Unions and Collective Bargaining in the Wake of the Great Recession: Evidence from Portugal

Date01 September 2017
Published date01 September 2017
DOIhttp://doi.org/10.1111/bjir.12198
British Journal of Industrial Relations doi: 10.1111/bjir.12198
55:3 September 2017 0007–1080 pp. 551–576
Unions and Collective Bargaining in the
Wake of the Great Recession: Evidence
from Portugal
John T. Addison, Pedro Portugal and Hugo Vilares
Abstract
Against the backdrop of its industrial relations architecture, characteristic of
the ‘southern European group’ and intimately linked to the recommendations
of the Troika, this paper examines four key aspects of Portuguese collective
bargaining. First, it provides definitive estimates of private sector union density
for that nation. Second, it models the determinants of union density at firm
level. Third, it yields estimates of the union wage gap for dierent ranges of
union density. The final issue examinedis contract coverage. The receivednotion
that the pronounced reduction in the number of industry-wide agreements and
extension ordinances of late is to be equated with a fall in coverage is shown to
be a chimera, the number of workers covered by new and existing agreements
remaining largely unaected by the economic crisis. The reduced frequency of
new agreements and extensions is instead attributed to downward nominal wage
rigidity in low-inflation regimes.
1. Introduction
Portugal is one of a number of countries within the Eurozone to have
experienced a major external balance problem, leading to financial support
by the Troik a (the European Commission, the European Central Bank, and
the International Monetary Fund) in return for the joint therapy of fiscal
consolidation and structural reforms. Portugal’s external problem may be
seen as the outcome of a competitiveness crisis stemming from a decade
of misalignment between (rising) wages and (lagging) productivity growth
(for a full diagnosis, see Blanchard 2007). One mechanism underlying this
misalignment was the country’swage setting architecture that failed to deliver
JohnAddison is at the Darla Moore School of Business and Durham University Business School.
PedroPortugal is at the Bank of Portugal and the NovaSchool of Business and Economics. Hugo
Vilares is a graduate student atthe London School of Economics and Political Science
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2016 John Wiley& Sons Ltd/London School of Economics. Published by John Wiley & Sons Ltd,
9600 Garsington Road,Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
552 British Journal of Industrial Relations
the necessary responsiveness of wages to their underlying determinants. This
failure was exacerbated by the conjunction of a low inflation regime with
severe nominal wage rigidity, resulting in burdensome employment losses
(Carneiro et al. 2014).
Now the role of collective bargaining systems in achieving eciency —
to be equated with the ability of the economy to maintain a low average
unemployment rate and to limit fluctuations in the unemployment rate
in response to economic shocks — has been the topic of considerable
policy interest in recent years (see Addison 2015), and in this regard the
Portuguese model has been allied to labour market rigidity and heightened
reliance on quantity adjustment. But Portugal does not stand alone. It is not
atypical of the group of southern European nations in terms of its industrial
relations infrastructure and in particular high degree of collective bargaining
coverage and social dialogue, albeit accompanied by union fragmentation,
lack of articulation in collective bargaining, and material informality in
the labour market. An additional commonality has been the historical
importance of the favor laboris principle, which in the Portuguese case has
traditionally meant that successor collective agreements can only improve
on the terms of the immediate past agreement. More generally, Portugal is
representative of continental European nations — indeed in the vanguard —
in respect of its extension (of collective agreement) procedures, employment
protection legislation, and decline in union density from its peak circa
1980.
In consequence, Portugal was one of the three southern (and other)
European nations placed under the scrutiny of the Troika and pressured
to push through material reforms to its collective bargaining system (inter
al.) in the wake of their economic diculties/sovereign debt crises. As we
shall see, the quid pro quo for financial assistance included sharp curbs on
extension agreements that wereperceived to produce downward wage rigidity
— for example, Martins (2014b: 3) argues that extension ordinances promote
nominal wage rigidity throughthe setting of around 30,000 wage floors — and
greater unemployment.
Notwithstanding the importance of the great recession and Troika policies
to contemporary industrial relations in Portugal, therefore, is important to
discuss the pre-existing architecture of collective bargaining to understand
the behavioural shift sought by that agency and also to properly address the
nature of the so-called crisis in collective bargaining whichis widely perceived
to be more acute for southern European nations in general and Portugal in
particular than elsewhere in Europe (see, for example, Cruces et al. 2015). To
this end, we havefirst to describe the bargaining framework in Portugal and its
evolution both before and in response to the economic crisis. This will enable
us to address the functionality of the wage bargaining system and to speak of
a standstill rather than an overt crisis in collective bargaining.
Having outlined the bargaining framework, measurement of overall union
density is a key component of any discussion of there being a developing
crisis in collective bargaining. Unfortunately, countries often lack ocial
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2016 John Wiley& Sons Ltd/London School of Economics.

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