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Chapter 1: The legacy of the crisis: resilience and challenges
5.4.3. The stabilisation main actors (workers’ and employers’ rep- and Spain. Several Central and Eastern
role of short-time working resentatives, as well as the state). Nonethe - European countries experienced decreases
arrangements and automatic less, a number of broad developments can from initially low levels. In continental North
triggers for benefits be identified, corresponding to the different West Europe, coverage remained high
phases of the recession. and fairly stable. While national systems
Some institutional arrangements have appeared to converge slightly prior to the
proved relatively effective in limiting the The initial impact of the crisis affected the crisis, this trend was reversed.
impact of economic shocks. Automatic sta- private sector in particular. In response,
bilisers, in particular unemployment benefit social partners — often with the help of Countries where social dialogue is well-
systems, played an important role in sup- governments — cooperated effectively to established and industrial relations systems
porting incomes in the first phase of the limit employment losses through internal are strong have proven most resilient during
crisis in most Member States. Discretionary flexibility measures and short-time working the recent downturn. We can expect social
measures to temporarily increase the cover- schemes, as discussed. At this stage, social dialogue to play an important part in the
age and adequacy of benefits also proved dialogue was generally recognised as a fac - durable recovery of the European economy,
successful, although Member States with tor of resilience and adaptation (European promoting win-win solutions and the owner-
lower coverage and lower levels of benefits Commission, 2011c). ship of labour market reforms.
were not generally among those introducing
such measures. As the crisis deepened and widened, how- Watt (2009) also found, for example, that
ever, social dialogue came under increasing there was a higher likelihood of equity
Short-time working arrangements, sup - strain. Diverging views emerged between and social concerns being included in the
ported by partial unemployment benefits, employers and their representative organi- design of fiscal reforms packages in Mem-
also proved successful in absorbing eco - sations and trade unions regarding the most ber States when trade unions were involved
nomic shocks in their initial stage, although effective exit strategy. Fiscal consolidation in the process. In particular, as already
they were not available in all countries measures gave rise to further tensions, noted, the participation of social partners
(ECFIN, 2013) ( 113 ). However, not all gov - particularly in the public sector (European in the design and introduction of the STW
ernments and social partners opted for Commission, 2013b). schemes has been seen as a crucial factor
short time working arrangements during in ensuring their fast and effective imple-
the recession, just as many also resisted While European industrial relations were in mentation (Eurofound, 2010b).
pressures to reduce the level of employ - flux even before the crisis, the crisis appears
ment protection on permanent contracts on to have increased the pace of certain devel - 5.5.2. Minimum wage
the grounds that such actions were more opments. The decentralisation of collective and wage-setting mechanism
likely to lead to job losses than job crea - wage bargaining — a secular trend since developments
tion. Another explanation could also be that the 1980s — has accelerated since 2007.
the extensive use of temporary contracts In 12 Member States, the main bargaining Minimum wages are designed to prevent
enabled firms to unilaterally reduce their levels are seen to have shifted downwards, wage competition in low-paid occupations
workforce without recourse to negotiations. with the company level gaining impor- such that wages are too low to prevent pov -
tance vis-à-vis negotiations at industry or erty and social exclusion. From an economic
Evidence suggests that, in case of reces - cross-industry level. The recentralisation perspective, minimum wages can increase
sions, especially if protracted, automatic of bargaining in Belgium and Finland is a labour costs and thereby reduce levels of
triggers of benefits and more flexible work - notable exception. employment. Nevertheless, they can also
ing arrangements within more stable con- be seen as part of a broader dynamic pro-
tractual arrangements could improve the Recent years have also seen important cess that encourages firms to invest in skill
resilience of systems. The indexation of ben - changes in linkages between bargaining formation and on-the- job-training with a
efits could also be smoothed over a longer levels, notably increased use of opening view to raising labour productivity — and
time period in order to better distribute and opt-out clauses from collective agree- strengthening profits.
economic resources where most needed. ments. At the same time, fewer agreements
were (legally) extended to cover all workers While some economists consider that
5.5. The role of social and employers of a given level. There is also minimum wages have adverse effects on
partners: industrial relations evidence of reduced horizontal coordination employment, as do price rises in any com-
and minimum wages between bargaining units (a trend which did petitive market, empirical evidence is mixed.
not necessarily pre-exist). A recent review of empirical minimum wage
5.5.1. Main developments studies by Holmlund (2013) concluded that
in industrial relations Industrial relations are systems, whose minimum wages have ‘negligible employ-
settings are interrelated. In this regard, it is ment effects despite having substantial
The recession had a significant impact on notable that countries under financial assis - effects on wages’ ( 114 ). Nevertheless, the
industrial relations in Europe. There is con- tance have experienced more changes than possibility that a relatively high minimum
siderable diversity in the social dialogue others, in a larger number of parameters of wage involves the risk of ‘pricing out’
practices of different Member States, their systems (Eurofound, 2014b).
including different institutional frameworks ( 114 ) Holmlund, Bertil, 2013. What do labor
with different roles and capacities of the Since 2008, the share of European workers market institutions do? (available
at https://ideas.repec.org/p/hhs/
covered by collective bargaining decreased uunewp/2013_023.html). Working Paper
( ) European Commission, 2013. (from 66 % in 2007 to 60 % in 2012). The Series (available at https://ideas.repec.
113
Labour Market Developments in Europe, org/s/hhs/uunewp.html) 2013:23, Uppsala
European Economy 6, 2013. largest drops occurred in Portugal, Greece University, Department of Economics.
87
5.4.3. The stabilisation main actors (workers’ and employers’ rep- and Spain. Several Central and Eastern
role of short-time working resentatives, as well as the state). Nonethe - European countries experienced decreases
arrangements and automatic less, a number of broad developments can from initially low levels. In continental North
triggers for benefits be identified, corresponding to the different West Europe, coverage remained high
phases of the recession. and fairly stable. While national systems
Some institutional arrangements have appeared to converge slightly prior to the
proved relatively effective in limiting the The initial impact of the crisis affected the crisis, this trend was reversed.
impact of economic shocks. Automatic sta- private sector in particular. In response,
bilisers, in particular unemployment benefit social partners — often with the help of Countries where social dialogue is well-
systems, played an important role in sup- governments — cooperated effectively to established and industrial relations systems
porting incomes in the first phase of the limit employment losses through internal are strong have proven most resilient during
crisis in most Member States. Discretionary flexibility measures and short-time working the recent downturn. We can expect social
measures to temporarily increase the cover- schemes, as discussed. At this stage, social dialogue to play an important part in the
age and adequacy of benefits also proved dialogue was generally recognised as a fac - durable recovery of the European economy,
successful, although Member States with tor of resilience and adaptation (European promoting win-win solutions and the owner-
lower coverage and lower levels of benefits Commission, 2011c). ship of labour market reforms.
were not generally among those introducing
such measures. As the crisis deepened and widened, how- Watt (2009) also found, for example, that
ever, social dialogue came under increasing there was a higher likelihood of equity
Short-time working arrangements, sup - strain. Diverging views emerged between and social concerns being included in the
ported by partial unemployment benefits, employers and their representative organi- design of fiscal reforms packages in Mem-
also proved successful in absorbing eco - sations and trade unions regarding the most ber States when trade unions were involved
nomic shocks in their initial stage, although effective exit strategy. Fiscal consolidation in the process. In particular, as already
they were not available in all countries measures gave rise to further tensions, noted, the participation of social partners
(ECFIN, 2013) ( 113 ). However, not all gov - particularly in the public sector (European in the design and introduction of the STW
ernments and social partners opted for Commission, 2013b). schemes has been seen as a crucial factor
short time working arrangements during in ensuring their fast and effective imple-
the recession, just as many also resisted While European industrial relations were in mentation (Eurofound, 2010b).
pressures to reduce the level of employ - flux even before the crisis, the crisis appears
ment protection on permanent contracts on to have increased the pace of certain devel - 5.5.2. Minimum wage
the grounds that such actions were more opments. The decentralisation of collective and wage-setting mechanism
likely to lead to job losses than job crea - wage bargaining — a secular trend since developments
tion. Another explanation could also be that the 1980s — has accelerated since 2007.
the extensive use of temporary contracts In 12 Member States, the main bargaining Minimum wages are designed to prevent
enabled firms to unilaterally reduce their levels are seen to have shifted downwards, wage competition in low-paid occupations
workforce without recourse to negotiations. with the company level gaining impor- such that wages are too low to prevent pov -
tance vis-à-vis negotiations at industry or erty and social exclusion. From an economic
Evidence suggests that, in case of reces - cross-industry level. The recentralisation perspective, minimum wages can increase
sions, especially if protracted, automatic of bargaining in Belgium and Finland is a labour costs and thereby reduce levels of
triggers of benefits and more flexible work - notable exception. employment. Nevertheless, they can also
ing arrangements within more stable con- be seen as part of a broader dynamic pro-
tractual arrangements could improve the Recent years have also seen important cess that encourages firms to invest in skill
resilience of systems. The indexation of ben - changes in linkages between bargaining formation and on-the- job-training with a
efits could also be smoothed over a longer levels, notably increased use of opening view to raising labour productivity — and
time period in order to better distribute and opt-out clauses from collective agree- strengthening profits.
economic resources where most needed. ments. At the same time, fewer agreements
were (legally) extended to cover all workers While some economists consider that
5.5. The role of social and employers of a given level. There is also minimum wages have adverse effects on
partners: industrial relations evidence of reduced horizontal coordination employment, as do price rises in any com-
and minimum wages between bargaining units (a trend which did petitive market, empirical evidence is mixed.
not necessarily pre-exist). A recent review of empirical minimum wage
5.5.1. Main developments studies by Holmlund (2013) concluded that
in industrial relations Industrial relations are systems, whose minimum wages have ‘negligible employ-
settings are interrelated. In this regard, it is ment effects despite having substantial
The recession had a significant impact on notable that countries under financial assis - effects on wages’ ( 114 ). Nevertheless, the
industrial relations in Europe. There is con- tance have experienced more changes than possibility that a relatively high minimum
siderable diversity in the social dialogue others, in a larger number of parameters of wage involves the risk of ‘pricing out’
practices of different Member States, their systems (Eurofound, 2014b).
including different institutional frameworks ( 114 ) Holmlund, Bertil, 2013. What do labor
with different roles and capacities of the Since 2008, the share of European workers market institutions do? (available
at https://ideas.repec.org/p/hhs/
covered by collective bargaining decreased uunewp/2013_023.html). Working Paper
( ) European Commission, 2013. (from 66 % in 2007 to 60 % in 2012). The Series (available at https://ideas.repec.
113
Labour Market Developments in Europe, org/s/hhs/uunewp.html) 2013:23, Uppsala
European Economy 6, 2013. largest drops occurred in Portugal, Greece University, Department of Economics.
87
