Within the framework of the new European economic governance, neoliberal views on wages have further increased in prominence and have steered various reforms of collective bargaining rules and practices. As the crisis in Europe came to be largely interpreted as a crisis of competitiveness, wages were seen as the core adjustment variable for ‘internal devaluation’, the claim being that competitiveness could be restored through a reduction of labour costs. This book proposes an alternative view according to which wage developments need to be strengthened through a Europe-wide coordinated reconstruction of collective bargaining as a precondition for more sustainable and more inclusive growth in Europe. It contains major research findings from the CAWIE2 – Collectively Agreed Wages in Europe – project, conducted in 2014–2015 for the purpose of discussing and debating the currently dominant policy perspectives on collectively-bargained wage systems under the new European economic governance. Download the book: http://www.etui.org/Publications2/Books/Wage-bargaining-under-the-new-European-Economic-Governance

1. TURI-seminar
IRES, Paris
28 September 2015

2. Output of CAWIE II Project
Collectively Agreed Wages in Europe
28.09.2015Guy Van Gyes & Thorsten Schulten
Grant: European Commission (DG Employment)
Coordination KULeuven-HIVA (Belgium) and WSI (Germany)
Research group:
14 Institutes from the TURI-Network
AIAS (Netherlands) FAFO (Norway)
AK (Austria) FAOS (Denmark)
Associazione Bruno Trentin (Italy) IRES (France)
Fundacion 1 de Mayo (Spain ESRITU (Hungary)
Instituto Ruben Rolo (Portugal) ETUI (EU)
Labour Institute for LRD (UK)
Economic Research (Finland)

3. Main argument
built-up in the book
1. Critique of the dominating view on wages
and its policy implications
2. Negative implications of this dominating
view
3. Building an alternative strategy:
coordinating inclusive growth
28.09.2015Guy Van Gyes & Thorsten Schulten

4. Wages in the crisis –
Dominating European policy view
■ Crisis is essentially seen as a
crisis of cost competitiveness
■ Imbalances are the result of
divergent unit labour costs development
■ Asymmetric view:
Wage developments in the deficit countries
were “too high” so that they lost competitiveness
■ Symmetric view:
Wage developments in the surplus countries
were “too low” (wage-dumping hypothesis)
28.09.2015Guy Van Gyes & Thorsten Schulten

5. Wages and the crisis –
Empirical critique of the dominating view
■ TURI database of 10 countries with statistics on collectively-agreed wages
■ Dominant story based on evolutions of nominal unit labour costs
■ (Real) wage trends different (certainly when making abstraction of
Germany)
■ Wages (agreed and actual) grew in line with price increases
■ Prior to the crisis: almost all countries modest wage growth since the early
2000s when also taking productivity increases into account
■ Thus: Forgetting the demand-side: diminishing labour share in national
income
■ Plus: Need to take better into account the composition effect of a crisis
period (cf. Spanish wage development in the first crisis period => rise in
unemployment is not evenly distributed over the wage curve)
28.09.2015Guy Van Gyes & Thorsten Schulten
Noélie Delahaie, Sem Vandekerckhove and Catherine Vincent
Chapter 2 Wages and collective bargaining systems in Europe during the crisis

6. Wages and the crisis –
Conceptual critique of the dominating view
Torsten Müller, Thorsten Schulten and Sepp Zuckerstätter
Chapter 7 Wages and economic performance in Europe
Narrow concept of competitiveness:
• exclusive focus on labour costs
• regardless of the structure of real economy
• regardless of non-price factors
• loose relation between wages and export performance
Narrow treatment of wages as cost factor:
• Ignorance of the role of wages for domestic demand –
wage-led demand growth model = Eurozone
Overestimation of the export sector
for the overall economic development
28.09.2015Guy Van Gyes & Thorsten Schulten

7. Policy implications
of dominating view on wages
New European Interventionism:
Economic Governance:
• European Semester/European
Imbalances procedure
– Half of the EU Member States got already recommendations
since 2011
• Troika /Memorandum of Understanding
Policy measures:
• Direct intervention into wage developments by cutting and
freezing public sector and minimum wages
• Structural reforms of wage setting institutions
to increase downward flexibility of wages
28.09.2015Guy Van Gyes & Thorsten Schulten

8. Main argument built-up
in the book
1. Critique of the dominating view on
wages and its policy implications
2. Negative implications of this
dominating view
3. Building an alternative strategy:
coordinating inclusive growth
28.09.2015Guy Van Gyes & Thorsten Schulten

9. Implications of
current wage policy
Radical decentralisation and
deconstruction of collective
bargaining:
• Many countries of Southern
and Eastern Europe
Decrease of real wages in a majority of European
countries:
• Internal devaluation in the South
• German shadow in the North
• (Social) Cost(ly) strategy in the East
28.09.2015Guy Van Gyes & Thorsten Schulten

10. Changes in collective bargaining
systems in EU countries under EU,
ECB and/or IMF surveillance
Abolition/termination of national collective
agreements
Ireland, Romania
Facilitating derogation of firm-level
agreements from sectoral agreements or
legislative (minimum) provisions
Greece, Portugal,
Hungary, Italy, Spain
General priority of company agreements/
abolition of the favourability principle
Greece, Spain
More restrictive criteria for extension of
collective agreements
Greece, Portugal,
Romania
Reduction of the ‘after-effect’ of expired
collective agreements
Greece, Spain
Possibilities to conclude company
agreements by non-union employees
Greece, Hungary,
Portugal, Romania,
Spain
28.09.2015Guy Van Gyes & Thorsten Schulten

11. Deconstruction/decentralisation
Portugal Spain
2008 2013 2008 2013
Agreements 295 94 5987 3161
Of which
company
95 48 4539 2274
Extension 137 9
Workers
covered
1,8 million 242 thousand 12 million 8.5 million
28.09.2015Guy Van Gyes & Thorsten Schulten
Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo Leonardi
Chapter 3 Impact of the euro crisis on wages and collective bargaining
in southern Europe – a comparison of Italy, Portugal and Spain

12. Real compensation in the EU
2010-2014
28.09.2015Guy Van Gyes & Thorsten Schulten

13. Low-cost strategy in the East –
Non-developing wage bargaining
• Low-wage countries
• Wage and social harmonisation with rest of
Europe fading
• Income policy = government prerogative
• Taxes, minimum wage, social transfer
• Tripartite dialogue but political domination of agenda
• Mainly decentralised collective bargaining
• Decreasing organisational strength unions and
employers’ organisations
• Key example = Hungary
28.09.2015Guy Van Gyes & Thorsten Schulten
Szilvia Borbély and László Neumann
Chapter 5 Similarities and diversity in the development of wages and collective bargaining in central
and eastern European countries – a comparison of Hungary, Slovakia and the Czech Republic

14. Shadow of Germany in the North
Coverage of
collective
agreements in
the private
sector*
Extension of
collective
agreements
Regime
Denmark 74% No Autonomous
Collective bargaining modelSweden 85% No
Norway 50% Yes, some since
2004
Mixed model
Finland 85% Yes, widespread Statutory regulations (and
strong unionsIceland 95% Yes, widespread
28.09.2015Guy Van Gyes & Thorsten Schulten
Table 1 Mechanisms for determining wages in the Nordic countries
-4
-3
-2
-1
0
1
2
3
4
5
6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Average_wages_FI
Collectively_agreed_wages_FI
Average_wages_GER
Collectively_agreed_wages_GER
Figure 1. Developments of average wages and
collectively agreed wages in Finland and in
Germany 2001-2013: manufacturing (%).
+ Social dumping in the
liberalising labour mobility
(construction, transport,
food industry)
Søren Kaj Andersen, Christian Lyhne Ibsen, Kristin Alsos, Kristine Nergaard and Pekka Sauramo
Chapter 4 Changes in wage policy and collective bargaining in the Nordic countries –
a comparison of Denmark, Finland, Norway and Sweden

15. Non-convergence: internal and external
imbalances/inequalities => less social inclusion
• Growing divergence in demand, inequality,
poverty between countries
• Pre-crisis: see next presentation for details
• Non-convergence in productivity; real wages in the
service sector, inflation
• Since the crisis
• Deflation popping up around the corner; sluggish
growth
• Increased ‘beggar-thy-neighbour’ => high social cost
• Loss of a governance instrument
28.09.2015Guy Van Gyes & Thorsten Schulten
Maarten Keune
Chapter 8 Less governance capacity and more inequality: the effects of the assault on collective
bargaining in the EU
Odile Chagny and Michel Husson Chapter 9 Looking for an ‘optimal wage regime’ for the euro zone

16. Main argument
built-up in the book
1. Critique of the dominating view on wages
and its policy implications
2. Negative implications of this dominating
view
3. Building an alternative strategy:
coordinating inclusive growth
28.09.2015Guy Van Gyes & Thorsten Schulten

17. What kind of wage policy
for inclusive growth?
Inclusive growth strategy
• Reference in new economic discourse (EU 2020, OECD etc)
• Everyone should participate in economic development
• Reduction of inequality
• Better economic performance
What role for wage policy?
• Everybody a fair share
• Wage-led demand growth
• Unions and organised wage bargaining as countervailing power to
market/capital forces
• Coordinated wage bargaining (multi-employer, institutionally supported,
coordination by centralisation)
• = Belief in the own European model of a social market economy
28.09.2015Guy Van Gyes & Thorsten Schulten
Thorsten Schulten and Guy Van Gyes
Concluding remarks A transnational coordinated reconstruction of collective bargaining
as a precondition for inclusive growth in Europe

18. Towards an alternative view on wages?
Stabilising and enforcing wage developments:
• counter deflationary price developments
• stabilise and increase private demand
• counter income inequality
• Pushing ‘smart’ productivity growth
Requires …
• stop of wage cuts and wage freezes
• wages increase at least in line with productivity and
target inflation
• more expansive wage developments in the surplus
countries
Requires … as STRUCTURAL REFORM
• Strengthening/reconstruction of wage setting institutions
28.09.2015Guy Van Gyes & Thorsten Schulten
Torsten Müller, Thorsten Schulten and Sepp Zuckerstätter
Chapter 7 Wages and economic performance in Europe

19. Towards an alternative view on wages?
Reconstruction of wage-setting institutions in
Europe requires as structural reform …
• No more restrictions and interventions
in autonomous collective bargaining
Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo Leonardi
Chapter 3 Impact of the euro crisis on wages and collective bargaining in southern Europe
– a comparison of Italy, Portugal and Spain
• Promotion of a higher bargaining coverage
Maarten Keune
Chapter 8 Less governance capacity and more inequality: the effects of the assault on collective
bargaining in the EU
• Promotion of multi-employer bargaining
“The impulse to collective industrial relations in the UK private sector has not
entirely disappeared and might be re-kindled under the right circumstances”
Lewis Emery
Chapter 6 Multi-employer bargaining in the UK – does it have a future?
28.09.2015Guy Van Gyes & Thorsten Schulten

20. 24
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19
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16
15
13
13
13
13
12
12
11
11
10
10
10
8
8
8
7
7
0 5 10 15 20 25
DE
LT
LV
EE
UK
IE
LU
CY
PL
RO
EU
AT
ES
MT
NL
SI
BG
HU
CZ
GR
BE
DK
IT
FR
PT
SK
FI
SE
Reconstruction: European minimum
Wage Policy
Current situation: rather low
MWs at rather low level
28.09.2015Guy Van Gyes & Thorsten Schulten
Future: 60% of the median wage
28 million workers in the EU ! (2010)61
61
56
54
52
50
50
50
50
48
48
47
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46
45
41
41
38
36
0 10 20 30 40 50 60 70
FR
SL
PT
HU
LT
BE
DE
PL
RO
LV
IE
NL
UK
SK
EL
ES
LU
EE
CZ
Poverty
threshold
50%
Low-pay
thres-
hold
66.67%
Thorsten Schulten, Torsten Müller and Line Eldring
Chapter 10 Prospects and obstacles of a European minimum wage policy

21. Institutional support: Can extension
mechanisms support the reconstruction
of collective bargaining ?
 A high bargaining coverage usually requires
some form of state support through extension or
functional equivalents
 Current attempts at national and European level to
reduce or even to abolish extensions lead to a
strong decline of the bargaining coverage
 European policy to strengthen collective bargaining
would require a European initative to promote
extension
28.09.2015Guy Van Gyes & Thorsten Schulten
Thorsten Schulten, Line Eldring and Reinhard Naumann
Chapter 11 The role of extension for the strength and stability of collective bargaining in Europe

22. What next?
Macro-economic challenges
 A European Solidaristic Wage Policy:
Is there an optimal wage coördination (rule)
beyond the national?
 Macroeconomic Coordination:
How to coordinate Wage with
Monetary and Fiscal Policy?
Political challenges
 How to strengthen European wage coördination?
What actors? What instituions?
 How to bring economic democracy in
European governance
28.09.2015Guy Van Gyes & Thorsten Schulten

23. Thorsten Schulten Guy Van Gyes
WSI HIVA
28.09.2015Guy Van Gyes & Thorsten Schulten
Thank you very much
for your attention !
Free download:
http://www.etui.org/Publications2/Books/Wage-
bargaining-under-the-new-European-Economic-
Governance