Opinion of the European Economic and Social Committee on ‘Strengthening collective bargaining power across the European Union’ (own-initiative opinion)
Date: 2023-07-12
Institutions: European Economic and Social Committee
Subjects: collective agreement, collective bargaining, employer, labour law, social dialogue (EU), social rights, trade union, worker participation, working conditions








C_2023349EN.01000701.xml










29.9.2023   


EN


Official Journal of the European Union


C 349/7







Opinion of the European Economic and Social Committee on ‘Strengthening collective bargaining power across the European Union’
         
(own-initiative opinion)
(2023/C 349/02)


Rapporteur:
Philip VON BROCKDORFF







Plenary Assembly decision


25.1.2023




Legal basis


Rule 52(2) of the Rules of Procedure




 


Own-initiative opinion




Section responsible


Employment, Social Affairs and Citizenship




Adopted in section


21.6.2023




Adopted at plenary


12.7.2023




Plenary session No


580




Outcome of vote
(for/against/abstentions)


152/4/9




1.   Conclusions and recommendations









1.1.


The EESC notes that collective bargaining is an essential instrument in industrial relations (assuming of course that employers and trade unions are willing negotiators) and refers to recent research suggesting that trade union membership beyond a specified level contributes towards reducing income inequalities within countries, thus alleviating entrenched disparities across different strata of society.












1.2.


The EESC stresses the important finding of an OECD report that wage coordination plays a key role in helping social partners account for the macroeconomic effects of wage agreements on competitiveness. The EESC also notes that the same OECD report emphasises the role of dynamic and strong collective bargaining in promoting productivity, competitiveness and economic growth.












1.3.


The EESC is of the view that trade unions together with employers’ organisations continue to play an important role in shaping economic, employment and social policy. However, the number of workers covered by either company-level or sectoral agreements continues to fall, thereby weakening the bargaining power of trade unions.












1.4.


It is therefore necessary to find ways for trade unions, employers and governments to assume greater importance in a dynamic labour market and to identify opportunities for ensuring the viability of sound and solid structures for social dialogue, collective bargaining power included, and respecting the autonomy of the social partners as well as national industrial relations.












1.5.


The EESC is of the view that it is up to the social partners to determine suitable structures for collective bargaining, and where appropriate, for tripartite and bipartite social dialogue. The EESC also recognises that governments play a key role in recognising the importance of collective bargaining by providing the enabling conditions to facilitate its undertaking, to protect against discriminatory practices and to prevent attempts at restricting workers from exercising their legal right to union participation.












1.6.


The EESC notes that the European Pillar of Social Rights (EPSR) encourages the social partners to negotiate collective agreements in matters relevant to them, while respecting their autonomy and the right to collective action (1).












1.7.


The EESC also notes that new forms of work such as the platform economy create new challenges for industrial relations. This new reality has weakened the ‘traditional’ role of trade unions as institutions representing organised labour, as well as that of employers’ organisations as key stakeholders in the labour market.












1.8.


The EESC notes that innovation in the workplace is critical for the success of any business and therefore recommends that, as part of the collective bargaining process, innovation processes in the workplace are addressed as part of collective bargaining and social dialogue in general.












1.9.


The EESC is of the view that in the face of intense global competition and increased energy costs, a balance may need to be found that factors in mutual interests such as higher living costs for workers while recognising that social dialogue, including collective bargaining can help boost productivity at the workplace.












1.10.


The EESC also believes that collective bargaining and social dialogue can support industrial strategy in changing economic conditions, in line with national industrial relations. Whereas some degree of flexibility may be required, this should be subject to agreement among social partners and without undermining collective rights or working conditions.












1.11.


The EESC notes that the most extensive and most stable collective bargaining coverage in Europe exists in those countries whose bargaining systems are characterised by multi-employer bargaining, where negotiations mainly take place at sectoral or, in some cases such as in Belgium, even at cross-sectoral level.












1.12.


Lastly, the EESC calls for governments to use public procurement in appropriate cases as complementary means to promote and recognise collective bargaining.




2.   General comments









2.1.


Collective bargaining is a key process in industrial relations that establishes fair wages and working conditions across economic sectors. It involves employers on one side and trade unions on the other. Whereas collective bargaining has been in place for many years, trade union membership has consistently fallen over the years. Research shows that as trade union membership falls, the bargaining power of unions is weakened, with implications for acquired workers’ rights and collective bargaining (2). Similarly, it is important for businesses to participate in relevant employers’ associations to strengthen the collective bargaining process, with research indicating that such organisations play a key role in promoting compliance with legal, labour and occupational health and safety standards, particularly within the informal economy (3).












2.2.


Further research sheds light on the relevance of trade unions in achieving a balance of power that supports social justice and economic prosperity. The empirical results show that income inequality follows an inverted U-shaped trajectory with trade union density rate. Initially, income inequality rises as more individuals in employment become unionised, reaches the peak of the inverted U-shaped trajectory when trade union density is in the range of 35 to 39 per cent, and is followed by a fall in income inequality as union density continues to increase. Hence, this research suggests that as membership increases beyond a specified range, it contributes towards reducing income inequalities within countries (4).












2.3.


Whereas innovation in enterprise, competitiveness and productivity are recognised as key drivers of economic growth in a highly competitive global environment, all three rely heavily on the input of labour and the value-added that workers provide in achieving innovation, competitiveness, and productivity. Underlying all this is the active involvement and contribution of social partners.












2.4.


As the EESC stated in its earlier opinion (5), the creation of long-term value remains the duty of executive directors through the pursuit of long-term interests and, therefore, improving accountability on the part of executive directors towards business sustainability should be encouraged. Indeed, this has been explicitly acknowledged by the European Financial Reporting Advisory Group (EFRAG) as part of its proposed ESG reporting requirements under the Corporate Social Reporting Directive (CSRD), with eligible companies required to disclose the extent of collective bargaining coverage and social dialogue across their workforce, since having an empowered, engaged, and valued workforce is viewed as one of the key tenets of a business’s long-term sustainability (6).












2.5.


Economic resilience and sustainability indirectly support social cohesion since resilience and sustainability can only be achieved by prioritising the value-added that labour provides to the economy. This priority is prevalent in economies where collective bargaining and social dialogue in general thrive and create a balance of economic power that promotes innovation in enterprise, competitiveness and productivity, based on technology and the workforce.












2.6.


Despite falling trade union density across the EU, the EESC is of the view that trade unions continue to play an important, though in some Member States, declining role in shaping economic, employment and social policies. However, the number of workers covered by collective agreements is falling. The representativity of employers’ organisations is also of concern in some Member States. Therefore, it is important that social partners, supported by an enabling framework, find ways to ensure that collective bargaining and social dialogue can serve their purpose as relevant and meaningful instruments, according to national circumstances and practices. The EESC notes that collective bargaining is a fundamental right, rooted in the ILO Constitution (7). Collective bargaining is also a means through which employers, and their organisations and trade unions, can establish fair wages and working conditions, whilst also taking into account national economic and social interests. In this context, the EESC refers to ILO Convention 87 on Freedom of Association and Protection of the Right to Organise, which is also a fundamental right of both workers and employers, as is the right for non-association itself. Sound labour relations also assume that employers and trade unions are willing negotiators. Evidence has shown that this is not always the case (8).












2.7.


The aim of this opinion, therefore, is to explore the reasons for and implications of ways to stem this decline, highlight the roles of trade unions, employers and governments in a dynamic labour market and identify opportunities for ensuring the viability of sound and solid structures for collective bargaining, while respecting the autonomy of social partners as well as national industrial relations.




3.   Specific comments









3.1.


As noted in SOC/764 Strengthening Social Dialogue (9), the level of commitment and effectiveness of social dialogue (and implicitly collective bargaining) varies from country to country. However, the EESC is of the view that it is up to national social partners to agree on the design of collective bargaining most appropriate to the country context.












3.2.


The EESC recognises that the governments play a key role in recognising the importance of collective bargaining by providing the enabling conditions to facilitate its undertaking, to protect against discriminatory practices and prevent attempts at restricting workers from exercising their legal right to union participation. This tripartite framework should reflect the salient points emerging from the Commission Recommendation on strengthening social dialogue, with a focus on ensuring social fairness, while boosting Europe’s prosperity and resilience.












3.3.


The EESC notes that the European Pillar of Social Rights (EPSR) (10) encourages social partners to negotiate collective agreements, while respecting their autonomy and the right to collective action. Furthermore, the EESC calls for social partners to be consulted on the design and implementation of economic, employment and social policies. However, it regrets that consultations are not being applied with the same conviction and commitment across the EU. The EESC also notes that, in line with the EPSR, and where appropriate, agreements concluded between the social partners shall be implemented at EU level and that of its Member States. This principle assumes that a minimum level of protection is provided.












3.4.


The world of work continues to change with new work practices shaping the working lives of millions of Europeans. New forms of work as part of the platform economy present formidable challenges to labour relations. The EESC is of the view that this new reality has impacted both trade unions and employers’ organisations, and both need to adapt quickly to this reality while safeguarding the fundamental rights of workers, in the spirit of the Commission’s proposed directive on platform workers.












3.5.


Collective bargaining is critical to the very existence and relevance of trade unions and ensuring a balance of power between employers and workers. The EESC believes that collective bargaining, as well as social dialogue generally, should also support innovation in the workplace with a view to boosting productivity and addressing potential changes to work practices which impact well-being and the working lives of workers. The EESC recognises that this places an added challenge for trade unions. However, employers should of course remain responsible for the decisions taken at enterprise level. What we are recommending is that, while respecting national industrial relations systems, the role of trade unions in the innovation processes of the workplace should be recognised as part of the relevant role of social dialogue and collective bargaining.












3.6.


It is relevant to highlight the findings of an OECD report (11) that reiterates that collective bargaining, is a key labour right that can also improve performance in the workplace. The same report worryingly concludes that this right is under pressure from the general weakening of labour relations and the rise of new and often precarious forms of employment. The report confirms that collective bargaining across the EU is under pressure, and how great the political need for action is. The report provides all the evidence necessary to strengthen collective bargaining in a way that makes it more flexible and more responsive to the changing world of work. In this context, the EESC believes that a balance needs to be found that takes into consideration mutual interests such as higher costs of living for workers and intensified global competition, recognising that collective bargaining and social dialogue, can boost productivity through workplace innovation and fostering skills development. Moreover, collective bargaining and social dialogue could support industrial strategy in changing economic conditions, based on national industrial-relations. Though flexibility as agreed by social partners should serve as means to adapt to changing circumstances and to balance the needs of companies and workers, this should not be at the risk of undermining collective rights, or at the expense of working conditions. Furthermore, properly regulated by legislation or collective bargaining, work flexibility implies benefits for both workers and employers alike.












3.7.


As regards company level and sectoral agreements in the collective bargaining process, there is no formula to determine whether one is more applicable than the other. That said, to increase collective bargaining coverage, as stated in the Directive on Adequate Minimum Wages (12), it is incumbent on social partners in individual Member States to undertake an analysis of the strengths and weaknesses of both forms of agreement and determine whether sectoral, company level agreements, or a combination of both represent the best way forward to increase collective bargaining coverage. For example, research indicates that the highest and most stable collective bargaining coverage in Europe exists in those countries whose bargaining systems are characterised by multi-employer bargaining, where negotiations mainly take place at sectoral or, in some cases such as Belgium, even at cross-sectoral level (13). Of course, efforts to increase coverage must take into consideration the circumstances prevailing in each country.












3.8.


The EESC recognises that increasing membership in trade unions and employers’ organisations will remain a formidable challenge, and whereas social dialogue and collective bargaining is and should be of a voluntary nature, we do recommend that social partners in individual Member States address this challenge by exploring appropriate methods to ensure viable membership in their organisations.












3.9.


The EESC recognises that there is a large diversity of national industrial relations systems reflecting Member States’ different economic and political situations. According to a Commission note (14), collective bargaining has been characterised by a shift towards decentralised bargaining at company level. Evidence shows that collective bargaining coverage tends to be higher where bargaining is centralised; where employers’ organisation rates are higher; and where the extension of agreements to non-signatory parties is practiced.












3.10.


The EESC also stresses the important finding of the OECD report that wage-coordination plays a key role in helping the social partners account for the business-cycle situation and the macroeconomic effects of wage agreements on competitiveness (15). Furthermore, the EESC is of the view that the process of bargaining will depend on the circumstances prevailing at enterprise level, be it a small or large.












3.11.


The EESC urges social partners to enhance the relevance of collective bargaining systems by evaluating how the collective bargaining at all levels could, in a balanced way, ensure added value for workers and employers alike in all sectors of the economy and society. In this context, it is pertinent to note the OECD’s most recent Employment Outlook report emphasising the role of a dynamic and strong collective bargaining in promoting productivity, competitiveness and economic growth.












3.12.


The EESC notes the important role that governments play or could play in engaging with employers and trade unions for closer cooperation, and in support of macroeconomic policies. Governments are of course major employers themselves and often bargain with unions representing workers, which in some Memers States can set the pattern for the entire economy. Furthermore, governments play a key role in providing the right conditions for industrial peace, price stability, increased productivity and non-discriminatory employment patterns. To achieve these objectives, and while respecting the autonomy of social partners the EESC calls for strengthening of collective bargaining to reach better outcomes for businesses and workers. As one of the measures, we recommend that governments use public procurement in appropriate cases as complementary means to promote and support collective bargaining, as outlined in two previous opinions issued by the EESC (16).












3.13.


As stated earlier, agreed flexibility in collective bargaining may be necessary. However, the EESC is of the view that any agreed modifications to collective agreements need to balance the interests of and present benefits for both parties. While national and sectoral-level agreements should be promoted, the EESC recognises that, as regards company-level negotiations, work flexibility, properly regulated by legislation or collective bargaining can benefit both employers and workers alike. Such negotiations should be underpinned by mutual trust and effective negotiation structures, whilst ensuring that working conditions are not allowed to regress. That said and wherever possible, a middle ground needs to be found whereby decentralised systems become more organised and allow sectoral agreements to set broad framework conditions leaving detailed provisions to firm-level negotiations. Indeed, research suggests that hybrid systems of collective bargaining, entailing coordinated sectoral and multi-level systems, results in improved outcomes for both workers and enterprises alike (17).






Brussels, 12 July 2023.


The President of the European Economic and Social Committee

Oliver RÖPKE
            





(1)  Principle 8.

(2)  Schnabel, C. (2020). Union membership and collective bargaining: trends and determinants (pp. 1–37). Springer International Publishing.

(3)  ILO (2013). The informal economy and decent work: A policy resource guide supporting transitions to formality. International Labour Office.

(4)  Montebello, R., Spiteri, J., & Von Brockdorff, P. (2022). Trade unions and income inequality: Evidence from a panel of European countries. International Labour Review.

(5)  Opinion of the European Economic and Social Committee on ‘No Green Deal without a social deal’ (Own-initiative opinion) (OJ C 341, 24.8.2021, p. 23).

(6)  https://www.efrag.org/?AspxAutoDetectCookieSupport=1.

(7)  It is also reaffirmed as such in the 1998 ILO Declaration on Fundamental Principles and Rights at Work.

(8)  Pisarczyk, Ł. (2023). Towards rebuilding collective bargaining? Poland in the face of contemporary challenges and changing European social policy. Industrial Relations Journal.

(9)  Opinion of the European Economic and Social Committee on the proposal for a Council Recommendation on strengthening social dialogue in the European Union (COM(2023) 38 final — 2023/0012 (NLE)) and on the communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on strengthening social dialogue in the European Union: harnessing its full potential for managing fair transitions (COM(2023) 40 final) (OJ C 228, 29.6.2023, p. 87).

(10)  Principle 8.

(11)  https://www.oecd.org/employment/negotiating-our-way-up-1fd2da34-en.htm.

(12)  Directive (EU) 2022/2041 of the European Parliament and of the Council of 19 October 2022 on adequate minimum wages in the European Union (OJ L 275, 25.10.2022, p. 33).

(13)  https://www.etui.org/services/facts-figures/benchmarks/what-s-happening-to-collective-bargaining-in-europe.

(14)  https://commission.europa.eu/system/files/2016-03/social-dialogue-involvement-of-workers_en.pdf.

(15)  https://www.oecd.org/employment/negotiating-our-way-up-1fd2da34-en.htm.

(16)  Opinion of the European Economic and Social Committee on ‘Decent minimum wages across Europe’ (exploratory opinion requested by the European Parliament/Council) (OJ C 429, 11.12.2020, p. 159); and Opinion of the European Economic and Social Committee on ‘Public procurement as a tool to create value and dignity in work in cleaning and facility services’ (own-initiative opinion) (OJ C 429, 11.12.2020, p. 30).

(17)  Braakmann, N., & Brandl, B. (2016). The efficacy of hybrid collective bargaining systems: An analysis of the impact of collective bargaining on company performance in Europe.