Recent strikes by Southern Rail and Eurostar staff this summer are a reminder of the UK’s persistent struggle with labour disputes. Those between government, businesses and labour unions, that fail to be resolved through negotiation, are detrimental to the economy. Particularly those over public transport services. For example, the lowest estimate of the cost per day of the London tube strikes in 2014 was 10 million pounds.
Political scholars contend that the UK’s pluralist system of interest group participation is susceptible to high strike rates. The argument being that wage bargaining between labour and business in the UK is a highly fractured and disorganised free-for all that is likely to result in aggressive protest without resolution. In contrast, Austria’s system of interest group participation is regarded as highly cooperative. The graph below illustrates the success that Austria has had in mitigating against labour disputes and strike rates.
Figure 1: Strike duration across countries
Source: WSI, Hans Bockler Foundation 2015
Austria’s success is rooted in its pragmatic approach to interest group participation, particularly the tripartisan relationship between labour, business and government known as “social partnership”. The Austrian Government, a grand coalition between the Austrian People’s Party and Social Democratic Party of Austria, developed this policy framework in the post-World War II era.
Social partnership is upheld by non-market institutions which provide a formal forum for debate and negotiations between labour and business. Employers and Employees are represented by various economic chambers, (such as the Chamber of Commerce and Chamber of Labour), similar to the British Chambers of Commerce. Membership to one of Austria’s various chambers is obligatory for employers and employees – although labour union membership is not obligatory, with over 50% of employees belonging to one anyway. All parties concerned in labour law aim for conclusive negotiations at industry level, which is achieved by maintaining a continual dialogue.
Most negotiations are concluded at the industry level, between Austria’s economic chambers and the various labour unions. These co called “collective agreements” make up the bulk of labour law, with only a few informal negotiations taking place between industry associations in areas such as the newspaper and printing industry. Austria’s collective bargaining coverage rate (proportion of employees whose pay and/or conditions of employment were determined by a collective agreement) was 79% in 2010 compared to the UK’s which was just 35%.
Under the principle of subsidiarity, Austrian works councils organise proceedings for labour dispute settlements at lower levels industry, typically between individual companies and their employees. Works councils are elected bodies of employee representatives (independent of union organisations), who’s function it is to represent the interests of employees vis-à-vis their employer. The councils provide a more localised access point for workers to participate, ensuring that they can negotiate formally with their employers over labour issues such as salaries, new working agreements and conditions.
The success of Austria’s cooperative interest group framework was exemplified during the 2008 financial crisis, as businesses undertook a lengthy stint of negotiations with their employees and state representatives with the aim of reducing labour costs and avoiding job losses. A successful compromise was found working time reductions were adopted, which increased working-time-flexibility and keeping unemployment low. In addition, the International Labour Organisation found that in 2015 Austria did not lose one day of work to labour strikes, compared to a strike rate (rate of days not worked due to strikes and lockouts per 1000 workers) of 27 in the UK during 2014.
Developing a more cooperative and inclusive framework for labour and business interest groups could help prevent damage to the UK’s economy from unresolved labour disputes. To improve labour market flexibility and resistance to external shocks, the Government should mimic elements of Austria’s social partnership format and negotiate compromise (that reduce labour costs) with workers in times of crisis. Employees and employers should be encouraged to join formal economic chambers, equivalent to the British Chambers of Commerce, but for employees instead of businesses, perhaps making membership obligatory. In addition, following Theresa May’s pledge, “to have not just consumers represented on company boards, but workers as well”, Austrian-style works councils would prevent more disputes at the company level by increasing worker representation. Moreover, following the referendum vote it is likely that Britain will renew its parliamentary sovereignty in competences like labour law. If the government wants to reform EU labour regulations without being met with higher strike rates, a cooperative structure is the better choice.