Social Dialogue and Economic Performance What matters for business - A review Damian Grimshaw Aristea Koukiadaki Isabel Tavora CONDITIONS OF WORK AND EMPLOYMENT SERIES No. 89 INWORK Conditions of Work and Employment Series No. 89 Social Dialogue and Economic Performance: What Matters for Business - A review Damian Grimshaw Aristea Koukiadaki Isabel Tavora Work and Equalities Institute, University of Manchester, UK INTERNATIONAL LABOUR OFFICE - GENEVA Copyright © International Labour Organization 2017 First published 2017 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Licensing), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with a reproduction rights organization may make copies in accordance with the licences issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organization in your country. ISSN: 2226-8944 ; 2226-8952 (web pdf). The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. Information on ILO publications and digital products can be found at: www.ilo.org/publns. Printed in Switzerland Table of contents Acknowledgements ......................................................................................................................................... ii 1. Introduction ....................................................................................................................................................... 1 PART ONE: DEFINITIONS AND ANALYTICAL FRAMEWORK ................................................................................ 5 2. The Character and Intrinsic Properties of Social Dialogue ................................................................................. 5 2.1. Defining social dialogue ............................................................................................................................. 5 2.2. The intrinsic properties of effective social dialogue .................................................................................. 8 3. Can Social Dialogue Support Business Growth? An Analytical Framework ....................................................... 9 3.1. The costs and benefits of social dialogue for business ............................................................................ 10 3.2. Tracing the implications for four features of business growth ................................................................ 13 PART TWO: REVIEWING THE EVIDENCE ....................................................................................................... 18 4. Firm‐level Social Dialogue ................................................................................................................................ 18 4.1. Social dialogue and business performance .............................................................................................. 18 4.2. Social dialogue and workplace conflict .................................................................................................... 23 4.3. Social dialogue, redistribution and business legitimacy ........................................................................... 26 5. Sector and national level social dialogue ......................................................................................................... 27 5.1. The consequences for economic stability and social cohesion ................................................................ 28 5.2. The effects on economic performance .................................................................................................... 31 5.3. Social dialogue in Europe during the recent economic crisis ................................................................... 34 6. Inter‐Firm Contracting and Social Dialogue ..................................................................................................... 38 6.1. What are the key enablers of effective social dialogue in supply chains? ............................................... 38 6.2. Business benefits of social dialogue in inter‐firm contracting ................................................................. 40 PART THREE: CONCLUSION ............................................................................................................................ 55 7. Conclusion: Identifying Positive Enabling Conditions ....................................................................................... 55 7.1. Summary of Empirical Evidence ............................................................................................................... 55 7.2. What are the positive enabling conditions? ............................................................................................. 56 References .................................................................................................................................................... 59 Conditions of Work and Employment Series .................................................................................................. 69 Conditions of Work and Employment Series No. 89 i Acknowledgements This working paper has been produced with support from the Government of Sweden within the framework of the Global Deal for Decent Work and Inclusive Growth. The paper benefited from input and comments received by the ILO (the Bureau for Workers' Activities, the Bureau for Employers' Activities, the Governance and Tripartism Department, the Enterprises Department and the Conditions of Work and Equality Department), the Government of Sweden, the OECD and a number of companies who generously shared their views and experiences in interviews. ii Conditions of Work and Employment Series No. 89 1. Introduction The long-standing debate on the role of social dialogue in business growth has been renewed following the economic crisis of 2008. For some in the business and policy community, social dialogue has the potential to serve as a productive input into business. This position is exemplified by the UN’s 2030 Agenda for Sustainable Development and its Sustainable Development Goals, where social dialogue is presented as a critical element for achieving decent work,1 the European Union’s New Start for Social Dialogue, which reinforces social dialogue as a pillar of Europe’s social market economy and the Global Deal, a multi-stakeholder partnership that seeks to enhance social dialogue around the world. For others, however, the positive case remains unconvincing. Social dialogue is associated with a number of potential business problems including protracted decision-making (e.g. on hiring, firing and modernizing work organisation), reduced profits caused by additional costs (to wage and non-wage costs), greater risk of legal challenges, damage to business reputation and brand, and wasted resources as a result of industrial relations disputes. A negative outlook may reflect specific local experiences or perceived challenges at sector or country level. Alternatively, it may be a direct result of the immaturity or apparent dysfunctionality of social dialogue structures and processes, especially in some developing countries where structures for workers’ representation have limited resources and weak statutory support. The aim of this report is to investigate the research evidence supporting these views about social dialogue’s contribution to business growth. The report was commissioned as part of a programme of activities that feed into ‘the Global Deal’, a multi-stakeholder endeavor initiated by the Swedish Government with the objective of promoting decent work, greater equality and inclusive growth around the world.2 The Global Deal is an input to the United Nations’ sustainable development goals. Its core objective is ‘to encourage governments, business, unions and other organisations to make commitments to enhance social dialogue’ and is guided by the notion that social dialogue is the best instrument to sustain long-term benefits for workers, business and society. The present report provides a state-of-the-art review of academic research as well as a snapshot of real-world views of members of the international business community drawing on original interview data with Global Deal signatory parties and other stakeholders.3 In light of the scope of the review, the analysis points in the conclusion to areas where further research is