Prof. Dr. Gerhard BoschUniversität Duisburg EssenInstitut Arbeit und QualifikationForsthausweg 2, LE, 47057 DuisburgTelefon: +49 (0)203 / 379-1339; Fax: +49 (0)203 / 379-1809 Email: gerhard.bosch@uni-due.de; www.iaq.uni-due.de In

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Gerhard Bosch

INEQUALITIES, NEOLIBERALISM AND EUROPEAN INTEGRATION: PROGRESSIVE ANSWERSAthens, 23rd - 25th November 2017, MEGARON, The Athens Concert Hall, Nikos Skalkotas Hall Vass. Sophias & Kokkali

Reducing inequality by collective bargaining

Structure of presentation

1. Impact of neoliberal LM deregulation2. Inclusive CB - Powerful instrument to

reduce inequality3. Impact of wage restraint on other EU-

countries4. Weakening of democratic institutions

1.1 The Neoliberal Labor Market Model (NLMM)

Basic assumptions – equilibrium through- micro- and macro-wage-flexibility- no negative macro-economic effects- neglectable trade-offs

LM-institutions like Collective Bargaining- a barrier to micro and macro-flexibility

(especially industry wide bargaining, extensionof agreements, favorability principle, after-effects)

- no other functions like democratic rights, balancing power relations in society

1.2 Impact of NLMM on Ranking – Example: The Global Competitive Index of the World Economic Form

Source: World Economic Forum, The Global Competitiveness Report 2016–2017

1.4 Deregulation of Greek LM – show caseAbolition of inclusive LM-institutions

• Abolition of extension of CA‘s and favorability principle; reduction oftime extension and after effect to 3 months; maximum of duration 3 years; easy exit options: deviating firm agreements by „associations ofpersons“

Impact: • deepening of economic crisis – optimistic prognosis of

institutions all wrong• ongoing erosion of CB (MW becoming the going rate)• ongoing increase of income inequality and weakening of

social dialogue

Cynical recommendation of OECD to Greece „to make economicgrowth more inclusive by urgently adopting policies to reducepoverty and inequality“ (OECD: Economic survey of Greece 2016)

1.5 Forecast Errors on Greek GDP by EU Commission

Source: EU Commission, own compilation

-10

-8

-6

-4

-2

0

2

4

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Spring 2008

Fall 2008

Spring 2009

Fall 2009

Spring 2010

Fall 2010

Spring 2011

Fall 2011

Spring 2012

Fall 2012

Spring 2013

Fall 2013

Spring 2014

Fall 2014

Spring 2015

Fall 2015

Spring 2016

Fall 2016

Spring 2017

Fall 2017

Spring 2008

Fall 2008

Spring 2009Fall 2009

Spring 2010

Spring 2011

Spring 2012

Fall 2012

Spring 2013

Spring 2014

Fall 2014

Spring 2015

Fall 2015

Fall 2016

Spring 2017Fall 2017

1.6 Collective bargaining coverage (2009, 2013)

Source: ICTWSS Database

0

20

40

60

80

100

120

FR ES EL

2009

2013

Source: OECD (2016),5In: It Together: Why Less Inequality Benefits All.http://www.oecd.org/eco/surveys/economic-survey-greece.htm

Structure of presentation

1. Impact of neoliberal LM deregulation2. Inclusive CB - Powerful instrument to

reduce inequality3. Impact of wage restraint on other EU-

countries4. Weakening of democratic institutions

2.1 Rate of coverage by collective agreements and share of low-wage work (2014)

Source: Visser 2015, Eurostat, own calculations

2.2 Wage distribution in a liberal market economy with MW and in coordinated market economy with high coverage by collective agreements

:

2.3 Two real cases: UK 2014 and Germany 1995

Source: : SOEP 2012, own calculations; Dickens (2015): The Low Pay Commission and the National Minimum Wage. Presentation to NEDLAC

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Germany

1995

Increasing efficiency

Micro-flexibility encourages low-road business-models

Research shows clearly benefits of co-ordinated CB:- Extension of scope and time horizon of CB:

negotiations on internal flexibility (skills, w-time)- Reduction of transaction costs for companies –

highly important for SME‘s- Levelled playing fields for companies: Encourages

investments in skills- Reduction of bureaucracy – creation of labour

standards according to the needs of industries –unburdenthe state from interventions

Structure of presentation

1. Impact of neoliberal LM deregulation2. Inclusive CB - Powerful instrument to

reduce inequality3. Impact of wage restraint on other EU-

countries4. Weakening of democratic institutions

3.1 Unit Labor Costs (2000 = 100)

Source:

3.2 Increasing imbalances of payments in EU (in billion €)

Source: Albu et al. (2017) IMK Report 128.

IrelandItalyPortugalSpainAustriaBelgium

Germany

NetherlandsGreeceFrance

3.3 Development of domestic demand 2000q1=100 (1)

Source: Albu et al. (2017). IMK Report 128.

Belgium

Finland

France

Netherlands

Germany

Euro zone

3.3 Development of domestic demand 2000q1=100 (2)

Source: Albu et al. (2017) IMK Report 128..

Spain

Italy

Greece

Euro zone

3.4 Drivers of trade imbalances

Germany trade surplus 8,5% of GDP in 2016 - Reduction of surplus by higher wage increases in DE?Different views- EU-Commission “Overall there is no evidence that wage

developments are at the root of the development” (European Economy 9/2012: 91) – Why then the dictate of the institutions?

- German government: Low price elasticity of German exports, ageing society needs savings for the future…

- IMK: yes low price elasticity – but German wage restraint reduced domestic demand and therefore imports – a combination of wage increases and investments programs would help

Also weak price elasticity of Greek exports – depend on growth strategies – focus on the quality of exports

Impacts of the Neoliberal Labor Market Model

1. Increase of social inequality – erosion of themiddle class

2. Undermining built-in-stabilizers in economiccrisis

3. Reduction of efficiency4. Weakening of democratic institutions

4 .Weakening of democratic institutions

- Trade-unions give employees a voice in politicaldecisions

- Fragmentation of CB marginalizes unions- Increasing inequality reduces participation in

political life like in voting in political elections

Result: - No countervailing power to business lobbying -easier for special interests to influence politicaldecisions

Decreasing voters participation in Bundestag-elections 1980 to 2012

Abgebildet sind die aus einer logistischen Regression ermittelten Wahlwahrscheinlichkeiten unterschiedlicher sozialer Gruppen, wenn Alter, Geschlecht, Bildung und politisches Interesse konstant gehalten werden.

Source: Bundesregierung,, Armuts- und Reichtumsbericht 2017.

Conclusion

Clearly negative impacts of labor market deregulationand need for implementing proposal of the expert group of the Greek government and the institutions

But caution:- Opposition to neo-liberalism not sufficient- Resistance to all reforms support demands for

deregulation- Continuous need to reform collective agreements- The positive impacts of co-ordinated CB do not

come automatically – require trust between socialpartners and modernization of CA (for example w-time flexibility for employees as well as for employers)

Annex

(1) Development of hourly gross wages in selected countries - 2000q1=100

Source: Albu et al. (2017) IMK Report 128

Finland

France

Netherlands

Belgium

Germany

Euro zone