Instability and Change in Collective Bargaining: An Analysis of the Effects of Changing Institutional Structures

Publication Date01 Sep 2017
DOIhttp://doi.org/10.1111/bjir.12207
AuthorBernd Brandl,Christian Lyhne Ibsen
British Journal of Industrial Relations doi: 10.1111/bjir.12207
55:3 September 2017 0007–1080 pp. 527–550
Instability and Change in Collective
Bargaining: An Analysis of the Effects
of Changing Institutional Structures
Bernd Brandl and Christian Lyhne Ibsen
Abstract
Previous studies on collective bargaining structures and macroeconomic
performance have largely ignored the role of stable and instable institutional
structures and the eects of institutional change itself. In this article we posit
that institutional stability of collective bargaining is of major importancefor the
moderation of unit labour costs growth. This hypothesis is tested on the basis
of data which cover the period 1965–2012 and includes28 countries. The results
show that institutional change impairsthe capacity to moderate unit labour cost
growth significantlyin the subsequent years following the change.This eect also
holds for changes in both decentralization and centralization of institutions.
1. Introduction
This article takes up a classical theme in economic and social sciences
— the consequences of institutional change — by analysing the impact
of changes to institutional structures of collective bargaining and the
subsequent institutional instability on macroeconomic performance. Changes
to collective bargaining structures, that is, in the level, domain and form
of bargaining co-ordination among dierent actors, have been pervasive
across industrialized countries in recent decades. Not least since the advent
of the current economic crisis, where in many European countries the
institutional structures of collective bargaining have been changed on the
basis of recommendations from the European Commission, the European
Central Bank and the International Monetary Fund, the so-called ‘Troika’
or ‘creditor institutions’ (Marginson 2015). However, the eects of these
and other changes in collective bargaining structures on macroeconomic
Bernd Brandl is at Durham University Business School, Universityof Durham. Christian Lyhne
Ibsen is at Employment RelationsResearch Centre, University of Copenhagen.
C
2016 John Wiley& Sons Ltd.
528 British Journal of Industrial Relations
performance are unclear. In part, this is due to the fact that the eects of
institutional change by itself and the eects of institutional instability have
largely been neglected in existing theoretical and empirical studies.
So far,macro-level studies on the relationship between collective bargaining
institutions and socio-economic aggregates have attempted to assess the
impact of particular bargaining structures on various outcome variables such
as wages, (un)employment, inflation, (wage) inequality and in particular on
(unit) labour costs (e.g. Baccaro and Simoni 2010; Brandl 2012; Calmfors
and Drill 1988; Iversen 1998; Johnston 2016; Kenworthy 2006; Soskice
1990). Other studies have focused on the change or resilience of institutions
for collective bargaining facing changing socioeconomic and technological
conditions (e.g. Crouch 1993; Hall and Soskice 2001; Kochan et al. 1994;
Streeck 2009; Thelen 2014). The axis of contention in the former — often
based on cross-sectional variance — has thus been which institutional
structures performed relatively better in terms of particular macroeconomic
goals, while the axis of the latter has been the existence, direction and causes
of institutional change.
Somewhere in between the two, the issue of the macroeconomic eects of
institutional change itself has thus been largely ignored or assumed. For the
former strand of studies, this omission is probably because after decades of
theoretical and empirical debates there is still no widely agreed consensus
on which institutional structure is associated with the comparatively ‘best’
performance (e.g. Aumayr-Pintar et al. 2014), so that the focus on analysing
the eects of the structure itself is still challenging and required. For the
latter, the cost of change has been theoretically assumed by many scholars
seeing path-dependence in bargaining structures (Hall and Soskice 2001) or,
alternatively, it is the direction and causes of change — rather than the eects
themselves — that receive attention (e.g. Baccaro and Howell 2011; Howell
and Givan 2011; Streeck 2009; Thelen 2014).
In this article we claim that, in some countries, collective bargaining
structures have changed considerably over time and these changes have come
with non-negligible macroeconomic costs, at least in the short-to-medium
term, that is, in the few years after the change. Building on institutional
economics, path dependency theory (e.g. Hall and Soskice 2001; North
1991; Pierson 2004) and theories of collective bargaining (e.g. Baccaro and
Simoni 2010; Calmfors and Drill 1988; Hicks 1932; Knight 1992; Olson
1982; Traxler and Brandl 2012), we argue that institutional change and
instability is costly due to a reduced ability for collective action under
increased distributional power struggles between actors. Yet, contrary to
path dependency arguments, we actually observe frequent and significant
changes to collective bargaining structures. While this seems to question
the path dependency logic in conventional neo-institutionalism, our analysis
shows that the central argument that change is costly holds, but that this
has not prevented actors from changing institutions. There are studies which
analyse the eects of an institutional change by comparing the eects of the
‘new’ and the ‘old’ institutional structure in specific countries (e.g. Daouli
C
2016 John Wiley& Sons Ltd.

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