Labor Relations and the European Union

Introduction

The subject of labor relations is inevitable in the world of employment and the interactions between major stakeholders in the job market. In other words, the subject presents the process of balancing employment goals that relate to efficiency, equity, labor rights, and workforce management (Boswell, 2008). As a course and a subfield of industrial relations, the topic of labor relations is majorly synonymous with the practice of running unionized job circumstances and the study of labor unions and movements. It combines other disciplines such as state affairs, money matters, sociology, and legal matters. It is also concerned with the responsibilities and rights of each party in an employment setting where the employee and the employer have crucial rights and obligations to uphold for their mutual benefit (Fairbrother & Yates, 2013). The labor relations movement in Europe and other developed nations of the world has a long history. Its subject matter relates to employment relationships, institutions and rules that govern such relations, and their importance in a wide range of financial, societal, and political outcomes.

In the recent three decades, the labor relations movement in the European Union has been undergoing enormous challenges and changes that seek to redefine how such relations are undertaken. For instance, for a long period of the European industrial period, human labor constituted a large share of inputs in organizations and hence the reason why concepts such as collective bargaining were central to labor movements (Holley, Jennings & Wolters, 2011). In addition, many of the large corporations were government-owned and non-profit oriented. They involved many bureaucracies that characterized the relationship between such organizations and their employees. However, issues such as an increased movement and a shift towards services industry, performance contracts, privatization of public corporations, the emergence of technologies, and other trends that are changing the conception of labor relations in the European Union have marked the last three decades (Mills et al., 2008). In addition, these changes have seen a reduction of trade union membership, as well as coverage of collective bargaining. This paper discusses labor relations in the European Union. It covers important areas of the European labor history, the current trends, and the future of labor relations in this region.

History of Labor Relations in the European Union

Although labor relations movements that involved employee relations, trade unions, and collective bargaining were popularized in the last three decades of the 20th century, the push for such approaches to employee-employer relations can be traced up to the 13th century in the European continent (Kalleberg, 2009). It is accepted that labor laws have been in place for as long as human labor has existed. Although such laws were not well organized as they are in the present day, it is evident that the push for employee rights has been a major concept in the labor market in Europe even before the European Union. Some evident push towards employee rights can be seen in the various Acts and laws that were passed during the 18th century. Such Acts made slavery illegal. The Slave Trade Act of 1807 and the Slavery Prohibition Act of 1833 effectively abolished slave labor throughout Britain (Harrod & O’Brien, 2012). These reforms towards more rights for employees and the emergence of freedom of contract in the labor market coincided with the industrial revolution of the 19th century, which changed labor relations in diverse ways. Britain was now the world’s industrial center that managed more than two-thirds of the world’s production needs while at the same time employing thousands of people to provide labor in the booming industries and manufacturing companies. Despite the issue of contract where employees had the freedom to choose whom to work for in what was referred to as a laissez-faire approach to the labor market, it was noted that the new conception of labor relations did not eliminate employee dependence on their employers (Fenwick, 2008). The rapid industrialization led to competition for employment, rapid employment, and subsequently miserable working conditions in the factories. Further, employees were often overworked and underpaid. This situation caused concerns among workers who had little say in the decisions of their employers due to their contractual agreements.

To bring order in this rapidly growing industrialization era and to protect the rights of employees in the light of the increasing poor working and living conditions, poor salaries, and many other factors that disadvantaged the employees, factory Acts of 1803 were enacted to guide the number of hours and minimum workers’ salaries. At the same time, employees were beginning to organize themselves formally. However, such efforts towards trade unions were thwarted by government legislations such as the Combination Act of 1799 and the Master and Servant Act of 1823 in France. These rulings criminalized worker disobedience. They declared strikes a breach of contract (Boswell, 2008). However, the organization of employees through trade unions was slowly accepted, following the passing of the Trade Union Act of 1871, which marked a great victory for workers. Through the Conspiracy and Defense of Assets Ruling of 1875, business mergers became constitutional and justifiable in matters relating to labor relations. Despite these successes, the rights of workers were still limited and disadvantaged as compared to those of employees. This situation did not go down well with trade unions of the time. For instance, while a group of bosses could withdraw from a contract and dismiss a member of staff without informing him or she of the situation, withdrawal of employment by recruits through their commercial industry was still a punishable misdeed. The trade unions were expected to compensate employers for hours lost during strikes (Batt, Holman & Holtgrewe, 2009). In the light of this obvious disadvantage to workers, as compared to employers in the employment contract, trade unions of the time formed what was referred to as the Labor Representation Committee, which later became the UK Labor Party that went ahead to win the elections and form the government in the 1906 general elections in the UK.

The new government under the labor party introduced new reforms to the labor relations of the United Kingdom, including the introduction of welfare reforms that were championed by great trade unionists of the time such as Winston Churchill and David Lloyd George. Firstly, the labor government enacted the Business Disagreement Act of 1906 that led to the conception of combined work ruling and shared bargaining. Hence, it annulled the previous laws that criminalized strikes (Kruppe, Rogowski & Schömann, 2013). In other words, trade unions were no longer required to reimburse employers. They were not to be subjected to civil proceedings in the case of a strike if such strikes were considered to extend an employment disagreement. The introduction of the Old Age Pensions Act of 1908 to provide insurance through pensions for retirees, as well as the enactment of the Trade Boards Act of 1909, which established minimum wages and lastly the national insurance Act of 1911 that guaranteed unemployment benefits to workers who lost job, was a major win for employees (Dølvik & Visser, 2009). These reforms marked the beginning of widespread trade union movements that marked most of the 20th-century labor market in the whole of the European Union.

Other notable success stories during in the 20th century ensured a stronger establishment of trade union as a central tenet in the labor relations. The end of World War I was marked by the subsequent establishment of the League of Nations that was formed with the desired goal of ensuring social justice across all societies (Kalleberg, 2009). It sought to guarantee the world that such a war would not be repeated. Accordingly, there was the realization that peace would never be achieved without social justice (Fiorito, Padavic, & Russell, 2014). Thus, many factors of social justice, including the role of labor market and labor relations also featured prominently. This achievement led to the formation of the International Labor Organization (ILO), which was to champion for good labor relations around the world. Following the formation of the ILO and the end of the World War II, the popularity of Trade Unions increased significantly. More rulings throughout the European Union were enacted to address different areas of labor relations such as collective bargaining, discrimination in terms of race, gender, disability, religion, and sex (Checchi & García-Peñalosa, 2008).

However, the powers bestowed on trade unions became too much and a major hindrance to government’s decisions regarding the labor market. Consequently, the governments of the time in the European Union began to enact reforms that would make trade unions more accountable. The goal was to reduce their autonomy and/or introduce more requirements for legality of industrial actions in the EU (Bonoli, 2012). For instance, at the end of the Second World War II, more than 80% of the workforce in government corporations had memberships in trade unions and other parties that upheld collective bargaining. From 1979, the United Kingdom government and other European Union member countries introduced major reforms with an aim of taming the freewill of trade unions (Dølvik & Visser, 2009). For instance, there was a requirement for trade union leaders and representatives of workers to be elected through a ballot (Maselli, 2012). The governments and employers increased campaigns against trade unions. Gradually, the membership of workers in labor unions reduced to less than 40% by 1990 and less than 30% by 1999. It is evident that labor relations movements’ history has a longstanding significance in the labor market of the UK and by extension the European Union where most of the reforms in the UK labor movement have been replicated throughout the union (Schmid, 2008). Currently, although labor relations that is characterized by strong and powerful labor unions area is almost a thing of the past, the subject has taken a totally different dimension in reflection of the changes in the labor industry of the modern European Union. For example, unlike in the past where work was majorly labor intensive, there has been a shift towards the service industry, which employs more people than any other segment (Bonoli, 2010). However, this claim does not mean that workers are disadvantaged in the new approaches to labor relations. Instead, it shows a new form of labor relations that is in line with the changing demands of the work environment and the overall employment sector of the 21st century in the European Union.

Concisely, the traditional labor relations sector of the 19th and 20th centuries has five main characteristics. Firstly, the trade unions have had a very strong influence and position in the public sector, with these organizations being viewed as above-the-average rate of organizations. Apart from their immense influence on workplace level, they have had a major political influence, especially in the UK the labor party, which led the government for the better part of the 20th century (Horgos, 2009). These trade unions ensured that workers in the public sector would get better benefits and additional rights relative to what was possible in the private sector workers.

The second characteristic of traditional labor relations is that that there was a high centralization of collective bargaining structure. For instance, in the European Union, while wages and working conditions were imposed through formal statutory regulations, rather than collective bargaining, the trade unions had informal yet highly comprehensive and centralized bargaining processes that influenced greatly the norms and standards that governed employment in the public sector. In addition, individual wage agreements through contracts have been virtually non-existent in the public sector. Instead, through collective bargaining schemes, trade unions, which were laid down in elaborate wage plans, negotiated wages (Rovelli & Bruno, 2008). In this case, various wage groups determined the wages. These groups were in terms of seniority in the organization, rather than qualification, individual job performance, or individual job skills. The lack of recognition of individual qualities to a job and individual specific terms to job contracts ensured fewer wage inequalities in the public sector than it was in the private sector organizations (Hassel, 2008).

The third characteristic of the labor relations of the 20th century was in the relatively low degree of wage dispersion that was expected in the public sector. In other words, while qualified people in the public sector earned less relative to their counterparts in the private sector, the reverse was true for less qualified employees. Therefore, the public sector became the preferred segment for decent jobs for low and medium qualified workers (Milman-Sivan, 2009). The lack of performance criteria and standards for workers in the public sector organizations also had a distinctive defining effect on the public sector’s working conditions (Budd, 2014). More focus was on the employee working conditions, rather than on their actual performance in the organization (Howell, 2009). While there were fewer inequalities in wages from one organization to another, the lack of individual incentives meant that despite the increment in wages that were achieved through collective bargaining, employees were often not motivated as their counterparts in the private sector.

The fourth important feature of the traditional labor relations was the degree of job security, stability, and long-term nature of the employment relationship. Many of the public sector employees were protected from unnecessary dismissals that had been negotiated by their trade unions (Akkerman, 2008). With many workers in the public sector having the civil servant status, it meant that they could only be dismissed for exceptional reasons and circumstances. This high level of employment security made the public sector very desirable to many people even when the wages would not match those in the private sector.

The last characteristic of the public sector labor relations is that the sector has played an important role as an instrument of employment policy. For example, the public sector was used to cushion the high levels of job losses in the private sector in the 1980s by absorbing many people into the system (Brown, 2009). In the recent past, the public sector has been a pacesetter by offering high wage part-time jobs, thus becoming a preferred employer in the European Union, especially for women.

The Current State of Labor Relations in the European Union

The current state of labor and employee relations in the European Union cannot be equated with the labor relations of the 20th century. For instant, at the macro level, the labor market has shifted more towards the service sector industry where technology has taken a higher precedence to redefine the role and obligations of employees and employers (Fichter, Helfen & Sydow, 2011). For example, more than 75% of all employees in the European Union work in the services industry as opposed to the smaller segments that work in the traditional industries of the past (Drinkwater, Eade, & Garapich, 2009). In addition, in the past, the government corporations were geared towards the provision of services and products to the society without any profit motivation. However, currently, there has been an increase towards privatization of public corporation with the view of making them profitable and self-financing, hence requiring a revisiting and overhaul of the labor market to adopt the changes (Fichter et al., 2011). As it will be discussed, in line with these changes, key drivers of new employee relations have been fueled by the emergence of new organizational profiles and the need for new employment engagement approaches among other trends in the European Union.

Changes in Business Profiles

Technology and globalization have brought significant changes that have redefined today’s workforce, as well as the business profiles. For example, while more than three-quarters of the workforce was employed to offer manual and unskilled labor up to as recent as the 1970s, major changes have occurred and consequently redefined the key role that organizations expect their workers to assume (Horgos, 2009). Currently, the desire for highly skilled labor has accelerated significantly in the last three decades. For example, while only 7.5% of people in the labor market were skilled and in the managerial positions in many industries, the number of professionals in each industry has currently increased by more than 1.8 million people (Drinkwater et al., 2009). In the same period, people who offer administrative and secretarial roles, as well as machine and transport operatives have reduced by more than 40% (Dastmalchian, Blyton & Adamson, 2014). Indeed, the current work environment demands high levels of skills than in the past where skills such as ICT, which were viewed as special and technical, have become the core and basic skills that each individual must have to be considered for employment today (Pencavel, 2014).

The way people work today has also shifted drastically over the years, thanks to technology and other forms of modernity. For example, while the traditional 8a.m-5p.m five-day work has been the norm for the better part of the 20th century, its relevance is greatly being eroded. Currently, many organizations in the dominant service industry work on a 24-hour basis, which requires an all-round availability of employees in the workplace. The plan demands different terms of work that do not conform to the traditional approaches to paying and benefits (Blyton, Heery, Bacon, & Fiorito, 2008). This trend is not only in the European Union but also across different nations due to globalization where organizations provide services to worldwide customers. The difference between day and night becomes subjective and hence requiring an all-round availability of employees to offer services. Further, these trends have led to the demand for job flexibility where people can work from home or any time of the day or night (Munck, 2010). The popularity of ‘teleworking’ or working from home has become a very central tenet to employee flexibility. Hence, it has redefined how employees relate to their employers.

Changes in Employee Engagement

The role of employees and their engagement with their employers has had the most drastic changes over the years. These changes have helped to define employee relationships in the European Union in the present-day work environment. In the past, the role of trade unions was to help employees to have a say in their engagement with their employers. However, this situation has greatly changed with only 15% of employees in the private sector having membership in labor unions. Instead, to remain competitive, organizations have adopted new human resource management approaches that allow employees to have powers in their organizations and hence the need to do away with trade unions or other representatives who speak on their behalf (Meardi, 2012). In other words, while the issue of participation in trade unions and collective bargaining is being disregarded, it has not affected the voice of employees and their involvement in workplace decisions.

Munck (2010) asserts that globalization, competition, and the changing nature of the business environment have greatly contributed to the decline of trade union where an increasing number of organizations, both in the private and public sector, refuse to deal with trade unions or require the influence of trade union to be passive. These approaches to employee relations by employers have been motivated by the increased competition, especially due to the opening of the European Union’s markets to the international market (Blanchflower & Lawton, 2010). There has been the need to ensure more control over work to ensure that the labor force delivers maximally and with minimal costs that may jeopardize an organization’s competitiveness in the highly globalized market that is now the European Union.

The increased employer-sponsored employee engagement strategies that promote employees’ participation and their representation are key indicators of the new form of employee voice that the modern labor market demands (Budd, 2014). Unlike the past where the employee voice was unheard and undesirable, the modern labor market has changed. Employers are too willing and ready to hear the voices of their employees to inform decisions and/or drive innovativeness and competitiveness (Drummonds, 2009). There has been an increase in the proportion of workplaces using non-union worker voice mechanisms from 16% in 1984 to approximately 65% in the 2013, which has coincided with a sharp decrease in unionized workplaces from 24% to less 15% in the same period (Holley et al., 2011). The shift towards non-union voice mechanisms and employee participation in the workplace is a good indicator of the shifting preferences of employers. In other words, employers have come to realize that trade unions add no value to the organization. In most cases, since they are disruptive, they are better ignored (Aghion, Algan & Cahuc 2008). On the contrary, direct employee-employer engagement is viewed as more valuable since it allows the organization to not only create a good working relationship with employees but also ensure a highly satisfied and engaged labor force that can guide competitiveness in the organization. Another important trend in the employee voice in the workplace environment in the European Union labor market is the use of dual voices where employees have their say in an organization in addition to having membership in a union. While more and more organizations are shifting towards non-union employee voice, employers are using such preferences to exert more control over employees. However, the strategy does not necessarily work for the best interest of employees and hence the reason why dual-voice mechanisms are more preferred by employees (Kaufman, 2010).

The Evolving Workforce

It is true that the workforce in the European Union is rapidly changing, especially in terms of its composition. For example, the workforce is expected to grow older in terms of the average age of workers due to the advancing ages of baby boomers. In addition, it is expected that the workforce is going to be more feminized and ethnically diverse as opposed to the previous periods (Batt et al., 2009). Migrant workers are also going to make a considerable number of the EU workforces in the future.

Firstly, the aging workforce will be a key driver of employee relations in the European Union. In this case, new regulations and Acts of employment terms have excluded the mandatory retirement age. Now, it is voluntary in most EU nations such as the UK. In these current regulations, older people will choose to leave the workplace, hence limiting the options for the young generations. In addition, the move will also greatly influence workplace policies and performance standards set for the workforce (Holley et al., 2011). For instance, it will be very important for employers to redefine their performance management approaches for the older workers. As employers get older, managing disability in the workplace will be a situation that employers will have to adjust since it will offer new challenges at the workplace.

The second important trend that will affect the labor relations in the European Union is the aging population. As a large number of the population gets older to the extent of demanding more and better approaches to elder care, the situation will inevitably lead to demands for an expanded care sector (Fossum, 2008). For example, in recognition of this emerging trend, the government of the United Kingdom has begun to prepare for an elaborate care and support system that will inevitably draw in the employment sector. The current care system is neglected. It has many challenges, especially with funding. The government of UK is keen on addressing this challenge. The care sector is greatly undervalued in the EU. It has a low wages, low entry qualifications, and high vulnerabilities of the employment status (Meardi, 2012). These conditions make those working in the sector highly insecure, hence leading to unreliable and poor quality services. In addition, with such a poor state of the care sector, many people are unwilling to take up jobs in the area (Malinowski, Minkler, & Stock, 2015). This case means that the supply of care workers is failing to meet the demand. Such a situation has a direct impact on relatives who are now left with no choice other than taking up more responsibilities of taking care of their relatives. Since these relatives are younger and working, it becomes difficult and often overwhelming to juggle between work and caring responsibilities (Holley et al., 2011). Consequently, as workers cope with work and caring for their children and their elderly relatives, high levels of stress, poor performance, and low employment engagement, organizations will have to be pulled into this issue and become more proactive in care support systems (Aghion et al., 2008). By 2020, it is anticipated that elder care will be of greater concern to employees. Hence, employers will have to consider providing support for employees with elder care responsibilities in addition to the current childcare support. This move will definitely change labor relations in the EU.

The third most important factor that is changing the labor relations is the shifting and fragmented employment relationship of the 21st century. While the traditional relationship between a single employer and its employee is still of significant importance, globalization and technological advances are changing how the employment relationship is undertaken. Technology has facilitated the breaking down of manufacturing and service sectors into their constituent parts, which are easily outsourced or relocated outside the traditional organizational setting, and most importantly even outside the EU (Kaufman, 2010). In addition, in a country such as Britain, strategies such as the focus on outsourcing, the use of agency staff, and partnerships are creating networked organizations. The main aim of these strategies is to reduce costs, increase efficiencies, and/or bring specialist knowledge and expertise at competitive prices. In addition, mergers and acquisitions are also revolutionizing the employment relationship where workers find themselves being transferred from one organizational management. The implication here is different terms, policies, and other factors in their employment relationship in as many years as they stay in the organization. The result from this dynamics in the employment relationship is a more diverse and complex work environment where contractual relationships are dynamic to reflect diverse terms, wage rates, and conditions (Batt et al., 2009). For example, it is common to get employees with the same qualifications working on the same project, but on different terms depending on whom their direct employer is, the historical bargaining unit they belong to, or the previous terms of employment with their current employer. The trend is likely to dominate the future labor relations, especially in the light of a shrinking public sector and a more robust and dynamic private sector that is inclined towards outsourcing, performance contracts, and other important changes that are revolutionizing the workplace environment.

The fourth important trend that is likely to change the labor relations in the EU is the move towards performance management. The European Union is more than ever open to the world, thanks to globalization and technological shocks. The movement of goods and services across the world means that belonging to a given country is no longer a competitive advantage to indigenous countries as compared to foreign companies (Kaufman, 2010). Demands have been witnessed for organization to be more efficient, cost-effective, and competitive. These demands will be greatly made possible through the workforce. While technology has previously played an important role in determining the competitiveness and efficiency of an organization, it will now lay as a balancing tool where all organizations can easily acquire and implement efficient and cost-effective technologies, thus effectively eliminating or reducing the influence of technology as an aspect of competitive advantage (Blanchflower & Lawton, 2010). For instance, following the removal of Default Retirement Age (DRA) clause in virtual teams, demands for flexible workers, and the increasing complexities and automation of performance management system, the labor relations sector will experience enormous changes (Aghion et al., 2008). Firstly, managing older people to offer rewards and benefits to the organization, despite their declining performances will require new approaches to performance management. Secondly, as more organizations demand highly skilled labor, a shift from a time-based payment system to a performance-based system will be expected. However, this situation will not likely affect unskilled and semi-skilled workers (Budd, 2014). The thin line between the definition of good performance and underperformance will also make performance management the new battleground for labor relations. It is important for organizations to identify important deliverables and expectations of each employee and the corresponding benefits (Meardi, 2012). Consequently, in the quest for achieving a high-performing labor force, organizations will have to take more proactive roles in creating a high-performing culture while at the same time involving the HRM in ensuring that underperformers are helped to perform as per the expectations or otherwise be eliminated from the system.

As these changes occur, the trade unions will play a peripheral role in the welfare of employees since organizations will be pushed by competition towards meeting the role of the trade unions. For instance, organizations will have to create good working conditions for their employees without necessarily being prodded to do so by trade unions (Kaufman, 2010). In addition, job security and other areas that trade unions fought for will no longer be relevant. Instead, job security, wages, and other agreements in an employment relationship will be pegged to performance.

Conclusion

It is evident that the labor relations segment in the European Union is facing exponential changes that have been pushed by the changing working environment. The changes have been brought by technology and globalization where organizations face heightened competition within and without the boundaries of their respective nations. With demands for a highly skilled and high performing workforce, organizations will have to find ways of ensuring that performance management is a central concept in the employment relations. Other major trends that are likely to affect the labor relations include the aging workforce, demand for skilled labor, demand for more flexible working environment, a reduction in production costs, and the increased efficiency. The position and influence of trade unions on the employment relationship has been shrinking drastically, especially with the shrinking public sector and more robust private sector. Consequently, with contracts being increasingly based on performance contracts, the role of trade will easily become irrelevant. Otherwise, it will have to evolve. As such, the labor relations sector in the EU is experiencing drastic changes. This situation will define the trend around the world, thanks to globalization and technology.

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