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Bargaining Over Wages Is More Effective When Done At Sector Level

Previously it was believed that a collective sector approach for higher wages and better working conditions was associated with inferior performance. However, research shows this is not true.
Previously it was believed that a collective sector approach for higher wages and better working conditions was associated with inferior performance. However, research shows this is not true.
  • Firm-level or small group pushes for higher wages do not often have the desired result
  • Bargaining at sector-level can also help to make firms more competitive – creating a win-win for employers
  • For success, compromises must be made by all parties, and everyone must be invited to take a set at the table

As the cost of living continues to spiral with food, fuel and energy prices all increasing far beyond what our budgets can accommodate and wages for many staying static, it is becoming increasingly difficult to make ends meet. And, if you’re in a job where you feel you are already being undervalued, it’s only a matter of time before these conflicting pressures come to a head.

The UK’s rail industry is a prime example.

Dissatisfied with a lack of response and action over what they felt were poor pay and working conditions, and in the face of increasing  job instability, approximately 40,000 members of the National Union of Rail, Maritime and Transport Workers Union (RMT) agreed to strike for three days in June.

Workers from thirteen separate train operators laid down tools (so to speak) and joined the picket line, to advocate for better working conditions, more rights and higher wages. As a result, the UK was effectively ground to a halt. Plans to travel into the capital for social events, get to airports for holidays or even just generally getting to and from work were scuppered for many.

However, whilst the UK public have no doubt been inconvenienced, the strike action has gone a long way in meeting its intended goals. People are talking about worker’s rights, asking why pay is not rising to meet the rate of inflation and calling for the government to do more – not just in the rail sector but also in other public sector professions.

However, so far, little progress has been made. To date, talks between the government and the RMT have failed to reach any agreement and, along the way, have made steps to bring in agency staff to fill in for the striking staff.

However, perhaps it would have been better for the government to enter into a negotiation? Professor Bernd Brandl is an expert in employment relations and Human Resource Management from Durham University Business School. His research explores the role and effects of collective wage bargaining and coordination between trade unions and employers’ organizations.

In his latest article, he finds that wage bargaining if done at a higher, sector level as opposed to firm or small groups, can be effective not only for employees but for management too by having a positive impact on performance.

His article details his explorations into the various theoretical and empirical approaches in academic literature beginning in the 1970’s – when collective bargaining was an important  instrument for economic and social policymakers all over the industrialized world to tackle rising inflation and shocks in energy supply – up until present day.

Through doing so, Professor Brandl discovered that collective bargaining at a sector-level can not only allow policy makers to manage economic and social crises, but some forms of sector-level bargaining can even outperform all other forms of wage bargaining in terms of increasing the competitiveness of firms.  

Previously, Professor Brandl says, it was believed that a sectoral collective bargaining approach, where a whole sector will push for higher wages and better working conditions, was associated with inferior performance. However, his explorations show this is not actually the case, and we now know now that it is not detrimental for performance.

Such discoveries are particularly pertinent given the current rising cost of living crisis, and employee unions conducting strikes in their quest to secure better pay and working conditions. Whilst workers might be more than capable of taking individual action to secure themselves a better deal, the best way to secure a positive outcome for all and to progress the rights of workers is to do so as a collective.

Professor Brandl’s findings do not only support the worker, but the employer too. His article showcases the best approaches for policymakers and organisations to take in ensuring that such collective bargaining is embedded in the legal and institutional framework, i.e. that that collective bargaining cannot be undermined and bypassed by individual firms and group of employees.

“There are many ways how the current railway strikes could be avoided and how the conflict over wages and working conditions could be solved,” he says. “But there need to be serious bargaining that also allows everyone involved to make compromises without losing their face. Such bargaining should be encompassing, i.e. sector wide, so that ‘compromises’ are not made on the expense of some groups. In fact the railway conflict could be solved by encompassing collective bargaining that considers the mutual long-run benefits for everyone. The latter includes also passengers, of course.”

However, there is no one-size-fits-all-approach. The article highlights that no collective bargaining system and situation is the same. Variations occur both across sectors and countries too, and these need to be taken into consideration when striking a deal between policymakers and organisations/workers.

Professor Brandl’s summary also states that centralised bargaining systems, where a dedicated team to the collective bargaining are employed at a high level, is a lot easier to bargain with and increases the efficiency in the process. However, he acknowledges that this is, of course, difficult for policymakers to handle, given the ability for workers to form various unions and have the freedom of association.

The key, Professor Brandl stresses, when engaged in collective bargaining is the importance of finding compromise between both the demand and supply-side and long-term perspectives are taken into consideration by all sides. This will ensure that not only do employees obtain greater work conditions and pay, but this pay is not over-inflated, reflects the market rate and also performance is not affected in the process.

“Though we can learn lessons from the past,” he says, “many theories are now redundant and are more likely to showcase an approach on how not to bargain. Instead, firms, workers and policymakers should work together to ensure all stakeholders are happy with the results.”

So perhaps taking a seat at the table rather than further delaying talks is the strongest move to make here? The government may do well to heed such advice and keep an open mind. Not only might workers benefit from having some of their needs met but, as a result, our transport system might just become a little more efficient as a result. After all, a happy workforce is a productive workforce.

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