Labour flexibility and company-level bargaining

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Recent research confirms that the labour flexibility practices most widely employed by Italian companies are those related to functional flexibility - such as job enrichment, job enlargement, job rotation and the provision of training. These practices are supported by participative trade union strategies and by the fact that unions are less willing to negotiate on numerical flexibility and on wage flexibility.

Research conducted in 1996 by Assolombardo, the Milan area employers' organisation, underlines that the labour flexibility practices most widely employed by Italian companies are those related to functional flexibility. These practices are supported by participative trade union strategies and by the fact that unions are more inclined to negotiate on these issues than on numerical flexibility and on wage flexibility. These developments and the effects of company-level bargaining on the management of labour flexibility should be stressed because, in Italy, they are frequently underestimated by a debate which tends to concentrate on the absence of numerical and wage flexibility.

The company-level management of flexibility

The demand of Italian firms for greater "labour flexibility" (flessibilità del lavoro) stems from changes in the economic, technological and institutional context, which have compelled company managements to adopt ever more complex and uncertain strategies of adaptation and adjustment. Product markets have changed in the last 20 years. The stable growth trends of the past have given way to new ones characterised by more erratic and slower growth and oriented towards high-quality personalised products and services. Although microelectronic technological innovation has made it possible to overcome rigid forms of work organisation (such as the assembly line), it has caused the obsolescence of traditional skills and occupations, giving rise to an irreversible occupational redefinition of the labour force, which affects not only company personnel managers but also the national educational and training systems.

It is in this context of rapid and uncertain change that Italian firms are introducing both old and new forms of labour flexibility. They are attempting to respond to external pressures by: adapting to fluctuating demand; increasing productivity levels; ensuring an adequate introduction of new information technologies; linking pay levels more closely to performance; and improving the quality of products and services.

The results of numerous research studies conducted in Italy concur on the fact that the labour flexibility methods adopted by firms have only partly addressed workers' entry into and exit from the firm ("numerical flexibility"). Instead, they tend to focus more closely on the management by companies of their internal labour markets ("functional flexibility") and on the growing variability of pay in line with a set of economic performance indicators ("wage flexibility").

Flexibility in the province of Milan examined

Assolombarda - the employers' organisation for the province of Milan, one of Italy's most important industrial areas - carried out a survey in 1996 on labour flexibility practices in a sample of 260 companies in the province's manufacturing sector. The study confirmed the prevalence of functional flexibility over numerical and wage flexibility, and showed that the most commonly used functional flexibility methods were job rotation, followed by job enrichment and job enlargement, and training for both white- and blue-collar workers. Comparison between 1989 and 1996 showed that the functional flexibility techniques most frequently employed by Milanese firms had not only increased in absolute terms, but also often improved their relative positions compared with numerical and wage flexibility methods.

The most widely used wage flexibility instruments were individual lump-sum bonuses, followed by individual pay increases and company-wide performance bonuses. Numerical flexibility was pursued mainly through the use of overtime, probation clause s, and work/training contract s.

The finding that Italian companies prefer functional, rather than numerical or wage flexibility, is in line with international comparative analyses. It is well known that continental European companies tend to rely on functional flexibility, unlike Anglo-Saxon companies which are able to make greater use of numerical and wage flexibility. Even the most recent surveys confirm that Italian companies relegate the latter to second place, in both current use and in their desired future use. Numerical flexibility does not display major variations in practice, although company managements would prefer to have greater freedom of action, especially as regards the flexible management of labour intake. Wage flexibility was used very infrequently in the late 1980s, and has become only slightly more common since then.

Labour flexibility and company-level bargaining

It is important to correlate the trends displayed by labour flexibility in Italian companies with tendencies in company-level collective bargaining and the "participative model" of industrial relations within these same companies. The presence of sufficiently strong trade unions (although undergoing difficulties in their support and representation in large companies), with a high bargaining capacity and a cooperative approach to labour relations, seems to mesh with demands for functional flexibility for two main reasons. Firstly, because this form of flexibility is also preferred by the unions. Secondly because it is more suited to capital-intensive firms in which the management of human resources and industrial relations grows increasingly complex, sophisticated, and oriented towards a highly-skilled workforce. For this kind of company, in fact, exclusively numerical and wage flexibility policies would be unsatisfactory and inappropriate.

The 1996 Assolombarda survey found that the abovementioned preference among firms for functional flexibility was matched by a new form of industrial relations. Indeed, 80% of personnel managers in larger firms (those with more than 500 employees) described the industrial relations systems in their companies as participative and with high levels of union involvement. This figure stood at 74% in medium-sized firms - 100 to 499 employees - and 18% in smaller ones - 10 to 99 employees. Moreover, collective bargaining, union rights in the workplace, and participative labour practices (such as information rights and joint committees) were very well-established. In 55% of firms, there were Rsa plant-level union structures, a figure rising to 100% in larger firms. Furthermore, in 90% of the larger companies the new Rsu representative body (IT9709211F) had already been elected. There were joint union/management consultation committees - dealing with issues like work organisation, health and safety, equal treatment for men and women, and canteens - in 30% of medium-sized firms and in 46% of larger ones.

Of course, company-level bargaining on labour flexibility is tied to the nature of the firms themselves, and the situation may differ considerably according to the context. For instance, the Assolombarda survey of the sample of manufacturing companies in the province of Milan found that the propensity to bargain was relatively low - 32.8% of the company signed any company-level agreement in the entire period 1990-95 - and that it was closely correlated with company size: 23.3% in small firms, 64.2% in medium-sized ones, and 81.2% in large ones.

Commentary

Company-level bargaining on labour flexibility in Italian firms during the 1990s apparently confirms the results of surveys conducted in the 1980s. Still predominant is the model of the industrial firm compelled to forgo "outgoing" numerical flexibility - in that there are constraints on making workers redundant - but which does not eschew the use of traditional instruments of "incoming" numerical flexibility (including extra work, overtime and new forms of employment such as temporary work) and wage flexibility (lump-sum individual bonuses), together with other more innovative pay practices (company-wide performance bonuses) and, in particular, functional flexibility practices (job enrichment and enlargement, job rotation and training). This model is typical mainly of large firms in which bargaining practice is most characterised by the participative approach to industrial relations mentioned above. (Serafino Negrelli, University of Brescia)

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