The Diminishing Real Wage and Collective Bargaining: Tripartism's Balance of Power in Hungary (1997)

INTRODUCTION Inflation, currency devaluation, increased income taxes and a sharp decrease in real GDP are just a few of the macroeconomic variables responsible for the dramatic fall of the real wage, topping 50 percent in some Eastern and Central European countries. For the first time since the collapse of Communist regimes in Central and Eastern Europe, in November 1995 the International Labor Organization, jointly with the European Commission, sponsored a symposium on reforming wage policy with the intent of affecting the diminishing real wage in that region. Present at the Budapest conference were representatives from trade unions, employer organizations, government representatives from Central and Eastern Europe and the CIS, and academia.(a) While strong emphasis as to possible resolution of the wage problem was placed on collective negotiations between the social partners(b) of tripartite systems in these countries, it is not quite clear that this would result in an equitable outcome for workers under the present tripartite relationship, at least in the case of Hungary. This article examines the interrelationships between the tripartite actors in Hungary, particularly between the government and the trade unions. It further examines the tripartite impact on wage levels and collective bargaining in that country's transitioning industrial relations system. This will demonstrate three conditions: (1) that political, rather than purely economic influences have played a significant part in hindering tripartism in Hungary; (2) that tripartism undermines competitive rivalry among the social partners required in a market economy; and (3) that Hungary's tripartite industrial relations system is not yet mature enough to successfully implement the proposed solutions to the diminishing real wage that were recommended by the ILO at the Budapest conference. METHODOLOGY AND STRUCTURE This article is not meant to be a comprehensive paper on the structure of industrial relations in Hungary. Rather, this draws several preliminary conclusions as to the deteriorating state of Hungarian industrial relations during transition, as well as the shrinking power of the labor movement, and suggests the possible development of a cyclical pattern between tripartite-bargained wage regulation and trade union strike behavior. The suggestion of a bargained wage control - strike behavior nexus may serve as a hypothetical base in future research. It can only serve as a hypothesis, or theoretical proposition, as this is developed and presented by way of an empiricist methodology coupled with the use of the induction model. That is, this presents no formal hypothetical theory initially. Rather, it presents a statement of observation made as a result of the collection and compilation of on the diminishing real wage, trade union strike behavior, membership strength and tripartite relationships. In this case, research comes before theory and we seek to generate theoretical propositions on social life from our data (May, 1993). With regard to this article's structure, wage regulation and determination, and the policy alternatives to wage regulation discussed and developed at the Budapest symposium are presented initially. The proposed ILO solutions to combat the diminishing real wage problem are not critiqued in the context of their economic feasibility, but rather as to whether they are politically attainable in Hungary's politically dynamic labor environment. This is followed by an examination of Hungary's tri-level collective bargaining structure for the purpose of determining whether this structure can accommodate the adoption of the ILO proposals geared toward free wage bargaining. The national level of the tri-level bargaining structure is further examined through an analysis of the interrelationships and the power balance between trade unions and the government. …