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Temas Públicos
Nº 829 -
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th
20 de20Julio
de 2007
July
2007
ISSN 0717-1528
ISSN 0717-1528
Collective Negotiation:
When and What For?
The collective negotiation is a mechanism that allows distributing the product’s value
among employees and the owners of the
shared capital, once paid all the others productive factors.
reactions is a transfer from workers with unprotected work to protected workers.
If, on the contrary, the salaries are lower than the productivity, resources from the
workers are transferred to the consumers and
to the capital, which is a situation that is neither
The theory maintains that the most efficient
efficient nor fair. The definition of ideal state is
distribution should have the work receive exnot an easy definition, although the market
actly its contribution to the product. The negosigns can be analyzed and untiation should take, additionalderstand the tendencies. We will
ly, the least possible cost, in
1
study these aspects in depth
terms of conflict .
further on.
In Chile there’s no evidence to
Salaries and
Productivity
For a negotiation to
agree on balanced salaries it
is necessary for the conditions
of the negotiations to be reasonably balanced, so the salary satisfactory can reflect the
employees’ contribution.
think that salaries are lower than
productivity, and on the contrary,
the high and constant
unemployment rates are
explained by strictness in
salaries, particularly associated to
minimum wage, only variable
subject to a centralized
negotiation.
Productivity and Salaries
in Chile
In Chile the work productivity
between 2000 and 2006 increased in average closer to the
actual salaries, in spite of the
unemployment rate which is
8.9% (rate includes emergency
unemployment programs) and
that increases the costs that had to be balanced with productivity increases.
If we start with that initial balance, raises in salaries where no increases in productivity are reflected can only be justified by consumer’s transfers, capital returns or both.
Morandé and Bergoeing believe that the market, even before the labor reform was approved (in 2001), reveals an impact equivalent
to an employment tax of 6%2.
Consumer’s transfers involve welfare
losses that the affected will try to minimize by
diverting its consumption towards other goods,
if possible. Capital transfers encourage redirecting investment to other productive sectors
and less exhausting technologies in “the kind
of work with salary higher than its productivity”
or laboring in general, reducing the employment level. A consequence of these inevitable
That reform surprised by raising the regulation costs and reducing the working week
from 48 hours to 45 hours (6.4%), and later in
2002 the unemployment benefit was introduced, which represents a tax equivalent to the
cost of the taxes of the employee and the
employer minus the value that the employee
pays for that provision.
5
Graph 1: Productivity and Salaries
Increase
2000
2001
2002
2003
2004
2005
2006
Average
Productivity
Increase
2,70%
2,20%
0,30%
0,10%
3,20%
1,80%
2,50%
1,80%
Rate of
real
Unemployme
remunerations
1,40% nt
9,00%
1,60%
9,10%
2,00%
9,70%
0,90%
9,50%
1,80%
9,50%
1,90%
8,20%
2,00%
7,60%
1,70%
8,90%
adverse cycle, the most recent one,
where unemployment stabilized in high
levels having no tendency of adjusting in
the first few years.
Empirical evidence shows the strictness
in salary obligations as being responsible
for that and this strictness is associated
mostly to the minimum wage. The duration of the collective negotiation and salary indexation would also have an effect.
Collective negotiations would help as a
model for sectors of the economy that
don’t negotiate collectively3.
(1) Productivity is measured as the variation of the product by employee. This
In conclusion, during the analyzed period,
there was an increase in costs and unemployment, salaries had to increase
less than the productivity and but they
increased anyway, reinforcing the hypothesis that the labor relations are balanced.
means that the average product is the same as the marginal product.
(2) In order to measure the raises in salaries various INE (National Statistics
Institute) actual salaries per hour are used.
(3) The unemployment rate is the INE (National Statistics Institute) official
measurement, and therefore excludes de emergency jobs effect
It is important to give emphasis to the
fact that the salaries may increase the same as
the productivity, in spite of the labor costs or
income taxes. In this last case, we can perceive a lower employment level at an aggregate level. This may explain the low rates in
employment participation in our country. While
in Chile 58.4% of people between 15 and 64
years old work, the average the country members of the OECD is 65.3%.
Labor Union Rate and Impact of the
Collective Negotiation
In spite of aforementioned, new legal
changes are intended for the collective negotiation, whose objective seems to be to increase the syndicalism rate. However, it is appropriate to ask if the syndicalism is less than
expected and therefore the objective is to give
freedom to syndicalism, or if the increase of the
rate is meant to be the objective itself. Additionally, it is highly questionable that this is the
right way to look for more syndicalism.
Additionally, our job market always reacts
in front of adversity increasing the unemployment rates which are prolonged in time.
The labor union density rate worldwide shows
a big variability and for 2003 there were rates
of 8.3% in France, 11% in Korea, even rates of
78% in Sweden or 74% in Finland4.
In the graph 1 you can observe that the
labor market in Chile presents serious fluctuations In the unemployment rates and that facing adversity, the adjustments are done in the
work levels instead of salary changes. This
was observed not only in the 1982 crisis but
also In the recent Asiatic crisis, in spite of the
difference in the magnitude of shock and the
previous macro economic conditions. In the
first crisis, unemployment took longer in adjusting to its levels. However, it is on the second
In Chile5 that same year the rate was 15.6% of
the wage-earning populace and in 2006 it was
14.5%, maintaining the world wide tendency.
Literature mentions that this tendency which
started in the eighties depends on various fac-
6
tors, among high unemployment rates in European countries, globalization, the slightest impact of inflation, etc.
Considering all this, the working atmosphere is
nothing but a very indirect indicator. For example, after the approval of the sub contractor’s
law there have been many conflicts that have
surpassed the public order and have ended up
in criminal acts and this could be perfectly attributed to a change in the national politic climate. In fact, a factor that may be interesting to
analyze with more detail is the development of
the politicized conflicts recently like an attempt
to explain the inequality occurred in the last 20
years.
The important thing is to measure if there is
less syndicalism than the expected by the employees and for that you can only turn to indirect indicators. For example, according to the
“Dirección del Trabajo” (Institution in charge of
making the labor affairs more fair), the number
of fines given out for anti syndicalism practices
have been only of 25, 27, 26 and 38 cases on
the consecutive semesters of 2005 and 2006.
On the other hand, surveys by the “Dirección
del Trabajo” until 2004 (last available date), on
collective negotiation processes show an attitude on the negotiation parties, confirming the
low impact of strikes.
Decentralized Negotiation
One of the most persistent proposals of
some of the Left leaning parties is to make the
employer do labor negotiation with the company. The collective negotiation field is more related to efficiency and the need to reduce the
probability of transfers from the consumers and
other workers and doesn’t respond to the objective of increasing syndicalism per se, subject that seems to be in the agenda of socialism.
This scenario couldn’t be described as anti
syndicalism and the explanations for the lower
rate in syndicalism should be looked for in the
lack of manual labor in large companies, or in
the lack of motivation of the workers. A less
explored cause, in a legal context, is the lack of
subject matters to negotiation on undeniable
and over regulated rights, with salary indexation. It is interesting to point out that the salaries in sectors that don’t negotiate may be following the same path of the sectors where collective negotiations do take place or similar to
salaries negotiated centrally such as minimum
wage or the public sector readjustment.
The theoretical and empirical evidence
demonstrate that the conditions of the collective negotiation may give different conclusions
of negotiating power between the parties.
7
Image 1:
Unemployment rate
30,00
con programas de empleo de
emergencia
efectiva
25,00
20,00
15,00
In a business, an excessive salary pressure will
displace the future investments and on the
other hand, salaries
lower than productivity
will make the more efficient workers leave the
business.
Even, inside the big
businesses it is totally
efficient and fair to ne5,00
gotiate over cost centers
and individually, be0,00
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20
cause that motivates
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
more efficient people or
groups to be rewarded.
Source: Elaborated based on:
a) Coloma and Rojas: "Evolution on the Labor Market in Chile: Reform and Results The opposite leads the
in The Economic Transformation of Chile" CEP, editors Larraín, Vergara. The authors quote employees to do averfor 1960-1969 Bulletins ODEPLAN (1982). 1970-1985: Cortázar (1997). 1986-1997: INE age work, causing a
official data; and for PEM, Jadresic (1986) and for 1986-1988 corrected by methodology tendency
to reduce
proponed by him.
b) Since 1997 and after, unemployement is obtained from INE and the emergency productivity. This is because by doing reorganemployment programs from DIPRES.
izations based on average productivity, employees with low producCox and Edwards6 analyzed the impact
tivity are rewarded and the ones with high
of the labor reforms between 1973 and 1989,
productivity are punished.
considering separately the effect of the changOn the other hand, a negotiation centralized
es on job protection, decentralization of the colnationally allows the workers that belong to a
lective negotiations and the privatization of solabor union be responsible for the cost in salary
cial security.
pressures over productivity. Blanchard and
The authors believe that the country
Phiippon affirm that the speed that the labor
moved from centralized collective negotiations
unions learn is a variable to considerate and
to negotiation systems inside the businesses
the same happens with the politicized degree
and as a consequence it was possible to reof the labor union movement7.
duce unemployment and the natural rate of
In the case of Chile, in spite of having good
unemployment.
relations within the companies and in collective
The advantage of the negotiations inside
negotiations, more centralized negotiations on
the businesses is in particular its efficiency,
minimum wage and private sector readjustbecause it allows the parties to be responsible
ment are constantly seen, even though they
for the cost of bad decisions.
are considered as a fact more than a legal
10,00
8
order. According to the available evidence, regarding strictness in payments and the impact
on readjustments in minimum wages, the more
qualified workers have transferred the cost to
the younger ones, and therefore, it would be
difficult to incorporate these kinds of cost to
centralized levels.
affirm that they are lower than expected or that
they differ to the evolution of other countries. In
any case, pretending to increase syndicalism
by introducing collective negotiations within the
businesses would have a high cost in efficiency, harming fundamentally the unemployed,
less qualified workers and the consumers.
Literature, at the same time, identifies
the intermediate model as the least efficient
one, because the employees of one sector
compete with others and they try to take over
rents without incorporating the global impact on
work, as long as they can
transfer the cost to other
In the case of Chile, in
sectors of the economy.
8
For Bertola and others spite of having good relations
(2002) the first ones going within the companies and in
through job losses are the collective negotiations, more
centralized negotiations on
workers with more offer
minimum wage and private
flexibility (young people
sector readjustment are
and women and the older
constantly
seen, even though
ones with pensions)
they are considered as a fact
more than a legal order. 4
Pencavel, J. (1997): “ Regulating Collective
Bargaining in Developing Countries: Lessons
fron three developed countries”.
1
Morandé, F. anf Bergoeing, R. (2003): “Labor Market Distortions, Employment and
Growth: The Recent Chilean Experience”.
2
Céspedes, LF and Tokman. A. (2004) “Evolución reciente del desempleo en Chile” –
“Recent unemployment evolution in Chile”
3
Cowan, Micco, Mizala, Pagés, Romaguera
(2003): “ Un diagnóstico del desempleo en
Chile”. – “ A diagnose of unemployment in
Chile”
Cowan, Micco Pagés (2004) “Labor market
adjustment in Chile”.
Visser, J. (2006). Union Memberhip statistics in 24
countries. Monthly Labor Review. January. The figure corresponding to France was confirmed with the Chilean French
Chamber.
Conclusions
5
This figure, however, doesn’t come from the same
source, but from the Dirección del Trabajo.
In Chile there’s no
evidence to think that salaries are lower than
productivity, and on the contrary, the high and
constant unemployment rates are explained by
strictness in salaries, particularly associated to
minimum wage, only variable subject to a centralized negotiation.
6
Cox, A. and Edwards, S. (2000) “Economic Reforms
and Labor Markets; policy issues and lessons from Chile”.
7
Blanchard, O. Y Philippon, T. (2004) : “ The quality of
labor relations and unemployment”. NBER 10.590
8
Bertola, G., Blau, F. y Khan, L (2002), “Labor Market
Institutions and Demographic” NBER 9043,
Even when the syndicalism rates are not
high and have decreased, it is not possible to
9