Wage Setting Social Pacts And The Euro

Politicians, economists, and social theorists tend to agree that globalization and neo-liberal economic policy have contributed to the decline of the social compacts underlying traditional European welfare states. Recently, however, social pacts have demonstrated an impressive resurgence, as governments across Europe facing necessary economic policy adjustments have chosen to view trade unions as vital negotiating partners rather than adversaries. Wage Setting, Social Pacts, and the Euro offers a theoretical understanding of the forces that have led to this new understanding, and of the challenges that increasing monetary integration will continue to pose.

Comprises 12 papers which analyse national experiences and the theoretical implications of the conclusion of social pacts in the European Union in the 1990s.

The result of a four-year long comparative research study centered at the European University Institute in Florence, Italy, and financed by the European Commission's Sixth Framework Programme, Social Pacts in Europe presents the first full-length theoretical and comparative empirical study of new social pacts in Europe. Its aim is to bring the level of sophistication achieved in an earlier literature on neo-corporatism to the more contemporary phenomenon of 'social pacting'. The book brings a wide range of complementary theories to bear on the emergence, evolution and institutionalization of pacts, compares systematically a wide range of cases across Europe, and provides in-depth studies of Ireland, Italy, Portugal, Spain, the Netherlands, and Slovenia. The book contributes to the scholarly debate on economic adjustment and institutional change in European capitalism by focusing on three inter-related questions: (i) what explains national variation in reliance on social pacts; (ii) what determines the outcomes of individual pact negotiations; and (iii) under what conditions are pacts repeated and become regular features of socio-economic governance? The book's theoretical innovations include a novel application of fuzzy-set Qualitative Comparative Analysis (fs/QCA) to help explain national differences in social pact adoption; the application of a game theoretic approach to explain social pact emergence; and a reinterpretation of traditional neo-corporatist and new institutionalist theory to help understand social pact consolidation and institutionalization.

This book presents an original multidisciplinary conceptual framework for the analysis of the processes of construction/transformation of workers' social rights. The framework was developed by taking an analysis of employment and social protection in the Latin European countries as starting-point, and thus offers an innovative alternative to the dominant approaches. It takes account of the institutional forms determining employees' resource flows and associated rights, and introduces a new analytical category of «resource regimes». Four spheres are identified for the observation of recent resource regime changes: employment systems, public policy frameworks, social hierarchies and industrial relations systems. The various chapters explore how each of these spheres participates in the institution of social rights over resources, and identify key vehicles of change such as transformations in forms of employment, labour market policies, pension reforms, the swing to a logic of competencies, social pacts, and the processes involved in the construction of the European Union. The book brings to the fore the dynamic relation between employment, wages and social rights and aims to contribute to current debates on social protection reforms and employment policies implemented at both national and European levels.

In this book leading European economists examine the current status of social pacts and their future. Particular focus is placed on the role of trade unions, and the positive role they can play for economic and social stability by agreeing to set wages on the basis of a target rate of inflation. As the European Union expands and social change accelerates, this insightful book will be of interest to all concerned with social and economic developments across Europe.

What explains Eurozone member-states’ divergent exposure to Europe’s sovereign debt crisis? Deviating from current fiscal and financial views, From Convergence to Crisis focuses on labor markets in a narrative that distinguishes the winners from the losers in the euro crisis. Alison Johnston argues that Europe’s monetary union was structured in a way that advantaged the corporatist labor markets of its northern economies in external trade and financial lending. Northern Europe’s distinct economic advantage lay not with its fiscal capabilities, which were not that different from those of southern Eurozone countries, but with its wage-setting institutions. Through highly coordinated collective bargaining, the euro North persistently undercut the inflation performance of southern trading partners, destining them to a perpetual cycle of competitive decline and external borrowing. While northern Europe’s corporatist labor markets were always low inflation performers, monetary union ultimately made their wage-setting institutions toxic for the South. The euro’s institutional predecessor, the European Monetary System, included economic and institutional mechanisms that facilitated macroeconomic adjustment and convergence between the common currency’s corporatist and noncorporatist economies. Combining cross-national statistical analysis with detailed qualitative case studies of Denmark, Germany, Italy, Ireland, the Netherlands, and Spain, Johnston reveals that monetary union’s removal of these mechanisms allowed external imbalances between these two blocs to grow unchecked, underpinning the crisis in which Europe currently finds itself. Rather than achieving the EU’s goal of an ever-closer union, the common currency produced a monetary environment that destabilized the economic integration of its diverse labor markets.

This book analyzes the interaction of European social models, the institutions structuring labor markets' supply side, and their turbulent macroeconomic environment from the deep Europe-wide recession, ending Germanys post-unification boom, through monetary union's establishment, to the Great Recession following the recent financial crisis. The analysis reaches two conclusions challenging the dominant view that the social models caused unemployment by impairing labor markets' efficiency in the name of equity. First, the social models' employment and distributive effects are far outweighed by their macroeconomic environment, especially in the Eurozone, where its truncated structure of economic governance transformed the Great Recession into a sovereign debt crisis. Second, instead of a trade-off between efficiency and equity, the employment effects of counteracting markets tendency to generate inequality depends on the macroeconomic conditions under which it occurs and how it is done.

In this book, first-rate international scholars in the field explore the role that unions are likely to play in the changed economic environment of the new century. Questions discussed include: What will unions look like in the years to come? Which kind of interest groups will they represent? How important will be the broader political role of unions? To what extent do unions care about future generations? Part One documents a tendency towards greater decentralization in collective bargaining and declining union membership rates in most European countries. The process of decentralization may only be partly reversed by social pacts of the type that occurred in several EU countries in the run-up to EMU. Yet this type of co-ordination is likely to be increasingly unstable in a context where membership is falling, hence will inevitably require government intervention. Not all governments may wish to intervene in wage setting, however, as there are strong reasons to believe that such intervention could impose wage rigidities in some parts of the economy and lead to non-enforcement in other parts. Moreover, under EMU what matters is ultimately co-ordination of bargaining at the pan-European level rather than simply at the national level. Such higher-level, transnational co-ordination is not likely to occur for a long time to come because of the huge costs that it involves. Some transnational co-ordination may occur within multinational firms, however, as costs are likely to be much lower at this level. Part Two characterizes the intergenerational conflicts present within unions. Unions may be able to better respond to the needs of the unemployed without losing the support of current employees when they become involved in the running of unemployment benefit systems, as has been the case in those countries applying the so-called Ghent system. They may also succeed in making the system more efficient by, for example, contributing to the reduction of moral hazard problems associated with the provision of unemployment insurance. Unions are, however, unlikely to solve the latent conflict between their younger and older members in a context where the population is ageing, since they tend to preserve the status quo when it comes to cutting pension benefits in order to deal with demographic transition. The cost of these dynamic inefficiencies may be accepted by younger generations as long as an intergenerational contract can be enforced whereby unions guarantee that the status quo will be preserved, and are credible in their commitment. Unions could play a key role in this implicit intergenerational pact because they are long-lived agents—-certainly longer-lived than many governments—-but, under present conditions, this pact may be no longer credible.

The single currency became a tangible reality for citizens with the entry into circulation of euro notes and coins. Nonetheless, without any other institutions of a federal kind, this centralisation of monetary policy raises a number of questions. This volume addresses one key aspect of the matter: what type of wage policy is best suited to a unified monetary area? After describing the past situation and present-day implications, it offers various hypotheses as to possible forms of wage policy at European level. The authors' aim is to put forward a wide range of views, both as to what would be desirable in terms of economic efficiency and what appears likely in terms of the stakeholders and policies. The second part of this book examines wage policy developments in five Member States (Germany, Belgium, Spain, Ireland and France) where the nature of wage co-ordination differs. It is also evident from recent developments in all of these countries that nothing is set in stone. This publication, compiled by well-known experts in the field of industrial relations, explores the various possible scenarios and their consequences in respect of equity and efficiency.

This book offers a labour perspective on wage-setting institutions, collective bargaining and economic development. Sixteen country chapters, eight on Asia and eight on Europe, focus in particular on the role and effectiveness of minimum wages in the context of national trends in income inequality, economic development, and social security.