From the TUC

Unions and collective bargaining in Scandinavia: What lessons for Britain?

02 Aug 2011, By Guest

I’ve recently been looking at the lessons that British unions might be able to take from the Scandinavian countries such as Sweden and Denmark, where there is widespread political support for collective labour market regulation, with union membership and collective bargaining coverage both at enviably high levels.

High bargaining coverage is one of the reasons why the Scandinavian countries have among the highest levels of income equality in the world. The ‘social case’ for collective bargaining is well established, and is acknowledged by international bodies such as the OECD and the ILO. Indeed, the decline of collective bargaining coverage in Britain has been singled-out by various studies as a key reason for rising inequality over the past three decades. The number of workers that were classified as ‘low-paid’ (i.e. earning less than two-thirds of the median income) was 13% in 1979 when collective bargaining coverage was near its peak, but has since risen to 22%.

While unions can point to the social benefits of collective bargaining, the economic case is more complicated. But it is on this point where the Scandinavian examples are most informative. Studies on the economic impact of collective bargaining have produced rather mixed findings, with many claiming that it can actually worsen unemployment and inflation.

In 1994, the OECD said that labour market deregulation was the best way for countries to reduce unemployment. However, the OECD revised its recommendations in 2006 after the Scandinavian countries showed that highly coordinated collective bargaining systems and active trade unions could actually produce strong economic performance and jobs growth (essentially the opposite of what the OECD had originally prescribed).

There is considerable agreement within the academic community that highly coordinated systems of collective bargaining have a more positive impact than ‘uncoordinated’ or ‘fragmented’ systems. In other words, it is not how many or how few workers are covered by collective agreements, but rather the extent to which bargaining is coordinated, that matters most in assessing whether collective bargaining systems have a positive or negative macroeconomic impact. This is important if unions want to make a political case for extending collective bargaining coverage across the workforce.

More information on employment relations in Scandinavia, and some of the possible lessons for Britain, can be found in the latest issue of the TUC/ESRC Unions, Collective Bargaining and Employment Relations Research Bulletin.