Decentralised Bargaining in Denmark and Australia: Voluntarism versus Legal Regulation.

Author:Andersen, Soren Kaj
  1. Introduction

    Both Denmark and Australia have made a transition in recent decades from a largely centralised system of industrial relations to a more decentralised one. However, in both there are important differences in the means by which these developments occurred and the extent to which the basic character of industrial relations changed. Furthermore, the nature of the earlier centralised industrial relations systems in Denmark and Australia were configured differently, and there remain strong influences from the past on recent developments.

    It should be noted that Denmark and Australia are not isolated examples of decentralisation among advanced market economies. Trends towards more decentralised forms of industrial relations in a number of countries which were formerly more centralised have been evident for some time. During the early 1990s, Katz(1993) reported a shift towards decentralised bargaining in six countries, which he argued was initiated mainly by employers against the opposition of central union organisations. Katz and Darbishire (2000) later noted that there was increasing convergence across countries, while at the same time there was increasing diversity within countries, which they described as 'converging divergences'. They also commented that, despite evidence of divergence, 'the persistence of sizeable country differences in the relative mix of employment patterns, and the role that national level institutions play in shaping that mix, suggests a continuing influential role for national employment-related institutions'(Katz and Darbishire, 2000, p. 281).

    European systems of industrial relations have in recent decades tried a variety of different approaches to the decentralisation of collective bargaining. Since the global recession in the late 2000s, the European Union (EU) has advocated the decentralisation of bargaining over wage setting and working conditions on the premise that greater workplace flexibility will promote job creation (Keune, 2015). In some countries which have been experiencing economic hardship, such as Greece and Spain, governments have intervened to exercise greater controls over both the process and outcomes of wage determination (Eurofound, 2015). By contrast, the Nordic countries have maintained a more voluntaristic, agreement-based approach to collective bargaining, although they have also introduced more company-level bargaining within a centralised framework (Campos Lima and Jorgensen, 2016). Traxler (1995) highlighted the variety of forms which decentralised bargaining can take by distinguishing between 'organised' and 'disorganised' decentralisation. Organised decentralisation refers to the close engagement of unions in sector-level framework agreements. Disorganised decentralisation involves single-employer bargaining, in which unions are less influential due to their declining density. However, Traxler (1995) noted that company-level bargaining can take place within the context of a broader industry or national framework--as in the case of Denmark, which has a well-established voluntary social partnership between unions and employers.

    The Danish 'negotiated economy' model, with its limited industrial relations legislation, emphasised social dialogue and coordination between employers and unions, supported by the state, in order to reform the collective-bargaining framework (Due et al., 1994; Madsen et al., 2016). By contrast, the approach to industrial relations in Australia has been based on a legal system that structures the relationships between the parties and frames the level, extent, and outcomes of their interactions according to well-defined legislative boundaries. The 'centralised' systems in each country gave way to divergent 'decentralised' systems and while both promoted greater flexibility, they did so in different ways.

    In Denmark, the path to decentralisation was through continuing negotiated outcomes between the employers' associations and trade unions. In keeping with the history of state intervention in Australia, decentralisation was pursued not via 'deregulation', as in many other liberal market economies, but through 'reregulation', which involved the reconfiguration of the legal framework to emphasise individual, rather than collective employment rights. This reflects what Howell and Kolins Givan (2011, p. 232) identified as 'a process of deep-seated and wide-ranging institutional change [that is] underway in the political economies of advanced capitalism'. However, as they acknowledged with regard tothe British, French, and Swedish comparisons, while decentralisation represented a convergent outcome, 'institutional convergence' did not necessarily follow. Indeed, the 'different starting points and inherited institutional sets have meant that each country [has] moved along somewhat different patterns...'(Howell and Kolins Givan, 2011, p. 250).

  2. Path Dependency and the Various Forms of Institutional Change

    The aim of the article is to analyse and discuss why Australia and Denmark followed quite different pathways in introducing decentralised collective bargaining; the puzzle here is that at a first glance, we see a parallel move towards decentralised bargaining. However, scrutinising the change in the two bargaining systems reveals significant differences in the way this decentralisation has been implemented, indicating that existing institutional structures matter. Encouraged by Teague (2009), we take up the concept of path dependency in order to compare the development of decentralised bargaining in Australia and Denmark.

    Paul Teague argues that we find both a strong and a milder version of path dependency, the strong one seeing institutions as deeply embedded with inbuilt self-reinforcing mechanisms and, accordingly, as difficult to change. Potential impetus to change will typically be exogenous. In the milder version, the importance of the past is emphasised; however, it allows for recalibration meaning first and foremost that the role of agency, the various actors, is highlighted (Crouch and Farrell, 2004). Via mindful action the actors can pave the way for a new path, thereby emphasizing that change can be endogenous. Thus, stressing that there is room for policy choice, where actors can shape and reshape the institutional landscape, still, new or reformulated paths tend to build upon features of the old path. Teague concludes that the milder or softer version of path dependency is the more satisfactory framework in which to assess industrial relations activity over time. The strong version simply becomes too rigid (Teague, 2009).

    Teague points to different trends in the literature illustrating this softer form of path dependency. A few should be mentioned here: Hybridisation where institutions are reformed to perform different tasks or to carry out particular tasks in different ways, while the overall characteristics of the institutions remain intact (Boyeretal., 1998). However, step-by-step changes might also lead to fragmentation meaning that established institutional arrangements either lose functionality or become disorganised, meaning that basic elements of the institution wither away. This suggests that even although gradual changes seem to evolve within existing characteristics of the institution, it might lead to a tipping point setting of a transformation of the institution (Gladwell, 2002). The robustness of a given institution can be analysed with regard to the strength of various forms of institutional lockins. First, the functional lock-in refers to the effectiveness of institutions in carrying out tasks they were put in place to do. Second, the cognitive lock-in covers rules, conventions, and norms embodying actions of individuals thereby expressing what are acceptable versus unacceptable actions. Third, the political lock-in tells how committed the state or other social forces are to preserving traditional institutional structures (Grabher, 1993).

    In collaboration with different colleagues, Kathleen Thelen has emphasised the need to study incremental institutional changes, arguing that even minor changes overtime might eventually lead to transformative change. Key concepts developed regarding incremental change are displacement, layering, drift, conversion, and exhaustion (Streeck and Thelen, 2005; Thelen, 2009; Mahoney and Thelen, 2010). These concepts are only rarely linked to path dependency; however, they are focused on institutional change as a subtle and not straightforward or rational process. This emphasises that existing institutional paths influence and matter in processes of change, or conversely, in social science we only rarely see a radical break away from the existing pathway.

    Based on these analytical inputs, we seek to explain the divergent trajectories of decentralisation in Denmark and Australia. The article begins by comparing some key characteristics of industrial relations in Denmark and Australia and how these have changed during the recent decades. The origins of the industrial relations systems in both countries are described, as are the divergent pathways which each has taken towards reform since the 1980s. The next section contrasts the voluntarist approach to reform taken by Denmark with the greater reliance on legal regulation in Australia. This is followed by two sections about decentralised bargaining in the two countries: first focusing on the introduction of decentralised bargaining in the 1990s, and second exploring examples of decentralised bargaining in manufacturing. Recent challenges to decentralized bargaining are analysed in the subsequent two sections. The article concludes by comparing theoretical insights on decentralisation of bargaining in the two countries, along with observations about the degree to which the characteristics of industrial relations in each country reflect their historical origins and can be regarded as examples of path dependency...

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