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An Institutional Approach to Trade Union Density. the Case of Legal Origins and Political Ideology

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An Institutional Approach to Trade Union Density. the Case of Legal Origins and Political Ideology Central European Economic Journal Jacek Lewkowicz1, Anna Lewczuk2 An Institutional Approach to Trade Union Density. The Case of Legal Origins and Political Ideology 1 Faculty of Economic Sciences, University of Warsaw, e-mail: [email protected]. 2 Faculty of Economic Sciences, University of Warsaw. Open Access. © 2017 J. Lewkowicz, A. Lewczuk, published by De Gruyter. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License. https://doi.org/10.1515/ceej-2017-0008 36 CEEJ 2(49) • 2017 • pp. 35−49 • ISSN 2543-6821 • https://doi.org.10.1515/ceej-2017-0008 Abstract: Which institutions may be important in terms of trade union density and how significant they are? Although the status of trade unions may be very different among states, unions are still a very meaningful compo- nent of labour markets. In this paper, we contribute to the debate about the institutions that may affect the outcome of trade unions in different legal systems. Firstly, we draw on the theoretical underpinnings of trade union activity and density. Then, we conduct an empirical analysis of the relationships between trade union density in a particular country, country’s legal origins and government’s ideology. In this way, the paper enriches an underexploited niche in institutional research devoted to labour market issues. Keywords: institutions, trade unions, legal origin, party ideologies. JEL Codes: J51, K40, P16 1 Introduction 2 The economic foundations of There is a lot of research on the role that trade unions play trade unions in modern labour economics (Oswald 1985; Ebbinghaus Trade unions may be perceived as a form of voluntary 2002; Ashenfelter and Johnson 1969), but this sphere has organization associating employees and other social to be examined with reference to other social sciences groups whose interests are based on the employment due to its complexity. Trade unions perform under spe- relationship. The main objective of unions is to protect cific legal regulations. This present work is related to employees’ interests against employers (Wratny and institutional forms of trade union density, from a law Bednarski 2010). Trade unions are the oldest and best- and economics perspective. The main research question known models of representation linked with employ- is whether legal origins and government ideologies have ment issues. They are defined as permanent associa- an impact on union density. tions, the aims of which are to maintain or to improve The functioning of trade unions is an interdisci- working conditions (Webb and Webb 2003). This desig- plinary and complex issue (Rees 1989). Research tools nation is very general, but in fact, trade unions are het- taken from law and sociology significantly enrich formal erogeneous. Numerous models have been developed economic trade unions models, making them easier to among different countries (Lewkowicz 2015). Employ- apply from a law and economics perspective. The analy- ees’ unions may differ in their internal structure, the sis presented in this article consists of three parts, which range of agreements made, their participation in man- are the presentation of the basic foundations of trade agement processes, their relationships with government unions, the review of the literature on legal origins and and political parties or in their contribution to the social ideologies of political parties and their impact on trade dialogue (Wratny and Bednarski 2010). union density and finally the empirical model. A par- There are different approaches towards trade unions. ticularly important section of this article is the last one, The divergence approach assumes that differences dedicated to an empirical evaluation of union density between them have mostly historical roots (Clegg 1976). determinants. The model is based on the panel data for This diversity is determined usually by organizational, 28 Organisation for Economic Co-operation and Devel- technological, social, ideological, and political issues. opment (OECD) members and is devoted to the union Trade union activity and involvement are specific for density issue. It includes general macroeconomic var- every particular country and this partially results from iables and the aforementioned legal origins and gov- the unique development of unions (Freeman 1994). On ernment ideologies. The main aim of the article is to the other hand, the convergence perspective emphasizes empirically investigate the impact of legal origins and common patterns of diffusion between trade unions as a government ideologies on trade union density. result of globalization and the presence of transnational institutions. B. Ebbinghaus investigates some European models of trade union activity, including labour unionism, sol- idaristic unionism, polarized pluralism, sectional plu- Jacek Lewkowicz, Anna Lewczuk/ An Institutional Approach to Trade Union Density 37 ralism and consolidated unionism (Ebbinghaus and union density. The more members a trade union has, the Visser 2000). Labour unionism is relatively typical for more bargaining power it gets. However, the impact of the British system. Each trade union there (industrial, unions on employment levels is ambiguous (Card 1990). professional or general) is independent to a large extent. Trade unions are sometimes treated as a factor that Solidaristic unionism originated in Scandinavian states. restrains a firm’s development. Employers limited by Solidaristic trade unions are involved in activity within trade unions claim that they are not able to use firm’s the welfare state model. Conflicts and political oppor- potential fully (Addison and Hirsch 1989). Thus, as a tunism led to the exclusion of union representatives result, unionized companies may be less attractive for from political structures (e.g., Spain, Portugal, Italy). investors (Machin and Wadhwani 1999). On the other Sectional pluralism, in turn, assumes that trade unions hand, another study reveals that trade unions support divide into different groups (religious and secular). Con- the management and assist in knowledge diffusion solidated unionism rests on harmonization and social (Freeman and Medoff 1985). Trade unions may influence cooperation that may be reached because of dedicated a firm’s productivity positively, because of increased institutions (Germany, Austria). employee retention. Wages negotiated by trade union What is more, three types of union activity crite- representatives could motivate employees to perform ria should be highlighted (Lewkowicz 2015). There are better (Cahuc and Kramarz 1997). There are some eco- unions whose main aim is to be involved in conflict nomic models that assume a convergence of trade between work and capital. Secondly, some trade unions union and firm objectives. According to such models, focus on improving working conditions (pure union- trade unions should support the development of firms ism). Last but not least, trade unions may try to cope (Aidt and Sena 2005). It is difficult to judge trade unions with a broader scope of problems, e.g., those linked with clearly, i.e., because there is a difficulty in isolating the labour policy or globalization. These different types of casual effect of union activity from any selection biases. trade union activities do not have to be treated as sep- However, the effects of their activity are related to their arate (Hollinshead and Leat 1995). There are specific bargaining power and their bargaining power depends models that include interactions between several trade mostly on union density. union goals. For instance, R. Hyman (2001) analyses the relationships and convergences that link different trade unions. These relationships may concern the sectional unionism model, the workers’ service orientation or 3 Trade union density employee roles in the society. Despite the large number of trade union models and Trade unions are perceived as successful organiza- their strong heterogeneity, as well as divergent political tions if they manage to provide a collective protection circumstances, the existence of such unions is still per- of employment and succeed in wage bargaining. The ceived as a necessary element of social order (Wratny power of trade unions increases when union density and Bednarski 2010). They are a significant social partner is higher. Their bargaining power usually develops as and some kind of force that acts in opposition to employ- a consequence. Union density, in turn, is dependent ers (Lewandowski 1996). not only on particular trade union characteristics (i.e., Empirical research devoted to trade unions focuses selective benefits or reputation), but also on institu- to a large extent on their effects on wages and other tional issues and the political management of reforms labour market variables (e.g., productivity or employ- (Lesch 2004). We are aware of the fact that unionization ment) (Lewkowicz 2015). Studies point out that the at different levels − firm, local, sectoral or national − union wage premium is positive, so in general, unions may have different types and magnitudes of impact on members may earn more (Card 1996). The scope of the labour markets and economic growth. Indeed, trade premium depends on the way that wages in unionized unions which are representative at the national level sectors spread into those that are non-unionized. Union may influence legislation and labour market policies, premium wages vary between countries (Blanchflower which are factors that to some extent determine eco- and
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