Collective bargaining in Europe: part of the solution, not part of the problem
The Wall Street Journal has published a thoughtful article on the impact of the Eurozone crisis on unions and collective bargaining. It reports that some blame union bargaining strength in countries like Greece, Italy and Spain for the way wages and consumption rose while productivity didn’t since the Euro was introduced; and records that collective bargaining is under sustained attack – especially in Greece. But it also quotes trade union and academic sources that tell a different story: Germany’s even stronger unions and more embedded collective bargaining hasn’t stopped that country’s productivity gains and has, arguably, enhanced them.
It’s always worth pointing out that collective bargaining is hardly likely to be the key determinant of productivity. Employers have far more control of investment strategies and training provision, and employers are at least equal partners (in reality rather more than that) in determining wages through collective bargaining. And it doesn’t bode well for Greece’s economic future if the only way to increase productivity is to slash wages!
What’s also worth pondering is how far the much-touted German wage restraint over the last ten years (which certainly contributed to Germany’s export boom, but has undermined domestic demand to such an extent that Germany is now reliant on exporting goods to countries which can no longer afford to buy them) is in any way mirrored by what is happening to wages in countries like Greece.
In reality, the wages of ordinary Greeks are in freefall, and apart from the catastrophic effects that is having on people’s living standards (as well as social problems like domestic violence, homelessness, suicide rates, violent racism, forced adoption etc), it rules out the prospect of a domestic demand-led recovery, meaning that the Greek economy will not be able to generate the resources needed for capital investment or skills training that would produce more than an arithmetic increase in productivity.
Scrapping collective bargaining, and undermining unions, is no solution to the problems Greece and other European countries face – quite the opposite. It will only provide a windfall for the already rich, and postpone reform even further. The people of Europe need a pay rise, and only union-based collective bargaining will deliver it.