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High quality industrial relations can help EU face crisis

03/02/2009 sheet metal worker in factory

A European Commission report published on February 3, 2009 shows that structured dialogue between workers' and employers' representatives can help the EU face the economic crisis.

High quality industrial relations are a key element in managing economic change and reducing its costs, helping workers and companies adapt to change while protecting them from transitory shocks.

The Industrial Relations Report shows that collective bargaining retains an important role in Europe, despite a moderate decline in trade union membership (from 27.4% in 2000 to 25.6% in 2005). In 2006, almost two-thirds of European workers were covered by a collective agreement. Membership of employers' organisations – which largely determines collective bargaining coverage – appears to be stable. However, there are marked differences between the Member States. Membership of trade unions ranges from 8%-80% and membership of employers' organisations from 20%-100%. While bargaining coverage is 68% in the EU-15 Member States, it is 43% in those countries that joined the EU since 2004.

Wage bargaining seems to have had an impact on the gender pay gap, wage inequality and in-work poverty. The empirical evidence suggests that, with all other variables constant, where trade union membership is 10% higher, wage inequality is around 2% lower. An increase in collective bargaining coverage of 10% is associated with a reduction in in-work poverty of 0.5%.

Minimum wages are an increasingly important component of wage setting in the EU. Statutory minimum wages now exist in 20 Member States. Only in Member States where strong employers' organisations and trade unions negotiate for a large number of firms and workers in a coordinated way is the lowest wage floor set by collective agreement rather than statutory minimum wages.

The Commission considers that social partner organisations themselves need to be strong and must build a relationship based on trust. That is why the EU has substantially increased the support to social partners through the European Social Fund, in particular in the Member States that have joined the EU since 2004.

At European level, the report highlights that social partners throughout Europe have not only demonstrated that their European federations can negotiate autonomous framework agreements at EU-level but that they can also put them into practice. The European social partners agreed in 2006 on minimum rules for dealing with violence and harassment at work. They have also presented the results of how previous agreements on telework and work-related stress were implemented. EU-wide social dialogue at sectoral level has been extended to contract catering and professional football.

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