The effects of collective bargaining systems on the productivity function of firms: An analysis of bargaining structures and processes and the implications for policy making

• Published date: 01 May 2021
• Author: Bernd Brandl,Nils Braakmann
• Date: 01 May 2021
• DOI: http://doi.org/10.1111/irj.12325

ORIGINAL ARTICLE

The effects of collective bargaining systems on

the productivity function of firms: An analysis

of bargaining structures and processes and the

implications for policy making

Bernd Brandl

1

| Nils Braakmann

2

1

Durham University Business School,

Durham University, Durham, UK

2

Newcastle University Business School,

Newcastle University, Newcastle upon

Tyne, UK

Correspondence

Bernd Brandl, Durham University

Business School, Durham University, Mill

Hill Lane, Durham DH1 3LB, UK.

Email: bernd.brandl@durham.ac.uk

Funding information

European Union

Abstract

In recent years, individual and company bargaining

have increasingly supplanted sector and country collec-

tive bargaining leading to increasingly heterogeneous

and perforated, that is, hybrid, national collective

bargaining systems. Little is known about the relative

effects of these different systems. In this paper, the

authors derive and test a comprehensive categorization

of collective bargaining systems and argue that differ-

ent systems are associated with different production

functions and therefore have different effects on labour

productivity. The hypotheses are tested using represen-

tative workplace-level data for all member states of the

European Union. It is found that the performance of

coordinated sector collective bargaining systems is

higher than for all other forms of collective and indi-

vidual bargaining. Policy implications of the results are

discussed as these results challenge attempts to reform

collective bargaining in Europe.

Received: 13 June 2020 Revised: 3 March 2021 Accepted: 8 March 2021

DOI: 10.1111/irj.12325

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits

use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or

adaptations are made.

© 2021 The Authors. Industrial Relations Journal published by Brian Towers (BRITOW) and John Wiley & Sons Ltd.

218 Ind. Relat. 2021;52:218–236.wileyonlinelibrary.com/journal/irj

1|INTRODUCTION

Interest in the effects, that is, the functioning and impact, of different collective bargaining sys-

tems, that is, different institutional structures and processes of collective bargaining, on the pro-

ductivity of companies has (re)gained both political and academic interest in recent years. This

interest was triggered by the advent of the economic crisis in 2008, because the ability of some

forms and structures of collective bargaining to provide flexibility for companies to maintain or

increase their productivity and competitiveness was questioned in some countries.

Particularly in the European Union (EU), political interest in the effects of collective

bargaining systems increased after the adoption of the Europe 2020 strategy in 2010, which

aims at promoting ‘smart, sustainable and inclusive growth’for the EU member states. A part

of this strategy aims at fostering the productivity of European companies to enable them to

compete successfully in the world market. Although Europe 2020 does not directly refer to

collective bargaining, several countries received recommendations to review their bargaining

systems to ensure that labour costs, that is, wages and working time arrangements, support

competitiveness and productivity growth (European Commission, 2011). Furthermore, political

interest in the effects of collective bargaining increased in recent years after the European Com-

mission, the European Central Bank (ECB) and the International Monetary Fund (IMF)

included reforms of collective bargaining systems on the agenda of their Memoranda of Under-

standings (Johnston, 2016; Marginson, 2015; Zartaloudis & Kornelakis, 2017).

In academia interest increased as in many European countries, ‘well-known’national col-

lective bargaining systems, which were characteristic of European countries for the second half

of the 20th century (Crouch, 1993; European Commission, 2015), transformed into hybrid sys-

tems (Brandl & Bechter, 2019), that is, into perforated, multilayered and complex systems of

collective bargaining (Ebbinghaus, 2004; Keller, 2018; Marginson, 2015). From a national, that

is, countrywide, perspective, these new systems of collective bargaining are certainly not homo-

geneous and uniform for all (or the majority) of companies in the economy but characterized

by the presence of different collective agreements, for example, sectoral, and company agree-

ments, within one country (Marginson & Sisson, 2002). However, little is known about the rela-

tive effects of these systems of collective bargaining for companies in this recently emerged

environment.

Against this background, we provide a generalizable, comprehensive and in-depth investiga-

tion of the relationship between distinct collective bargaining systems and company perfor-

mance using cross-European microdata on the workplace level. Specifically, we contribute to

recently emerged microstudies and debates on the relationship between different industrial

relations factors including collective bargaining systems and company performance (Askenazy

et al., 2016; Braakmann & Brandl, 2021; Boeri, 2014; Forth et al., 2017; Organisation for

Economic Co-operation and Development [OECD], 2019). These recent debates do not focus

anymore on data and cases in a small number of countries with very limited institutional vari-

ety in industrial relations but are able to provide generalizable insights into the relationship

between different aspects of industrial relations and company performance. Within these recent

debates, which investigated a number of industrial relations factors, we concentrate and take a

more detailed look at the role of different collective bargaining systems. More specifically, we

augment current discussions by widening the analysis by investigating the degree of coordina-

tion between different bargaining units at the same or between different levels. Similar to very

recent investigations that also emphasized the important role of coordination of collective

bargaining (OECD, 2019), we contribute to these debates by augmenting the analysis by a more

THE EFFECTS OF COLLECTIVE BARGAINING SYSTEMS 219