Concepts and issues", Keith Sisson, Jacques Freyssinet, Hubert Krieger, Kevin O'Kelly, Claus Schnabel and Hartmut Seifert, EFILWC, 1999) was presented, and the cases of air and railway transport were analysed by workshops and round-tables.

The research study

During the 1990s, Europe saw a proliferation of cases in which collective bargaining addressed the issues of employment and competitiveness jointly and in a coordinated way. As illustrated by the table below, this happened at all levels: national and intersectoral through "social pacts"; regional and local through "territorial pacts"; and sectoral and company level through "pacts for employment and competitiveness".

Employment and competitiveness pacts in Europe in the 1990s, by level of bargaining
Country National Regional Sectoral Company
Austria . . A A
Belgium ABC B A A
Denmark . B A A
Finland A . A A
France A . A A
Germany BC BC AB A
Greece AB B . .
Ireland B . . A
Italy B B A A
Luxembourg B . AB A
Netherlands A . AB A
Norway A . . A
Portugal B B . A
Spain A B AB A
Sweden C . A A
United Kingdom . . . A

A = collective agreements between the social partners ("employment pacts"); B = collective agreements between the social partners and government ("social pacts"); C = failed attempts to conclude social pacts.

Source: EFILWC, based on EIRO data (excluding mining).

These pacts are seen as significant, first of all because of the importance that employment has assumed within the European Union in recent years, as evidenced by the European employment strategy adopted by the European Council meeting in Luxembourg in November 1997 (EU9711168F) and by the inclusion of an employment chapter in the Amsterdam Treaty (EU9707135F). It should also be emphasised that the pacts combine the priority concern with employment and competitiveness with the social partnership method, thereby uniting three central components of the EU's current economic and social policies. Interest in these pacts was also confirmed by a speech to the Rome conference by a representative of the European Commission, who declared that they match the orientation of European policies in that they sustain two important priorities (employment and competitiveness) through the definition of new forms of governance.

The Foundation research concentrates on an analysis of PECs, defined as "collective agreements dealing explicitly with the relationship between employment and competitiveness". This approach is justified by the fact that, whilst there is a relatively well-established body of research on "social pacts" and "territorial pacts", there is scant availability of data and detailed surveys on PECs at the sectoral and enterprise levels. An important feature that differentiates PECs from other types of social partnership agreement is that they are bipartite. Whilst in social and territorial pacts, direct participation and intervention by the central or local government are usually decisive, in pacts at the sector and enterprise level the government's role is at most one of providing support and encouragement.

For the researchers, a second distinctive feature of PECs, besides their importance for EU policies, is that they may apparently represent a significant element in the transformation of industrial relations systems, as regards the logic, structure and contents of collective bargaining. The EFILWC study was preceded and accompanied by the identification of a set of issues which may be useful for assessment of the importance of PECs for the industrial relations systems of the European countries. The researchers viewed these issues as "working hypotheses" to be developed and reconsidered in the light of the study's results. Specifically, the emergence of PECs seems to have a close bearing on a number of important issues related to the transformation of collective bargaining in Europe:

  • essentially "distributive" collective bargaining may be changing into a form which concentrates on "competitiveness" and is based on "partnership", thereby emphasising possible cooperation in pursuit of future common benefits, rather than conflict over the allocation of results already achieved;
  • management appears to be playing an increasingly active role in collective bargaining, abandoning an essentially "defensive" stance with respect to union claims;
  • PECs may represent a tendency for collective bargaining to assume tasks traditionally addressed by the government through employment policies; and
  • the fact that PECs have been implemented almost everywhere in Europe may be a distinctive sign of convergence in European industrial relations systems.

Generally speaking, these interpretations of ongoing changes in industrial relations can be related to economic issues, and in particular to the increased competitiveness of markets and to the market "turbulence" that affects not only Europe but also the global economy as a whole, according to the researchers. The ability of businesses to ensure their long-term competitiveness increasingly depends on their capacity for adaptation and innovation. In certain situations, collective bargaining may be an important means of obtaining work flexibility in exchange for employment protection and workforce involvement. It is this possible outcome which may push company management to take up a more "proactive" approach and may lead to "partnership" agreements, seen by some commentators as "one of the most important ways to achieve social change in an increasingly turbulent world" and indeed as "the only alternative to change through the market". Another route may be that of labour flexibility on all fronts – pay, working hours, hiring and firing etc – to reduce labour costs to the minimum. Moreover, more "delegation" to the social partners of responsibility for sustaining employment and competitiveness can be interpreted as a search by national governments for forms of intervention in the economy that are more efficient and efficacious that those based on a "top-down" approach, and which sustain the cooperation and autonomy of the parties by means of specific incentives. An orientation of this kind may arise, on the one hand, from awareness that it is more difficult for unilateral and rigid solutions to be effective in a profoundly changed and more dynamic context, and on the other, from the not always satisfactory results of direct intervention and from increasing constraints on public spending.

Some preliminary results

During the Rome conference, a presentation was made on the reasons for the Foundation's study and some preliminary results were highlighted.

The reasons for social pacts

Why is the phenomenon of bargaining on employment and competitiveness so widespread? The presence in almost the whole of Europe of pacts at every level which deal with these two issues stands in contrast to what seems to be a general decline in the importance of collective bargaining in many countries. A first explanation offered for this apparent contradiction is the increasing "necessity for realism" in the regulation of employment relationships. As pointed out above, the major economic and social changes currently in progress often compel large-scale restructuring. "Social pacts" and PECs make it possible to combine reorganisation and the creation of conditions for greater adaptability with employment protection.

The diffusion of PECs

It is interesting to note that PECs seems to be more widespread in Germany and the Netherlands, where they concern 5%-10% of private-sector firms, and less so in the Scandinavian countries. Possible explanations suggested by the researchers are that, in Denmark and Sweden, workforce involvement in company strategic choices and the government's continuing central role in the formulation of employment policies substantially reduce the need for formal bilateral agreements. At company-level, there is a mutual legitimisation: trade unions see decisions regarding employment as falling under employers' prerogative and they regard employment levels as dependent on competitiveness; while employers accept the unions' role in the restructuring process and are committed to effective consultation. At the same time, the state provides important support for finding compromises in combining employment and competitiveness, and the emphasis on active labour market policy helps reduce the pressure of unemployment. The institutional context plays an important role in Germany and the Netherlands in supporting the diffusion of PECs. In these countries, the cost to managers of "non-cooperation" with workers and unions in restructuring processes is particularly high and is therefore an important incentive for agreements and shared solutions to be pursued and reached.

The contents of PECs

PECs seek to support the competitiveness of firms by acting on the cost of labour, on working hours and their flexibility, on internal flexibility and on work organisation, as well as on external work flexibility in, for instance, the case of outsourcing. The main objective is to legitimate change while also encouraging workforce cooperation and reducing costs. As regards employment, PECs typically provide for the safeguarding of present employment levels or for the creation of new jobs. In some cases, they also contain more general and indirect provisions concerning corporate strategies, like pledges to undertake a certain amount of investment or to keep certain production in certain sites. There are also pacts which seek to promote the "employability" of workers by introducing training and retraining schemes. The majority of pacts are of a "defensive" type, in that they are intended to protect employment rather than create it. Moreover, provisions concerning working hours are more frequent that those concerning pay.

PECs and concession bargaining

Another aspect examined by the research study is the difference between PECs and the so-called "concession bargaining" that has spread in the USA in recent years and consists substantially of a reduction in levels of job protection without counter-concessions for the workers. In Europe, in contrast to the situation in the USA, the experience of PECs seems to involve an effective "quid pro quo" which restricts the unilaterality of restructuring by management and reduces its overall impact on workforce protections.

The importance of a shared assessment

If PECs are to "work", it appears from the research to be important that the parties should have a shared "assessment" of the corporate situation. In particular, it is important that there is joint awareness of the seriousness of the crisis facing the company and that evaluation of its causes and possible solutions is shared. Moreover, the pact must enable reciprocal legitimisation and yield benefits to each party. Mutual recognition seems to be a particularly crucial aspect. Management must accept the role of the union as representing all workers and its involvement in strategic choices. On the other hand, the union must be willing to share responsibility for the firm's economic performance and for restructuring.

Debate on PECs in the air and railway sectors

During the conference, there was a specific analysis of the air and railway transport sectors. These are two sectors of great importance for the European transport system, and they are currently undergoing a phase of profound change, not least as a result of specific intervention by the European Union (TN0003402S). In many companies, restructuring has been accompanied by PECs and the formation of partnerships between company and union. This is the case, for instance, of the air carriers Lufthansa and Alitalia (IT9706306F) and the rail companies SNCF (FR9906193N), Ferrovie dello Stato (IT9912349F) and DB AG.

Debate during the conference focused on the role of the state and the EU in the restructuring of these two sectors. It was emphasised that a government's attitude may crucially sustain partnership pacts, both through "moral persuasion" and through the provision of concrete support like the funding of early retirement and retraining schemes. Trade union representatives stressed the importance of forms of social dialogue which also involve the new operators in the air and railway sectors, the purpose being to ensure uniformity of treatment, and they also argued that the EU should act as the guarantor of a "European model" for regulation of restructuring which ensures the reciprocity of commitments undertaken by unions. According to the unions, governments have a vital role to play in fostering "trust" between the parties by making clear and precise decisions which reflect future developments in the airline and railway markets and ensure, amongst other things, the continued public ownership of railway services. Firms seem to be in favour of public intervention which fixes specific and cogent rules to protect the public interest in areas such as health and safety, while definition of individual restructuring projects should be left to the social partners, albeit with the provision of appropriate support.


The conference provided a good occasion for debating the ongoing transformations of European industrial relations systems. The main underlying issue is whether it is possible to distinguish a number of changes that may indicate the creation of some sort of new "European model" of industrial relations, based on a "partnership for competitiveness", instead of the traditional "distributive conflict". The first examples of such a change may be found in the macro-level social pacts which were reached in some countries in the 1990s, essentially under the increasing pressure of unemployment and of the Economic and Monetary Union (EMU) convergence criteria. In this sense, PECs would represent the meso- and micro-level expression of such a model, since they interpret the "partnership" approach at sectoral and company levels.

At the moment, it is difficult to give a definite answer to the question of whether we are actually witnessing the emergence of a new model. The Foundation study will probably be an important help in this respect. In order to be in a position to assess the real scope and relevance of PECs, it will be important to extend the research efforts to medium-sized firms. The presence of "partnership agreements" in larger firms, maybe with a substantial presence of state ownership (as in the case of air and rail transport), though very interesting per se, could be due to specific situations (such as a greater need for restructuring, higher union presence, established industrial relations tradition, or extensive government support) and of lesser significance for the industrial relations system as a whole. However, preliminary data presented by the Foundation seems to support the view that the diffusion of PECs involves medium and small-sized companies too.

Another point which should be analysed is the difference between PECs and the collective agreements which accompanied company reorganisation and restructuring plans in the 1970s and 1980s. It is a difficult issue, but some elements of such a distinction may be tentatively identified. First, the definition of the "instruments" that can be used to face crisis and restructuring is now left to the bargaining parties to a greater extent. This is an apparent sign of increased "delegation" of employment policy prerogatives from government to social partners. Such decentralisation entails a second difference: the content of the agreements has changed to include more "quid pro quo" elements, in the sense that the parties have to find a common solution relying more on their own resources, and less on external help. Therefore, PECs typically involve intervention on work flexibility (especially on working time) in exchange for employment protection or creation, as the crucial part of the agreement. The possible provision of external financial support often aims at sustaining new organisational arrangements (through training or reduced working time) or to diminish the social impact of transformations (retraining and outplacement, or incentives for resignation or retirement).

Third, the new proactive approach that company management is apparently taking is particularly interesting. Such an "interest" in establishing a partnership with the unions for supporting adaptability and competitiveness deserves special attention. Of course, it cannot be given for granted, since it is a "choice". For this to happen, trade unions should be perceived as important and reliable partners by the firm and this is more likely where union presence is strong and industrial relations are traditionally collaborative. At the same time, trade unions should make a similar "choice", based on an equivalent basis of "trust". In such cases, industrial relations become a "resource" for all the actors: the company, the workers and trade unions. It is for this reason that the issue of enforcement of PECs by external parties (typically the state), which was also raised during the Rome conference, may lose some of its relevance. PECs should be, "by definition", "self-enforcing pacts": the implementation of the agreements should be in the parties' interests, framed by mutual trust and "shared assessments". For this reason, the future endurance and success of PECs will be an important part of the assessment of their innovative nature compared with bargaining on employment in the past decades (Roberto Pedersini, Fondazione Regionale Pietro Seveso).

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment