The Gradual Transformation of the
Australian Employment Relations System:
Theory, Literature and Case Study Comparison
Alex Veen
University of Groningen
Faculty of Economics and Business
MSC INTERNATIONAL BUSINESS and MANAGEMENT
The Gradual Transformation of the Australian
Employment Relations System:
Theory, Literature and Case Study Comparison
November 2010
Alex Veen
Student number: 1421840
Email: A.Veen.1@student.rug.nl Alex.Veen@gmail.com
First supervisor: dr. N.A. Lillie Second supervisor: drs. H.C. Stek
Abstract: How has the Australian employment relations system changed from the Accord years till today? This is the main question answered in this thesis. A theoretical framework based on the integrated approach as developed by Bamber, Lansbury and Wailes (2004) is used to derive the changes of the Australian employment relations system. The findings of this study are firstly that the Australian employment relations system has seen substantial changes in the regimes regulating the system. There have been a number of structural changes in the system. It is argued that a rearrangement of industrial powers in the system has taken place in which the federal government and managers have been the winners whereas the Commission and trade unions have been the losers of this redistribution. The changes that have taken place in the Australian employment relations systems are than tested against three theories of transformational change (Erickson and Kuruvilla, 1998; Kuruvilla and Erickson, 2002; and Streeck and Thelen, 2005). It is concluded that a gradual transformation of the Australian employment relations system has taken place. A case study of five Australian industries, the automotive assembly industry, the beer manufacturing industry, the coal mining industry, the domestic passenger airlines, and the supermarket industry, confirm these findings from an industry perspective for the national context. However, the cases also expose that there are distinct differences between the national and the industry level. Furthermore, the case study has revealed that there are distinct differences in the changes of the employment relations within and between the five industries. Finally, the case study research has yielded some interesting findings on the most recent change in the Australian labour laws, especially on the abolition Work Choices and the introduction the Fair Work Australia regime.
From the Harvester Decision - 8th day of November 1907:
....The provision for fair and reasonable remuneration is obviously designed for the benefit of the employees in the industry; and it must be meant to secure to them something which they cannot get by
the ordinary system of individual bargaining with employers. If Parliament meant that the conditions shall be such as they can get by individual bargaining – if it meant that those conditions are to be fair and reasonable, which employees will accept and employers will give, in contracts of service – there would have been no need for this provision. The remuneration could safely have been left to the usual,
but unequal, contest, the “higgling of the market” for labour, with the pressure for bread on one side, and the pressure for profits on the other. The standard of “fair and reasonable” must, therefore, be
something else; and I cannot think of any other standard appropriate than the normal needs of the average employee, regarded as a human being living in a civilized community...
Justice Henry Bourne Higgins
ACKNOWLEDGEMENTS Groningen, 1st of December 2010
Dear reader,
Here before you is perhaps the longest master thesis written in the history of the IB&M department. One thing is for sure, it is not the shortest. The preparation, investigation and actual writing of this thesis has been quite the journey. In my life I have been fortunate enough to visit Australia twice. The first time before I started my studies and the other time when I had a semester off. The beauty of its nature, its unique animals, but most of all the kindness of the people has enriched my life. Therefore, it was with great pleasure and fascination that I have researched the changes of its Employment Relations system. At the end of this journey there are a number of people I would to thank. For without their assistance and support I would not have been able to pull this off.
I would like to thank my supervisor Nathan Lillie for his continued believe and support in this research project, but also for introducing me to the fascinating research field of industrial and employment relations.
Then I would like to thank Bill Harley, Greg Patmore, and Mark Wooden for answering all my questions in the telephonic interviews. I would like to thank Joe Isaac and Russell Lansbury for the interviews as well, but also for the tremendous amount of articles and information they have send to me. I would like to express my appreciation to Bradon Ellem for his assistance in setting-up interviews, but also for the personal interview. I am grateful to Greg Bamber for convincing me to come to Copenhagen to the IRRA congress and for introducing me to all the Australians there. I would like to thank Rae Cooper, Paul Gollan, Ray Markey, David Peetz, Patrica Todd, John Thompson, Nick Wailes, and David Worland for the interviews on such short notice and for skipping parts of their congress. It is much appreciated. Furthermore, I would like to express my gratitude to all the union officials who were willing to participate in this research.
Furthermore, I would like to thank my loving family, Bart, Anne, Roelof, Cato, and Duco. Thank you for the continuous support not just for these last couple of months but during all the troubles we have been through together. And last but not least, I would like to thank my lovely girlfriend Ingrid de Waart, who had to put up with my never ending stories on the Australian employment relations system, the late night and early morning telephonic interviews, and all the stress that came along with this project.
Sincerely,
TABLE OF CONTENTS ACKNOWLEDGEMENTS ... 4 TABLE OF CONTENTS ... 5 LIST OF FIGURES ... 7 LIST OF TABLES ... 7 LIST OF ACRONYMS... 8 INTRODUCTION ... 9
CHAPTER 1 THEORETICAL FRAMEWORK ... 12
1.1 WHAT IS GLOBALIZATION? A MATTER OF DEFINITION ... 13
1.2 THEORIES OF COMPARITIVE EMPLOYMENT RELATIONS ... 15
1.2.1 Dunlop’s Industrial Relations Systems Theory ... 15
1.2.2 Collective Bargaining and the Structures of Unions and Employers... 16
1.2.3 Decentralization of Collective Bargaining ... 18
1.2.4 Varieties of Capitalism Framework ... 19
1.2.6 Varieties of Capitalism Framework Reconsidered ... 22
1.3 CHANGES AND TRANSFORMATIONS OF EMPLOYMENT RELATIONS SYTEMS ... 24
1.3.1 Change from a Biological Science Perspective ... 24
1.3.2 Numerical and functional flexibility as Indicators of Transformational Change ... 25
1.3.3 Institutional Change in Advanced Political Economies... 26
1.4 DIRECTIONS OF CHANGING INDUSTRIAL RELATION SYSTEMS THEORIZED ... 29
1.4.1 Convergence ... 29
1.4.2 Divergence ... 30
1.4.3 From Strategic Choice to Converging Divergences ... 31
1.4.4 Varieties of Capitalism – Globalizing Liberal and Coordinated Market Economies ... 33
1.5 GLOBALIZATION AND THE AUSTRALIAN EMPLOYMENT RELATIONS ... 35
CHAPTER 2 CHANGES OF THE AUSTRALIAN EMPLOYMENT RELATION SYSTEM ... 37
2.1 HISTORICAL CONTEXT OF THE AUSTRALIAN EMPLOYMENT RELATIONS ... 38
2.1.1 The Route to Compulsory Arbitration and Conciliation in a Federated Australia ... 38
2.1.2 The Birth of Compulsory Arbitration and Conciliation ... 40
2.1.3 From Basic wage to Total wage – Inflation, Moderation, Indexation ... 42
2.2 THE CHANGES OF THE LEGAL AND POLITCAL CONTEXT ... 44
2.2.1 The Accord – The Australian Corporatist Years ... 44
2.2.2 Towards Enterprise bargaining – The Hawke and Keating years ... 45
2.2.3 The Workplace Relation Act 1996 – Curtailing the Commission and Enhancing Flexibility ... 46
2.2.4 Work Choices – A Government Gone too Far? ... 48
2.2.5 Fair Work Act 2009 – Forward with Fairness? ... 50
2.2.6. The Complexities of the Australian Labour Laws ... 54
2.3 THE STRUCTURAL CHANGES OF THE AUSTRALIAN ER SYSTEM ... 57
2.3.1 The Decentralization of Collective Bargaining ... 57
2.3.2 Changes in Union Membership, Structures and Power ... 59
2.3.3 The Downward Trend in Industrial Disputes ... 61
2.4 THE ACTORS ... 64
2.4.1 The Federal Government ... 65
2.4.2 The Employers and Their Associations ... 67
2.4.3 The Unions ... 71
2.4.4 The Australian Industrial Relations Commission – The Fair Work Tribunal ... 73
2.5 DEBATES SURROUNDING THE AUSTRALIAN ER SYSTEM ... 75
2.5.1 The Search for Increased Flexibility in the Face of Globalization ... 76
2.5.2 The Productivity Debate ... 79
2.5.3 The Modern Awards ... 80
2.6 THE REARANGEMENTS OF THE AUSTRALIAN INDUSTRIAL POWERS ... 81
2.6.1 The Increasing Industrial Power of the Federation ... 81
2.6.4 Enhancing the Managerial Prerogative ... 82
2.7 TRANSFORMATION OF THE AUSTRALIAN EMPLOYMEN RELATIONS SYSTEM? ... 83
CHAPTER 3 CASE STUDY COMPARISON OF FIVE INDUSTRIES ... 90
3.1 METHODOLOGY ... 91
3.1.1 Why a Case Study Comparison? ... 91
3.1.2 Why an Industry Case Study Comparison? ... 92
3.1.3 Research Design for this Case Study ... 94
3.2 THE INDUSTRIES ... 96
3.2.1 Supermarket Industry ... 96
3.2.2. The Beer Manufacturing Industry ... 99
3.2.3 The Domestic Passenger Airlines ... 100
3.2.4. The Automotive Assembly Industry ... 102
3.2.5 The Coal Mining Industry ... 105
3.3 COMPARATIVE CASE STUDY ... 107
3.3.1 How did the Employment Relations Change? ... 107
3.3.2 Actor Relationships, Behaviour and Strategic Choices ... 111
3.3.3 Unions’ perception and experiences of the Work Choices and Fair Work Australia regimes ... 114
3.3.4 Globalization and the Employment Relations in the Industries ... 118
3.4 DISCUSSION ... 120
DISCUSSION ... 126
CONCLUSION ... 132
REFERENCES... 136
APPENDICES ... 145
APPENDIX 1 – National Employment Standards (NES) Fair Work Act 2009 ... 145
APPENDIX 2 – Unemployment in Australia ... 146
APPENDIX 3 – Productivity Figures ... 147
APPENDIX 4 – ABS Classification of Industries at Class Level ... 148
APPENDIX 5 – Major Occupational groups domestic airlines and their respective unions 2010 ... 149
APPENDIX 6 – Market Share by Producers Australian Automotive Industry ... 150
APPENDIX 7 – Australian Coal Producers ... 151
LIST OF FIGURES
Figure 1.1 – Types of Institutional Change: Processes and Results ... 27
Figure 1.2 – Institutions as Regimes ... 28
Figure 2.1 – Proportion of Employees who are Trade Union Members ... 60
Figure 2.2 – Working days lost due to industrial disputes per 1000 employees 1972-2009 ... 62
Figure 3.1 – Market Share of Coles and Woolworths ... 97
LIST OF TABLES Table 1.1 – Three levels of Industrial Relations Activity... 31
Table 1.2 – Katz and Darbishire’s Key Growing Patterns of Workplace Practices ... 33
Table 2.1 – Overview of the legislative changes in the Federal industrial legislation ... 55
Table 2.2 – The Changes in the Australian bargaining structure ... 58
Table 2.3 – Union Membership and Density 1976-2009 ... 61
Table 2.4 – Nature of IR System Change ... 86
Table 3.1 – Market Overview of the Australian Supermarket Industry ... 97
Table 3.2 – Australia beer market Share: % share, by volume, 2009... 99
Table 3.3 – International exposure of the five industries ... 119
LIST OF ACRONYMS
ABS Australian Bureau of Statistics ABCC Australian Building and Construction
Commission
ACAC Australian Conciliation and Arbitration Commission
ACCI Australian Chamber of Commerce
and Industry
ACTU Australian Council of Trade Unions AFAP Australian Federation of Air Pilots
AFPC Australian Fair Pay Commission
AFP&CS Australian Fair Pay and Conditions Standards
AIG Australian Industry Group
AIPA Australian and International Pilots
Association
AIRC Australian Industrial Relations
Commission
ALAEA Australian Licensed Aircraft Engineers’ Association
ALP Australian Labor Party
AME Asian Market Economies
AMIEU Australasian Meat Industry Employees Union
AMMA Australian Mines and Metal Association
AMWU Australian Manufacturing Workers’
Union
APESMA Association of Professional
Engineers, Scientists, and Managers of Australia
ASU Australian Services Union
AWA Australian Workplace Agreement
AWU Australian Workers Union of
Employees
BBEIUW-WA Breweries & Bottleyards Employees Industrial Union of Workers Western Australia
BCA Business Council of Australia
BOOT Better-off-overall-test
CFMEU Construction Forestry, Mining and Energy Union
CME Coordinated Market Economy
DME Developed Market Economy
EBA Enterprise Bargaining Agreement
EFA Enterprise Flexibility Agreement
ER Employment Relations
ETU Electrical Trades Union
FAAA Flight Attendants’ Association of
Australia
FDI Foreign Direct Investment
FWA Fair Work Australia
GATT General Agreement on Tariffs and
Trade
GDP Gross Domestic Product
IFA Individual Flexibility Arrangement ILO International Labour Organisation
ITEA Individual Transitional Employment
Agreement
IR Industrial Relations
IRRA 1993 Industrial Relations Reform Act 1993
LCC Low Cost Carrier
LHMU Liquor, Hospitality and Miscellaneous Union
LME Liberal Market Economy
MIT Massachusetts Institute of
Technology
MVP Motor Vehicle Producer
NES National Employment Standards
NSW New South Wales
OEA Office of the Employment Advocate
QLD Queensland
SA South Australia
SDA Shop, Distributive and Allied
Employees Association
TWU Transport Workers’ Union
VIC Vehicle Industry Certificate
VIPA Pilots Union VIPA
VoC Varieties of Capitalism
WA Western Australia
WTO World Trade Organization
WPA Workplace Agreement
INTRODUCTION
Australia is known for its unique habitat and animals. It is home to marvels of nature like the Great Barrier Reef and the twelve Apostles. Also mankind’s influences have shaped Australia to what it is today. From the ancient culture of its original inhabitants the Aboriginals to manmade marvels like the Sydney Opera House. But Australia has more unique features than just its nature, culture and architecture. Australia has a very distinct employment relations system. Historical developments in Australia have led to a system of arbitration and conciliation (Macintyre and Mitchell, 1989). Historically, due to the constitution the Federal government of the Commonwealth of Australia could not directly intervene in the industrial relations (Creighton and Mitchell, 1995). Instead it had an indirect influence through conciliation and arbitration tribunals that were originally permitted to prevent and settle industrial disputes involving more than one State (Isaac and Macintyre, 2004).
In the 1980s this employment relations system was highly centralized through a corporatist arrangement, which started in 1983, between the federal government of Australia and the peak body of the trade union movement called the Australian Council of Trade Unions (ACTU) (Chapman, 1998). However, at the end of the 1980s the government, the unions, and the employers and their associations wanted a more decentralized bargaining system (Briggs, 2001).
The structure of the thesis
To answer the main questions first a theoretical framework is developed through which the changes of the Australian employment relations system are analysed. This is done in the first chapter. Firstly, I deal with the definition of globalization because it has been used as a justification, reason and excuse for the implementation of reforms in the Australian ER system. Hereafter I discuss the theoretical models that in this thesis are used for the analysis of the changes over time. Instead of opting for the use of one single model I follow an integrated approach as developed by Bamber, Lansbury, and Wailes (2004). This approach helps to understand how the complex interactions of globalization, institutions and the behaviour and strategic choices of the actors shape and change an ER system. To assess whether the changes of the Australian system can be labelled transformational three theories on transformational change are introduced. Then, an overview of four perspectives on the direction of changing ER systems is presented. Finally, I discuss how globalization and the related forces of market liberalization and international competition change ER systems.
At the start of the second chapter a brief overview of the historical development of the Australian ER system till the Accord years is presented. Without a proper understanding of the historical context and the idiosyncrasies of the Australian ER system one cannot fully comprehend the full impact of the changes that have taken palace. I analyse the changes in legislation, structural changes in the employment relations, the behaviour, relationships and strategic choices of the actors, the debates surrounding the changes of the ER system, and the rearrangement of industrial powers. At the end of the chapter I assess these changes through the theories of transformational change. On the basis of the outcomes derived from these theories I conclude that the Australian employment relations system has undergone a gradual transformation.
Bray and Waring (2009) argue that due to the level of aggregation at the national level sometimes interesting differences within an ER system are overlooked. Therefore in order to overcome this shortcoming a case study comparison of five industries is conducted. The changes in the employment relations in the automotive assembly industry, the beer manufacturing industry, the coal mining industry, the domestic passenger airlines, and the supermarket industry are assessed. In this third chapter I first discuss the methodology, the relevance of industry studies, and I present the research design for this comparative case study. The case study also follows the integrated approach as developed by Bamber, Lansbury, and Wailes (2004). An outline with background information on the employment relations for each of industries is presented. The structural changes in employment relations across the various industries are compared against each other but also against the national context. By looking at the relationships, behaviour and strategic choices of the actors at an industry level it becomes evident that there are discrepancies between the way the legislator envisions a regime to work and how it works in practice.
how one side of the bargaining table, namely union officials, in the five industries perceived the most recent changes in the legislation. I have investigated whether the changes in the legislation affected the bargaining process, the balance of power, and the relationships in the industry. Also, the impact of the recent process of award modernization is taken into account. The industry findings support the claims for a gradual transformation of the Australian ER system. But also illustrate the ability of the actors at an industry level to influence the direction of change.
In the discussion I justify the approaches used in this thesis. Furthermore, I assess how the findings at both the national as well at the industry level help to improve the current state of literature. Also, remarkable differences and similarities between the national and industry level are discussed.
The conclusion is the last part of this thesis. Here the main findings of the research project are presented. The main research question is answered and the most significant changes of the Australian employment relations system are highlighted. Based on the outcomes of the research at the national and industry level it is argued why the Australian system has undergone a gradual transformation. Hereafter, the limitations of this research are discussed and suggestions for further research are made.
Contribution of this thesis
How does this thesis contribute to the current state of the literature? In Australia since the Accord years the regime regulating the ER system has changed on six occasions. This study presents a comprehensive theoretically grounded overview of the historical developments of the Australian ER system over the last two decades. But also takes into account the distinct historical context from which the Australian ER system has emerged. The integrated approach was developed by Bamber, Lansbury and Wailes (2004) for the comparison of ER systems in an international context. In this thesis I demonstrate that integrated approach is also a valuable method for the analysis of a single country case but also for the industry level. Furthermore, the importance of industry level research as emphasised by Bray and Waring (2009) is underlined.
The findings at the national and industry level support the argument by Wailes, Lansbury, and Bamber (2010) for a modified Varieties of Capitalism (VoC) approach. The behaviour of the actors at the national and industry level strengthen the claims made by critics on the original VoC approach as developed by Hall and Soskice (2001). Especially the notion of institutional complementarities has to be rejected. This is demonstrated by applying the theory of Streeck and Thelen (2005) to the Australian situation at the national as well the industry level. These findings support the claim that the actors have the ability to influence and alter the direction of the change in an ER system.
CHAPTER 1 THEORETICAL FRAMEWORK
The purpose of this chapter is to provide a theoretical framework that can help to analyse the changes the Australian employment relations system has undergone since the Accord years till today. Following the outline I first deal with the definition of globalization. Because in many of the contemporary policy debates and academic discussion the argument is made that globalization is the cause for changing ER systems. However, in the literature globalization is used somewhat ambiguous and to prevent any misinterpretations the concept of globalization will be discussed.
The first important step is to decide ‘what’ is going to be compared and ‘how’ this comparison will be done (Bamber, Lansbury, and Wailes, 2004). The theoretical basis for the comparison conducted in the latter part of this thesis is derived from the comparative employment relations literature. Following Bamber, Lansbury and Wailes (2004), in this second part I opt for an integrated approach in which various theories and methods of comparative employment relations are combined into a holistic approach. The approach includes elements of Dunlop’s (1958) industrial relations systems theory. It takes into account the influence of trade union and employer structure on the collective bargaining process (Clegg, 1976; Sisson, 1987). The causes for the decentralization in developed market economies (DMEs) is assessed (Katz, 1993). Furthermore, the firm centric Varieties of Capitalism approach helps to analyse how the institutional settings of a country assist its firms to solve their coordination problems (Hall and Soskice, 2001). Furthermore, additional types of market economies, consideration for the overemphasis on path-dependency, and the lack of internationalization in the VoC approach are taken into account through the refinements as proposed by Wailes, Lansbury and Bamber (2010).
In the third part, I will analyse three theories of change and transformation. These theories will help to analyse the changes employment relations systems undergo. As Erickson and Kuruvilla (1998) have pointed out, the term transformation is somewhat ambiguous and has been used in the past to describe changes in industrial relations systems without a strong theoretical basis. In order to prevent this from happening I will turn to three theories which help to provide a solid basis to describe and label the changes the Australian employment relations system has undergone. Firstly, a theory developed by Erickson and Kuruvilla (1998) loosely based on two theories biological science is introduced. Then I assess the theoretical model used by Kuruvilla and Erickson (2002) to evaluate the changes of Asian industrial relations systems. Hereafter, I discuss a model to analyse institutional change in advanced political economies developed by Streeck and Thelen (2005).
convergence theory is the divergence theory as framed by Goldthorpe (1984). Then I will deal with a more comprehensive view on the impact of globalization. Following the research of Kochan, Katz and McKersie (1986) on strategic choice Katz and Darbishire (2000) analysed how employment relation systems have changed. Katz and Darbishire’s (2000) ‘converging divergences’ theory identifies some of the complexities in dealing with cross-country comparison. Hereafter I will discuss the VoC approach views on the impact globalization on employment relations systems. Following Thelen and Wijnbergen (2003); Thelen and Kume (2006); and Blanpain and Lansbury (2008) I argue for three refinements on the VoC perspective in relation to globalization. Firstly, it is demonstrated that the strength of firms in the face of globalization is weaker than often denoted. In addition, globalization leads more often to institutional breakdown than to institutional complementarities. Finally globalization reinforces country specific characteristics rather than reduces them.
In the final part of this chapter I will argue that in order fully comprehend the changes that have taken place in the Australian employment relations it is best to analyse these through the use of an integrated approach.
1.1 WHAT IS GLOBALIZATION? A MATTER OF DEFINITION
Before the impact of globalization on employment relations systems can be analysed it is necessary to define globalization. In the academic literature globalization is allotted a large scale of possible outcomes. Some see globalization as a threat to peace and stability in the world (Friedman, 2003), whilst others hail globalization as an opportunity for developing countries to close the gap with the developed world (de la Dehesa, 2007). All in all, globalization literature can be classified into three positions (ibid, 2007). First there are those who believe by opening up markets problems of the world will be resolved. They are the straightforward pro-globalization stream, usually classified as “liberal” or “market led” view. There is also a more moderate pro-globalization stream that sees many obstacles to overcome. This perspective is known as the “eclectic view”. Finally there is the anti-globalization perspective mainly expressed as an “anti-capitalist” perspective (ibid, 2007: p. 292).
see globalization as the previous mentioned advancements of technologies and transport combined with the restructuring of firms who have started to revaluate their strategies and started to look for exit strategies and investment opportunities abroad in search of bargaining advantages over the other actors. Thirdly, there are those who see globalization as the increasing neo-liberal trends set out by the Thatcher and Reagan governments in the 1980s. These governments pursued market liberalizations and were breaking up some of their social institutions. Fourthly, there are those who argue that globalization is the increasing number of liberal democracy states after the collapse of the communist USSR. They argue that since the demise of communism there is no longer an opposite ideological view on how to organise a state. Fifthly, there are those who see globalization as the decreasing protectionism of economic zones and the strive towards a world market. And finally, there are those who see globalization as the transition of the GATT to the WTO which they see as the start of regulation on a global scale. As Rieger and Leibfried (2003: p. 17) note some of these views seem to put globalization as an independent force which acts against the existing welfare states, depriving them of autonomy and lowering their ability to create independent policy decision. However Rieger and Leibfried (2003: p. 17) already note that this view of globalization as an uncontrollable exogenous force storming against powerless welfare states is misleading. Other authors who agree with them on this view are Wade (1996) and Boyer (1996). These authors argue that globalization is partly used as an excuse to impose reforms governments wanted to undertake for a while.
perceptions in distance which in effect results in new perception of isolation, forms of communication, and forms of organization (Ellem, 2006). Another narrow definition of globalization which allows to take the comments on the Hall and Soskice (2001) definition into consideration is presented by Bamber, Lansbury, and Wailes (2004: p. 3). The authors define globalization as “a description of recent changes in international economy, but accept that these economic changes may be symptomatic of, and supported by, reconfigurations in the broader political and ideological context within which economic activities take place”. For this thesis I will use a definition of globalization following Bamber, Lansbury, and Wailes (2004).
Therefore in the remainder of this thesis with globalization I refer to relatively narrow definition of Bamber, Lansbury and Wailes (2004) which allows to take into account the remarks made on the definition of Hall and Soskice (2001) on product and labour market liberalization and technological advancements with its effects on spatially. Finally, I would like to note that following Isaac (2005: p. 1) that deregulation can be read exchangeable with the term re-regulation. This because deregulation does not necessarily implies less regulation. Rather with deregulation I refer to the process of decreasing control on markets by governmental agencies.
1.2 THEORIES OF COMPARITIVE EMPLOYMENT RELATIONS
Theories of comparative employment relations can be used to make cross-country comparison of ER systems but also be used to evaluate national ER systems over time. Furthermore, the theories help to identify critical elements for industry research. Four theories for the comparison of employment relations systems are discussed in chronological order. These theories demonstrate the development the field of comparative employment relations has undergone. I will start with Dunlop’s (1958) industrial relations systems theory, followed by Clegg’s (1976) and Sisson’s (1987) analyses on the influence of union and employer association structures on the collective bargaining process. Hereafter I deal with Katz’s (1993) comparative analysis of decentralization of collective bargaining. Then Hall and Soskice’s (2001) framework of comparative capitalism called the Varieties of Capitalism is introduced. To conclude some refinements for the VoC approach are discussed (Wailes, Lansbury, and Bamber, 2010). Instead of opting for the use of one of these comparative approaches at the end of this chapter I will argue why instead an integrated approach is used.
1.2.1 Dunlop’s Industrial Relations Systems Theory
which is the wider society and other subsystems (ibid, 1958: p. 8). According to Dunlop (1958: p. 9) the actors of an IR system interact with the environment on three significant issues: (1) the technological characteristics of the workplace and community; (2) the market or budgetary constraints which impinge on the actors; and (3) the locus and distribution of power in larger society. Within this context the three actors establish what is called the “web of rules” (ibid, 1958: p. 13). As Dunlop (1958: p. 14) notes some of the rules are more dependent on the context then others. Under the “web of rules” Dunlop (1958: p. 14) classifies these rules by the actors in three categories: (1) the rules governing compensation in all its forms, (2) the duties and performance expected from workers including rules of discipline for failure to achieve these standards, and (3) rules defining the rights and duties of workers, including new or laid-off workers, to particular positions or jobs.
As Bamber, Lansbury, and Wailes (2004: p. 9) explain Dunlop’s systems theory had quite the impact on the English speaking countries due to its attempt to theorize the field of industrial relations. However, the theory is far from generally accepted and has been subjected to severe criticism over the years (e.g. Clegg and Dunkerley, 1980: p. 207). Hollinshead, Nicholls, and Tailby (2003: p. 22) summarized six fundamental limitations of the theory. First of all, the theory presumes a high level of confirmation at the work floor level, assuming that workers sense a need for solidarity in order to withstand the unbalanced power relationship between them and the other actors. The basis of the system theory is an equilibrium which emerges a resolution from conflict. Secondly, the theory supposes rational behaviour by all actors. It depicts that all actors interpret and reacted similar to information. Thirdly, the theory expects employees to have similar goals as their employer thereby limiting the basis for conflict. Fourthly, the unevenness of power between those employing and employed is not well represented in Dunlop’s model. Also, the theory does not explain how the actors, environmental contexts and the ideologies of the day have come to being and how they change overtime. Finally, the overemphasis on conflict resolution does not seem to explain the situations of conflict in everyday life.
Why is Dunlop’s theory still relevant to discuss? Dunlop’s (1958) work was a first and important attempt to theorize the field of industrial relations. Before Dunlop this field was largely left to fact finding and descriptive practices and lacked theoretical foundation (Hollinshead, Nicholls, and Tailby, 2003: p. 23). Secondly, Dunlop’s theory inspired others to develop their own theories like Clegg’s (1976) work on collective bargaining. Still nowadays, theorization of employment relations research remains important aspect. Finally, the way actors arrange their relations with their environment, thus the web of rules, continues to be of interested to academics.
1.2.2 Collective Bargaining and the Structures of Unions and Employers
Germany. Clegg (1976: p. 2) followed the Webb’s arguments that trade unions can be classified according to the way their pay and working conditions are determined. Clegg (1976: 2-3) argued that unions could be classified into three categories according to the basis of their bargaining power. Firstly, there were the crafts unions who, due to apprenticeships and skills-sets, were able to control the amount of labour available to employers. These unions could engage in unilateral setting of wages of conditions or put forward their demands strongly through means of collective bargaining. Because of the tight grip they have over the labour market. Secondly, there are those unions whose workers were also skilled but did not hold control over the labour market through apprenticeships. These unions relied on seniority and Clegg (1976: p. 3) labelled them ‘promotion unions’. They relied on the seniority structures within the industry to organise. Finally, the third category were those unions whose workers were semi- or unskilled. For these workers solidarity was the common basis for engagement with employers. But due to their lack of skills these workers are more vulnerable to replacement and therefore lack some of the capacity of industrial action available to the crafts and promotion unions (ibid, 1976: p. 3).
Clegg’s (1976: p. 4) theory presumed that unions engaged in collective bargaining and therefore was not applicable to situations were unions relied on political action, such as under Communist regimes. The most important basis for collective bargaining is according to Clegg (1976: p. 5) the ability of parties to put pressure on each other to reach demands. As Clegg (1976: p. 5-6) notices, agreements posses only value to the parties if they can be administered.
According to Clegg’s (1976: p. 8) theory, differences in collective bargaining is the main determinant of variations between unions in the countries. Clegg (1976 : p. 118) argues that there are three dimension which influence a union’s density, namely the extent, and depth of collective bargaining and the degree of union security offered by collective bargaining.
Bamber, Lansbury, and Wailes (2004: p. 10) argue that Clegg (1976) neglects the important environmental issues which Dunlop (1958) took into account. A limitation of Clegg’s (1976: p. 119) theory is that without a theory on the behaviour on employers organization’s and governmental agencies the differences amongst trade unions would be incomplete. In an attempt to fill this gap Sisson (1987) developed an approach that dealt with employers’ behaviour in collective bargaining. Sisson (1987: p.10-11) argued that not the rational choices by the actors shaped the collective bargaining structures but that they are the result of settlements and resolutions in the process of industrialization. Sisson (1987: p. 11) does not argue that once a country has a certain structure of collective bargaining it is stuck with it, rather he emphasizes that history has shaped certain norms and conditions which the actors have to deal with. Furthermore, it also impossible for the employers, unions or governmental agencies to decide rationally whether they engage with the other actors, historical contexts have shaped these dimensions during the industrialization (ibid, 1987: p. 187).
Britain and Western Europe was the result of the organizational structures of trade unions along occupational or industrial lines (ibid, 1987: p. 187). Next to the advantages in economics of scale, multi-employer bargaining remained popular in Western Europe because it dealt with unionism at an industry level. Thereby trade unions were kept outside the firms (ibid, 1987: 188). On the other hand, Japanese and U.S. firms due to their later legislative obligations to recognise trade unions were more inclined to deal with unionism in-house. This also prevented the development of a national union force in these countries (ibid, 1987: p. 188). According to Sisson (1987: p. 189) the reason why the U.K. employers later on switched to single-employer bargaining was due to the lack of legal enforceability of multi-employer agreements. Because of this lack of legal enforceability, the employers were unable to neutralize union activity at firm level thereby making multi-employer bargaining irrelevant.
Sisson (1987: p. 190-191) concludes that employers are engaged in collective bargaining as a mean to keep control and to limit market regulation. By making some of the aspects of the employment relation open to collective bargaining management implicitly demands from unions to leave the other issues over to the managerial prerogative. “The structure of collective bargaining is best seen from the employer’s point of view as a system of control that defines the nature and extent of trade union involvement in the rule-making process (Sisson, 1987: p. 190).”
Clegg (1976) reasoned that union behaviour is explained by collective bargaining. Bamber, Lansbury, and Wailes (2004: p. 10) argue rightfully that unions themselves are participating in collective bargaining. Thereby unions also shape the process of collective bargaining. Sisson’s (1987) focus on the role of employers in shaping the collective bargaining is more useful in this sense. Sisson’s (1987) theory however does not explain the trend of decentralization which became common in many western industrialized economies in the 1980s. Nonetheless, the structure of the trade unions as well as the employer and their association helps to strengthen the understanding of the power basis of the actors.
1.2.3 Decentralization of Collective Bargaining
From the 1980s in various industrialized western economies there is a tendency towards decentralized bargaining. Where in the past bargaining took place at a national or industry level the locus in the 1980s shifted towards firm or plant level (Katz, 1993: p. 3). Katz (1993) analysed the bargaining structures of six countries (Sweden, Australia, Germany, Italy, the U.K. and the U.S.A) and hypothesized that the decentralization could be linked to (1) a shift in bargaining power, (2) productivity coalitions focused around changes in work organization, or (3) diversification of corporate structure or worker interests.
low-cost competition. But generally speaking employers favoured a decentralised system because this allowed for whipsawing and alterations to suit local needs. Exceptionally unions favoured decentralised bargaining system but only if this allowed them to gain better concessions for their members from firms through for example the use of pattern bargaining. This happened to be the case in Australia at the end of the 1980s (Briggs, 2001).
The decentralization of collective bargaining in the analysed countries is according to Katz (1993) best explained by his second hypothesis which argues that both management as well as the employees have to gain from a decentralized bargaining system. The first hypothesis, according to Katz (1993: p. 16), is somewhat contradictive since at the time there was also a strong demand by union members at firm and plant level to gain bargaining concessions. This was also definitely the case for Australia as explained in Chapter 2. Furthermore, not all employers had to gain from decentralized bargaining because for some of them this meant increased exposure to competition. The second hypothesis, the one Katz (1993: p. 17) supports, stresses the demand for productivity increases in firms. New technology and increased competitiveness demand and allow for more flexible work arrangements. Employers and employees want to maximize productivity increases to their advantages and therefore prefer firm or plant level collective bargaining. Katz (1993: p. 17) finds that there is insufficient evidence to support the third hypothesis. He argues that although decreasing solidarity amongst workers, for example the increased individualization in Australia (Wooden, 2000), and changed organizational structures of firms, such as MNCs, might have an impact on bargaining systems but their impact is not sufficient nor widespread enough to explain the trend towards decentralization of the collective bargaining systems.
Although Katz’s (1993) theory provides us with an important impetus for the change from centralized bargaining systems towards more decentralized systems of collective bargaining, the theory fails to address the role of the governmental agencies that deal with the collective bargaining as described by Dunlop (1958). The governmental agencies also have the ability to change and alter the bargaining relationships. By favouring either employers or unions the bargaining relationship is altered. The Varieties of Capitalism framework developed by Hall and Soskice (2001) lends itself for the comparison of employment relations systems. The theory takes into account the complexities of the bargaining relationship but also the interactions with institutions.
1.2.4 Varieties of Capitalism Framework
spheres. First of all, firms have to deal with their industrial relations. They have to coordinate wages and working conditions with their workforce. In order to do this, firms have to engage in negotiations with trade unions, other employee representatives and in some instances governmental agencies. Secondly, firms need to take care of the vocational training of employees, thereby ensuring that their workforce has the required skill-set. Thirdly, firms have to arrange their corporate governance, firms need to have access to capital and therefore need to sort-out their relationships with banks and other creditors. Fourthly, the inter-firm relations a firm establishes with firms in its supply chain and competitors also influence the strategic choices a firm can make. Finally, firms have to deal with their employees and make sure that the goals and objectives of the employees are aligned with those of the firm.
How firms deal with these coordination problems depends on the institutions they have at their disposal. Hall and Soskice (2001: p. 9) define institutions as “a set of rules, formal or informal, that actors generally follow, whether for normative, cognitive or material reasons, and organizations as durable entities with formally recognized members, whose rules also contribute to the institutions of the political economy.” Important for this definition is that Hall and Soskice (2001: p. 9) also see markets as institutions through which firms can coordinate and solve the coordination problems at arm’s-length in the face of competition. These institutions help firms to deal with their coordination problems through the exchange of information. The institutions monitor the exchange information and if necessary sanction firms in case of default and non-compliance to agreements (Hall and Soskice, 2001: p. 10). Through the identification of these kind of institutions and they way in which they facilitate the coordination problems Hall and Soskice (2001: p. 11) developed the comparative VoC framework. Accordingly, Hall and Soskice have identified two ideal types of capitalist economies. The two sets of institutional solutions that are the opposite ends of the equilibrium are Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs). On the one hand there are the LMEs with usually the U.S.A and the U.K. as the prime examples. Australia is also classified as a LME. Typical of LMEs is that they coordinate their relationships at arm’s-length through the use of market mechanisms and hierarchy. On the other hand there are the CMEs with as primary examples Germany and Japan. Where LMEs prefer to arrange their relationships through the use of markets and hierarchies CMEs prefer their relations to be resolved through non-market institutions (Hall and Soskice, 2001: p. 8).
Secondly, the internal structures of the firms in the two ideal types of capitalist economies are quite distinct. Managers in LMEs have a larger ability to unilaterally arrange the employment relations whereas in CMEs generally the system is more consensus based and employees have a larger voice through work councils and trade unions representatives. This is also reflected in the remuneration schemes for mangers in LMEs and CMEs (ibid, 2001: p. 24).
Thirdly, with regard to industrial relations firms in CMEs tend to have more knowledge intensive and skill specific forms of employment and therefore are more inclined to secure the continuity of their labour forces. Firms in LMEs tend to favour more fluid labour markets and labour forces with more general than specific skills. This is also expressed in the way firms in LMEs and CMEs are likely to deal with employees and their representatives, like trade unions. Managers in LMEs favour unilateral control over the workforce and therefore are more likely to be hostile towards unions whereas CME cherish a good relationship with its workforce and in general have a more cooperative attitude (ibid, 2001: p. 24-25; 29-30).
Fourthly, due to the different types of labour markets and skills favoured by the firms, the education and training of the workforce is differently arranged in LMEs and CMEs. CMEs due to their need for long term relationships with employees invest heavily in their training and education. Employees are trained for specific skills or crafts. Firms in LMEs, due to the fluidity of the labour market, are more hesitant to invest in employees as there is possibility for competitors to attract skilled workers with-out the initial investment. For workers also the fluidity of the labour market holds that it is better to have more general skills since there is less job-security in LMEs (Hall and Soskice, 2001: p. 25; 30).
Fifthly, the inter-firm relations in CMEs are much closer and based on trust and commitment. Firms jointly developed programs and there are institutions which facilitate this process. In LMEs firms prefer markets and hierarchy to arrange their endeavours with others. This is characterised by the use of formal contracts (ibid, 2001: p. 26-27; 30-31).
As mentioned the VoC framework is firm centric and thus focuses at the interactions of the actors at a micro-level (ibid, 2001: p. 15). However, firms are also dependent on the institutions available at their expense. As Hall and Soskice (2001: p. 15) argue institutions are the result of a historical process and assist firms in solving their coordination problems. Therefore firms want to make optimal use of the institutions at their expense. This should then results in distinct corporate strategies since LME and CMEs have their own particular way of resolving the coordination problems (ibid, 2001: p. 16). What follows, is that this will lead to institutional complementarities. There where one of the spheres of coordination has a very distinct type institution of either a CME or LME this in turn will lead to a reinforcement of this type of coordination in the other institutions within the other spheres of the economy (ibid: p. 18). This development of institutional complementarities and distinct strategic actions by the firms forms the basis of a nation’s comparative institutional advantage (ibid, 2001: p. 36). This depicts that the institutional settings provide firms or certain industries with beneficiary settings which help them to compete globally.
Although the VoC framework originates from the political economy as Wailes, Lansbury and Bamber (2010: p. 12) explain the framework is also useful for employment relations scholars in international comparative analyses. Furthermore, they argue that the VoC approach is useful because it only has a limited number of variables, but that these variables include important aspects of the employment relationships such as industrial relations, the training and education of employees and the relations with employees (ibid, 2010: p. 12). Furthermore, according Wailes, Lansbury and Bamber (2010: p. 12) the VoC approach helps to analyse how globalization affects employment relation systems. Finally, the authors praise the VoC framework because it is firm centric (ibid, 2010: p. 12). However, given that the VoC approach thus can be helpful to analyse the impact of globalization on an industrial relations system, Wailes, Lansbury, and Bamber (2010: p. 13) argue that it has several shortcomings.
1.2.6 Varieties of Capitalism Framework Reconsidered
well whereas Japan’s has seen many setbacks in recent times (Byoung-Hoon Lee, forthcoming).i
Secondly, the VoC approach is somewhat rigid in its views on institutions. Although, the VoC approach does not treat institutions separately from the other actors, like the classical institutionalist approaches, there is an overemphasis on institutional complementarities. The VoC framework assumes that once institutions are emplaced there is positive feedback loop which reinforces the institutions and thereby reinforces its institutional settings as either LME or CME. Thus what the VoC approach does is that argues for path-dependency. If institutions are only reinforced then there is little that the actors influence to alter the direction. However, as Wailes, Bamber and Lansbury (2010) argue this view overemphasizes institutional order. As the authors explain this view is problematic for ER scholars. Path dependency would mean that ultimately the actors have only limited influence on the direction of a nation industrial system and their actions would have minimal impact. However, as Wailes, Lansbury and Bamber (2010: p. 14) argue change is important aspect of ER systems. This view that the VoC approach overemphasis institutional complementarities is shared by other authors like Thelen and van Wijnbergen (2003); Streeck and Thelen (2005); Thelen and Kume (2006), and Thelen (2009). If this were the case then once a country has been classified as a CME or LME there is very little it can do about it. Historically, the research of employment relations has dealt with the conflicting interest of employers and employees. Changes in institutions have had a significant impact on this continues conflict. Also, understanding how change of institutions alters and affects employment relations is much of the focus of the research field. Even when institutions have not changed that much over time, a path dependency argument would be unable to explain how some of institutions that have remained intact start to produce different outcomes over the years, e.g. a decentralisation of bargaining.
Blanpain and Lansbury (2008) examined whether the Asian countries had their own distinctive response to globalization and could be framed within a third type of market economy, being an Asian Market Economy (AME). However, the authors found only limited evidence to support that AMEs should be added as a third distinctive type of market economy to the framework. Because of these shortcomings Wailes, Lansbury and Bamber (2010: p. 13) propose that the VoC framework should be extended with more dimensions. However, which dimension should be included is still unclear.
1.3 CHANGES AND TRANSFORMATIONS OF EMPLOYMENT RELATIONS SYTEMS When assessing the changes the Australian employment relations have undergone from the Accord years till today a question that needs answering is “how radical was the change of the system”? Was the change transformational? Wooden (2000: p. 47) wrote on the changes of the Australian IR systems that he analysed that it was arguable whether or not it was transformational. One of the problems with the claim whether change is transformational or not, is that in the literature the term has been used ambiguously. In order to prevent this from happening, I introduce three theories on change and transformation. These theories help to evaluate the changes of the Australian employment relations later on. First I analyse a model developed by Erickson and Kuruvilla (1998) who borrowed two contrasting theories from the biological science to analyse changes in IR systems. Hereafter Kuruvilla and Erickson’s (2002) theoretical model which they used to evaluate the changes of Asian industrial relations systems is assessed. To conclude with Streeck and Thelen’s (2005) model of institutional change in advanced political economies. This model is closely related to the VoC approach. It helps to overcome the rigidity of institutional complementarities in the original theory.
1.3.1 Change from a Biological Science Perspective
When there is a fundamental change in the industrial relations of a country this is often referred to as a transformation. However, Erickson and Kuruvilla (1998: p.4) demonstrate that there is no consensus in the IR literature on the definition of a transformation. Therefore the authors introduced their own definitions based on the evolutionary biology. Erickson and Kuruvilla (1998: p.4) make a distinction between transformations and non-fundamental change of IR systems. The advantage of using models of differentiation based on evolutionary biology is that they are culture free and thereby applicable to all countries (Erickson and Kuruvilla, 1998: p. 9).
Erickson and Kuruvilla (1998: p. 11) argue that the first step is to determine whether the “deep-structure” of an IR system has changed. The deep-structure of a country is defined as the set of underlying network of basic principles of a country’s industrial relations. However, a problem with this definition is that Erickson and Kuruvilla (1998) have not really identified which belongs to this scope. The authors suggest (1998: p. 18) that when analysing a countries deep-structure the focus should be on property rights in the workplace, employer-employee relationships, labour market structure, collectivism versus individualism, and relationships between state, employers and trade unions. These are some of their proposals on relevant elements for an analysis of the deep-structure of IR system, however, there is no clear definition.
changes are made to the structures forced by internal and/or external factors (ibid, 1998: p. 10). These changes are characterised by a great deal of experimentation in IR policy and practice (ibid, 1998: p. 13).
1.3.2 Numerical and functional flexibility as Indicators of Transformational Change
Whilst it is clear that a distinction can be made in the type of change an industrial relations system undergoes, namely transformational or nun-fundamental change (Erickson and Kuruvilla, 1998). It is still unclear what the deep-structure of an IR system is. Kuruvilla and Erickson (2002: p. 173) argue that there are different internal and external forces which cause IR systems to change overtime. Although Kuruvilla and Erickson (2002: p. 174) argue that most IR systems have not changed all that drastically through the years, a substantial shift in labour relations is seen globally. Where the post-World War Two period was characterised by industrial peace and stability in order to achieve economic development in countries the locus has shifted towards a system that enhances firm-level competiveness (ibid, 2002: p. 175). Kuruvilla and Erickson (2002: p. 175) argue that this shift has been caused by increased openness of markets, rising numbers of trade across the globe, and increasing focus on cost-efficiency. Whilst simultaneously, the agents of labour have seen their position weakened thereby reducing the importance of labour peace and stability. These forces have resulted in what Kuruvilla and Erickson (2002: p. 175) call an increased search for firm-level competitiveness, which is achieved through numerical and functional flexibility strategies.
To understand how numerical and functional flexibility shape and transform industrial relations systems Kuruvilla and Erickson (2002: p. 177) stress it is important to understand the definitions of flexibility and stability and how they are related. It should be noted that both stability as well as flexibility are multidimensional concepts (ibid, 2002: p. 178). Stability should be viewed from a broad perspective. All actions taken to reduce conflict and maintain labour peace can be regarded as moderators of stability. Flexibility can be separated into two dimension, firstly at the level of the labour market and secondly at the firm-level. Functional and numerical flexibility as proposed by Kuruvilla and Erickson (2002: p. 178) are focused at the latter dimension.
actors (mainly firms) who are striving for either flexibility have the ability to work around or influence the institutions to a certain extent (Kuruvilla and Erickson, 2002: p. 179-180).
Since firm-level competiveness is now the focus for many IR systems, numerical and functional flexibility have become goals which the different actors strive for. In order to achieve these goals changes are made to the existing institutions, labour laws, and work practices (ibid, 2002: p. 180). When are what types of flexibility strategies required? Kuruvilla and Erickson (2002: p. 215-216) identify four factors that influence the type of flexibility used. Firstly, nations which institutions have focused on labour security in the past are more inclined to allow increased use of numerical flexibility. Secondly, a country’s competitive advantage affects the flexibility it pursues. Thirdly, closely related to the former is the presence of institutions promoting and fostering knowledge, when these are present a more substantial emphasis will be placed on functional flexibility. And finally, the strength of unions seems to affect the pursued strategies as well. The stronger the unions the more likely there is a push towards functional flexibility. For numerical flexibility strategies create two-tier labour markets thereby creating a separation between core and peripheral workers. However, Kuruvilla and Erickson (2002: p. 217) stress that this latter factors tends to differ per country. In Australia, as I will demonstrate in Chapters 2 and 3, there has been a push towards functional as well as numerical flexibility.
How can the identification of the flexibility help to identify transformation from change? As noted before according to Erickson and Kuruvilla (1998) the deep-structure of an IR system has to change before a change can called transformational. Although numerical and functional flexibility do not provide us with a decisive judgement they are useful indicators of changes in the deep-structure, therefore they should be included when the changes of the Australian ER system are assessed.
1.3.3 Institutional Change in Advanced Political Economies
One way to determine the changes of an employment relations system is thus by analysing whether the deep structure of industrial relations has changed. Another possible way to analyse the changes of an ER system is through analysing the changes of its institutions. Streeck and Thelen (2005) developed a political economy model of institutional change, closely linked to the VoC approach, that helps identify these changes. A significant problem with the research on change in the political economy but also ER has been that there has been an overemphasis on stable systems that are disrupted by exogenous shocks (ibid, 2005: p.1). The authors (2005: p. 12) make a distinction between the process and results of change. As depicted in Figure 1.1. Streeck and Thelen (2005: p. 12) show that this distinction between process and result leads to four different types of institutional change.
understand the common trend of liberalization most Developed Market Economies (DMEs) have undergone. This process of liberalization has resulted in gradual transformation of institutions. Streeck and Thelen (2005: p. 27) argue that gradual transformation can occur in five different modes: displacement, layering, drift, conversion, and exhaustion.
Figure 1.1 – Types of Institutional Change: Processes and Results
Source: Streeck and Thelen (2005: p. 55)
In order to use Streeck and Thelen’s (2005) model of institutional change two important questions of definition have to be answered. What are institutions? And what is liberalization? The former, Streeck and Thelen (2005: p. 18) argue, should be seen in the light of social regimes. Figure 1.2 depicts how social regimes of rule makers and rule takers interact with each other. The rule takers can directly provide feedback to the rule makers. All of this takes place in the context of a society made up of third parties who provide the system with legitimacy (ibid, 2005: 19). The institutions have a formalized character and they constitute of a set of rules. The rules can be enforced by a third party and have an obligatory character (ibid, 2005: p. 15). This definition of institutions has three advantages (ibid, 2005: p. 16-17). Firstly, in reality there is a “gap” between how institutions are designed and how they work in practice. Where other theories fall short of recognising this, Streeck and Thelen’s (2005) definition recognises this aspect. This is important because the discrepancy between intended and actual behaviour can cause incremental change, called drift. Secondly, the definition allows seeing policies as institutions as well, with the notion that only those policies that have a binding character upon the actors with enforceability through third parties can be regarded in this manner (ibid, 2005: p. 17). Thirdly, it allows seeing some organizations as institutions as well. However, only those organizations which have a public function and are protected by third party enforcement. As an example Streeck and Thelen (2005: p. 18) argue that in some countries due to specific legal provision trade unions are institutions which employers cannot neglect.
occurred in both CMEs and LMEs. With liberalization Streeck and Thelen (2005: p. 5) refer to the process of deep revisions of the welfare states where the emphasis is placed on free markets in order to create resolutions for social and economic problems. Characteristic for this process of liberalization is the privatization of state firms, deregulation of markets, and increased self-reliance for all actors (ibid, 2005: p. 5).
Figure 1.2 – Institutions as Regimes
Source: Streeck and Thelen, 2005: p. 56
speaking breakdown of institutions happens over time. One of the points of criticism on the VoC approach was the way it assumes institutional complementarities. As mentioned, institutions are not always complementary. When they are not complementary, Streeck and Thelen (2005: p. 44) argue that in the short run they might co-exist but that in the long run either of the incompatible institutions has to seize to exist as a result of exhaustion.
The discussed theories of Erickson and Kuruvilla (1998) and Kuruvilla and Erickson (2002) focused on the changes of IR systems. Whereas, Streeck and Thelen’s (2005) institutional change model is focused on the changes and transformations of institutions. However, taking all three theories into account will result in an accurate analysis of the changes of the Australian ER system. The institutional change model helps to analyse changes of the institution. Especially the gradual transformations as theorized by Streeck and Thelen (2005) can be valuable when analysing the Australian system. As demonstrated in Chapter 2 the functions and set-up of the various institutions in Australia have changed drastically since the Accord years till today.
1.4 DIRECTIONS OF CHANGING INDUSTRIAL RELATION SYSTEMS THEORIZED The notion of globalization and the concomitant trends of market liberalization and increasing international competition has not been missed by ER scholars. However, as mentioned there is still no consensus on what globalization will bring to the world. Over the years various theories have come to pass and argued how change will affect the direction ER systems. I will discuss the most influential theories on the direction of change. First, the classic convergence theory developed by Kerr, Dunlop, Harbison and Myers (1960) and a revised convergence theory by Dore (1973) will be discussed. Hereafter, I deal with Goldthorpe (1984). His stream is the direct opposite of convergence theorists and predicted a divergence of ER systems. Hereafter, concept of strategic choice by Kochan, Katz and McKersie (1986) is discussed which has led to the more delicate converging divergences hypothesis (Katz and Darbishire, 2000). Finally, I outline how the Voc approach predicts employment relations systems to change under the influence of globalization.
1.4.1 Convergence
In his attempt to demolish the existing convergence theories, Dore (1973: p. 11) instead developed his own version of a convergence theory. What is wrong with the convergence theory as developed by Kerr et al. (1960) is according to Dore (1973: p. 10-11) that it overemphasizes the role of technology. The idea that technology pushes countries towards similar institutional settings is incorrect according to Dore (1973: p. 11). Rather he argues that a broader set of factors is of relevance, and that countries that have industrialized later on have an advantage over those who have industrialized in an earlier stadium. Dore’s (1973: p. 11-12) argument is different from the classical convergence theories in three ways. Firstly, he argues that the overemphasis on technology has left out organizational complexity and that at his time of writing there was increasing call for social equality. Secondly, according to the classical convergence theory the wage levels of employees were determined by markets. In Dore’s (1973) perception, however, wages will be determined less by markets and more by inter-firm-organizational aspects of the employment relations. Employees skills and capacities will not be valued on a labour market but by the inter-firm relative rankings. Thirdly, and most importantly Dore (1973) argues that late-starters, as in this instance Japan’s industrialization, have ‘late development effects’ which provides them with an advantage over earlier developed countries. Dore (1973: p. 12-13) argues that these late starters tend have many commonalities in their institutions and that early developer are likely to follow this direction. Although Dore (1973: p. 13) mentions that his model leaves substantial room for idiosyncrasies between countries his core idea is that industrialized countries tend to move towards institutional settings that the late-starters have already developed.
1.4.2 Divergence
The convergence theories developed in the 1960s and 1970s were subjected to severe criticism in later years. Especially the pluralistic industrialism theory (Kerr et al., 1960) has been the subject of much debate. Furthermore, the debate of convergence has kept the minds of academics like Bendix (1970); Goldthorpe (1984); Berger and Dore (1996) occupied over the years. Where Bendix (1970: 273-274) particularly debated that the work of Kerr et al. (1960) was overly deterministic, accredited too much influence to existing elites, and that there was no room for the explanation of idiosyncrasies. Goldthorpe (1984) follows Bendix’s (1970) line of criticism but also attempts to theorize the developments of IR systems in the light of corporatism and dualism which occurred in the 1980s. According to Goldthorpe (1984) the work of Kerr et al. (1960) fits in the time perspective of the 1960s in the post-war period in which the U.S. was the forerunner of industrialization. Rather than convergence, Goldthorpe (1984: p. 316) argues that the developments in the 1970s and 1980s point towards a divergence of IR systems.
