Institutions and Inequality in Liberalizing Markets

• Published date: 01 March 2016
• Author: Chiara Benassi,Katja Sarmiento-Mirwaldt,Virginia Doellgast
• Date: 01 March 2016
• DOI: 10.1177/0032329215617466
• Subject Matter: Articles

Politics & Society

2016, Vol. 44(1) 117 –142

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DOI: 10.1177/0032329215617466

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Article

Institutions and Inequality

in Liberalizing Markets:

Explaining Different

Trajectories of Institutional

Change in Social Europe

Chiara Benassi

Royal Holloway, University of London

Virginia Doellgast

Cornell University

Katja Sarmiento-Mirwaldt

Brunel University London

Abstract

This paper examines cross-national differences in the development of sectoral collective

bargaining in the European telecommunications industry following comparable changes

in market regulations. The authors seek to explain why centralized, coordinated

bargaining institutions were established in Austria and Sweden, both within incumbent

telecommunications firms and at the sector level, while Germany and Denmark

experienced decentralization and disorganization of bargaining at both levels. The

authors argue that these outcomes resulted from differences in institutional loopholes

employers were able to exploit to avoid centralized bargaining and past union structures

that influenced patterns of interunion cooperation. These two explanatory factors

were interrelated: the presence or absence of institutional loopholes affected the basis

for cooperation between unions, while labor cooperation was an important power

resource unions could draw on to close emerging loopholes. Findings demonstrate

the importance of sector-level political dynamics for the construction or erosion of

solidaristic bargaining structures under pressure from market liberalization.

Keywords

collective bargaining, restructuring, telecommunications, unions, liberalization

Corresponding Author:

Chiara Benassi, Royal Holloway University, Egham Hill, Egham, Surrey TW20 0EX, England.

Email: chiara.benassi@rhul.ac.uk

Authors are listed in alphabetical order, and contributed equally.

617466PASXXX10.1177/0032329215617466Politics & SocietyBenassi et al.

research-article2015

118 Politics & Society 44(1)

The expansion of service jobs within European coordinated economies has been

accompanied by growing inequality in pay and working conditions.1 In the past, these

economies were dominated by strong manufacturing unions that were able to distrib-

ute productivity gains to their members in core sectors, but also across workplaces

with weaker collective bargaining institutions. As employment shifts to service indus-

tries characterized by low union density and volatile jobs, unions find it increasingly

difficult to maintain encompassing bargaining arrangements. These developments are

often connected to broader processes of economic globalization and European integra-

tion that are driving the liberalization of protective institutions and dualization between

labor market insiders and outsiders.2

A large body of research investigates the political dynamics through which coordi-

nating institutions are undermined or sustained in different European political econo-

mies undergoing liberalization. Scholars associated with the Varieties of Capitalism

(VoC) tradition have argued that cross-national divergence is due to factors such as the

role and size of the state,3 the degree of centralization in business associations,4 and

the structure of electoral and party systems.5 These analyses concentrate overwhelm-

ingly on the politics of coalition-building at the national level, with most studies

reflecting the bias toward manufacturing typical of the VoC literature. Where service

industry actors are included in these frameworks, they are typically either treated as

peripheral groups or analyzed for their interactions with representatives of manufac-

turing employers or unions in peak associations.6

In this paper, we present an alternative industry-based approach to studying the

causes of divergent patterns of institutional change and their labor market effects.

Institutional change has been argued to occur through processes of “drift” or “conver-

sion” as actors reinterpret institutions.7 Much of this reinterpretation takes place within

specific industry and workplace settings, where actors negotiate over pay and the dis-

tribution of productivity gains. By neglecting heterogeneous sectoral developments,

theorists may overestimate institutional stability and the distributional effects of for-

mal policy changes. Understanding the political dynamics of institutional change at

the micro or meso levels within national political economies is necessary for develop-

ing broader theories concerning sources of institutional change from below, evaluating

weaknesses or pressure points in national models, and identifying the power resources

that key actors draw on to pursue their distinctive interests.

We demonstrate the value of this approach by comparing trajectories of institutional

change in national telecommunications industries, based on case studies in Austria,

Denmark, Germany, and Sweden. Our analysis traces developments in sectoral and

firm-level bargaining following market liberalization and the privatization of incum-

bent firms in the 1990s. Despite similarities in the challenges to established institutions,

we observe different outcomes in the four countries. In Austria and Sweden, unions

were able to maintain and extend encompassing collective bargaining institutions

within the sector. In contrast, Germany and Denmark experienced decentralization and

disorganization, resulting in growing inequality between industry segments as well as

between and within incumbent firms. These trends were exacerbated by firms’ restruc-

turing strategies that reduced pay and conditions for formerly core workers.