Power, flexibility, and the breakdown of centralized wage bargaining: Denmark and Sweden in comparative perspective

Comparative Politics

Volumn 28, Issue 4, 1996, Pages 430-436

  Iversen, Torben ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 21344437228     PISSN: 00104159     EISSN: None     Source Type: Journal    
DOI: 10.2307/422051     Document Type: Review

References (109)

1. See Philippe C. Schmitter, "Interest Intermediation and Regime Governability in Contemporary Western Europe and North America, " in Suzanne Berger, ed., Organizing Interests in Western Europe (Cambridge: Cambridge University Press, 1981);
2. Lars Calmfors and John Driffill, "Centralization of Wage Bargaining, " Economic Policy, 3 (1988), 14-61;
3. Jelle Visser, European Trade Unions in Figures (Deventer: Kluwer, 1989).
4. Miriam Golden, "The Dynamics of Trade Unionism and National Economic Performance, " American Political Science Review, 87 (June 1993), 439-54.
5. Markku Laakso and Rein Taagepera, "Effective Number of Parties: A Measure with Application to West Europe, " Comparative Political Studies, 12 (1979), 2-27.
6. For example, if there are one hundred equally sized bargaining units at the lowest level (n = 100), and all bargaining power is concentrated at this level, then C = .01.
7. It should be noted that "decentralized " bargaining in the Scandinavian context still implies a high (and actually increasing) degree of coordination of wages across firms within industries. In this sense the Scandinavian bargaining systems continue to be "centralized. " Nevertheless, I use the term "centralized " here to denote multiindustry peak-level bargaining and "decentralized " to denote multifirm industry bargaining.
8. See Jonas Pontusson and Peter Swenson, "Markets, Production, Institutions, and Politics: Why Swedish Employers Have Abandoned the Swedish Model, " paper presented at the Eighth International Conference of Europeanists, Council for European Studies, Chicago, March 27-29, 1992;
9. Nils Elvander, Den svenska modellen: Lonforhandlingar och inkomstpolitik 1982-1986 (Allmanna Forlaget, 1988).
10. Peter Katzenstein, Small States in World Markets (Ithaca: Cornell University Press, 1985).
11. Peter Gourevitch, "The Second Image Reversed, " International Organization, 32 (Autumn 1978), 881-912.
12. Calmfors and Driffill, "Centralization of Wage Bargaining ";
13. David Cameron, "Social Democracy, Corporatism, Labor Quiescence, and the Representation of Economic Interest in Advanced Capitalist Society, " and
14. Peter Lange, "Unions, Workers and Wage Regulation: The Rational Bases of Consent, " both in John H. Goldthorpe, ed., Order and Conflict in Contemporary Capitalism (New York: Oxford University Press, 1984);
15. Adam Przeworski and Michael Wallerstein, "The Structure of Class Conflict in Democratic Capitalist Societies, " American Political Science Review, 76 (1982), 215-38;
16. Mancur Olson, The Rise and Decline of Nations (New Haven: Yale University Press, 1982).
17. Peter Swenson, Fair Shares: Union, Pay, and Politics in Sweden and Germany (Ithaca: Cornell University Press, 1989);
18. Peter Swenson, "Bringing Capital Back In, or Social Democracy Reconsidered: Employer Power, Cross-Class Alliances, and Centralization of Industrial Relations in Denmark and Sweden, " World Politics, 43 (1991), 513-45.
19. According to Swenson, the "moral economy " "overrides what self-interest and market power alone would dictate. " See Swenson, Fair Shares, p. 3.
20. See Torben Iversen, "Wage Bargaining, Monetary Regimes, and Economic Performance in Organized Market Economies: Theory and Evidence, " Center for European Studies Working Series, 59 (1995).
21. Wolfgang Streeck "On the Institutional Conditions of Diversified Quality Production, " in Egon Matzner and Wolfgang Streeck, eds., Beyond Keynesianism (Aldershot: Edward Elgar, 1991).
22. See also Michael J. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity (New York: Basic Books, 1984).
23. Pontusson and Swenson very similarly use the flexible specialization argument in their treatment of the Swedish case.
24. In the special case where all workers and unions fall into this category the dilemma can be analyzed as a multiplayer PD game, the approach adopted in the collective action model.
25. See Michael Wallerstein, "Centralized Bargaining and Wage Restraint, " American Journal of Political Science, 34 (1990), 982-1004.
26. See Martin Osborne and Ariel Rubinstein, Bargaining and Markets (Boston: Academic Press, 1991).
27. In the case of public service producers, vulnerability is primarily a matter of the effect of particular spending policies on political support.
28. Lacking data for several OECD countries on the centralization index, I have employed the measure of centralization developed in Calmfors and Driffill.
29. Jesper Due, Jørgen Steen Madsen, Carsten Strøby Jensen, and Lars Kjerulf Petersen, The Survival of the Danish Model: A Historical Sociological Analysis of the Danish System of Collective Bargaining (Copenhagen: DJØF, 1994), pp. 150-1, 189-90.
30. Jesper Due, Jørgen Steen Madsen, Carsten Strøby Jensen, Lars Kjerulf Petersen, The Survival of the Danish Model: A Historical Sociological Analysis of the Danish System of Collective Bargaining Ibid., p. 189.
31. Swenson, Fair Shares, p. 59.
32. Over time the meaning of wage leveling has shifted in Sweden. Solidaristic wage policies were introduced at the 1951 LO congress and meant essentially "equal pay for equal work. " This market conforming (or even market perfecting) form of wage leveling was superseded in the 1960s by a more radical market nonconforming interpretation that emphasized interoccupational (and intrafirm) leveling. See Elvander, Den svenska modellen, pp. 30-36, 256-68. In Denmark, solidaristic wage policies always had an interoccupational form because they reflected a compromise among the main unions in a craft-based organizational structure.
33. Calculations are based on Dansk Arbejdsgiverforening, Lønstatistikken (Copenhagen: various years).
34. Calculations are based on Douglas Hibbs and Håkan Locking, "Löneutjamning och löneökningstakt under den solidariske lönepolitiken, " Ekonomisk Debatt, 8 (1991), 653-65;
35. Statiska Centralbyrån, "Löneutvecklingen 1973-1985, " Information om arbetsmarknaden (Stockholm: SCB, 1987); and
36. Statistiska Centralbyrån, Löner i Sverige 1982-1989 (Stockholm: SCB, 1991).
37. See Michael Piore, "Perspectives on Labor Market Flexibility, " Industrial Relations, 25 (1986), 146-67;
38. Paul Windolf, "Productivity Coalitions and the Future of European Corporatism, " Industrial Relations, 28 (1989), 1-20;
39. Streeck, On the Institutional Conditions of Diversified Quality Production; Piore and Sabel, The Second Industrial Divide.
40. See Robert J. Flanagan, "Centralized and Decentralized Pay Determination in Nordic Countries, " and
41. Torben M. Andersen and Ole Risager, "Wage Formation in Denmark, " in Lars Calmfors, ed., Wage Formation and Macroeconomic Policy in the Nordic Countries (Stockholm: SNS Forlag, 1990); Hibbs and Locking .
42. For a representative employer perspective, see Lars-Gunnar Albåge, "Recent Trends in Collective Bargaining in Sweden: An Employer's View, " International Labor Review, 125 (1986), 98-122.
43. See Guy Standing, Unemployment and Labour Market Flexibility: Sweden (Geneva: International Labour Office, 1988), pp. 56-63;
44. Anders Kjellberg, "Sweden: Can the Model Survive?, " in Anthony Ferner and Richard Hyman, eds., Industrial Relations in the New Europe (Oxford: Basil Blackwell, 1992), pp. 107-12, Ibsen and Stamhus, p. 54; Due et al., pp. 157, 161; Pontusson and Swenson.
45. See Kjellberg; Pontusson and Swenson; Ibsen and Stamhus.
46. Pontusson and Swenson. See also Ibsen and Stamhus, pp. 53-58.
47. See Pontusson and Swenson, p. 19; Kjellberg, pp. 114-115.
48. Ibsen and Stamhus, pp. 61-63.
49. Ibid., pp. 63-67.
50. My examination of the public sector wage data shows that between 1970 and 1982 the wage dispersion between civil servants in the Danish state administration decreased nearly 45 percent, while the comparable figure for other Danish state employees is about 38 percent. In Sweden the picture is very similar: from 1973 to 1980 dispersion decreased by 24 percent in the state sector and by 23 percent in the municipal sector.
51. Nina Smith and Niels Westergård-Nielsen, "Udviklingen i lønforskelle mellem den offentlige og private sektor, " Nationaløkonomisk Tidsskift, 1 (1988), 13-30;
52. Johnny Zetterberg, "Lønstruktur i privat og offentlig sektor, " Forskningsrapport Nr. 26 (Stockholm: FIEF, 1988).
53. Unsurprisingly, distributive conflicts have also developed within the public sector, despite a collective interest in maintaining parity with private sector wage increases. Public employees with highly marketable skills have generally been in favor of harmonizing the public wage structure with the private sector.
54. Fritz Scharpf, Crisis and Choice in European Social Democracy (Ithaca: Cornell University Press, 1991), pp. 238-55.
55. Figures are based on United Nations, World Investment Directory, vol. 3 (New York: United Nations, 1993), pp. 155, 411.
56. See James M. Buchanan and Robert D. Tollison, eds., The Theory of Public Choice-II (Ann Arbor: University of Michigan Press, 1984);
57. Aaron B. Wildavsky, Budgeting: A Comparative Theory of Budgetary Processes (New Brunswick: Transaction Books, 1986).
58. Some of these linkages were direct since some public employees were organized in LO member unions (primarily in the large Swedish and Danish municipal workers' unions, SKAF and DKA). Equally important was more informal coordination between private sector organizations and governments; the latter used agreements concluded in the private sector as the norm for reaching public sector wage settlements. Consequently public sector unions were subjected to private sector wage discipline.
59. Gøsta Esping-Andersen, The Three Worlds of Welfare Capitalism (Princeton: Princeton University Press, 1990), ch. 7.
60. For an analysis of the growing polarization of public and private sector interests in Sweden, see Peter Swenson, "Labor and the Limits of the Welfare State, " Comparative Politics, 23 (1991), 379-99.
61. See Jesper Due and Jørgen Steen Madsen, Når der slås scøm i: Overenskomstforhandlinger og organisationsstruktur (Copenhagen: Jurist og Økonomforbundets Forlag, 1988), pp. 42, 55;
62. Peter Nannestad, Danish Design or British Decease? Danish Economic Crisis Policy 1974 in Comparative Perspective (Århus: Aarhus University Press, 1991), pp. 159-62;
63. Lars Mjøset et al., Norden Dagen Derpå (Oslo: Universitetsforlaget, 1986), p. 261.
64. See Elvander, pp. 314-16; Due and Madsen; Kjellberg; Jonas Pontusson, The Limits of Social Democracy (Ithaca: Cornell University Press, 1992), p. 119;
65. Herman Schwartz, "Small States in Big Trouble: State Reorganization in Australia, Denmark, New Zealand, and Sweden, in the 1980s, " World Politics, 46 (1994).
66. Calculations are based on data from Tom Cusack, "The Changing Contours of Government, " WZB Discussion Paper, P 91-304 (Berlin: Wissenschaftszentrum Berlin für Sozialforschung, 1991).
67. Traditionally, sheltered sectors such as construction and retail have been vulnerable to such policies because fiscal austerity and high interest rate policies reduce purchasing power and debt-financed investments. See Scharpf and Iversen.
68. With this new devaluation the Swedish krone was devalued by 52 percent since 1976, compared to 24 percent for the Danish krone. See Thorvaldur Gylfason, "Exchange Rate Policy, Inflation, and Unemployment: The Nordic EFTA Countries, " in Victor Argy and Paul De Grauwe, eds., Choosing an Exchange Rate Regime: The Challenge for Smaller Industrial Countries (Washington, D. C.: IMF, 1990), p. 186;
69. Daniel Gros and Niels Thygesen, European Monetary Integration: From the European System to European Monetary Union (London: Longman, 1992), p. 17;
70. Erik D. Hansen, Kaj Kjæsrsgaard, and Jørgen Rosted, Dansk Økonomisk Politik: Teorier og Erfaringer (Copenhagen: Nyt Nordisk Forlag, 1991), pp. 148-49. These sources contain more detailed analyses of Danish and Swedish currency policies.
71. Elvander, p. 291; Pontusson, Limits of Social Democracy, pp. 116-17.
72. A perverse example is the 1988 bargaining round, in which an agreement was first reached in the baking sector; it awarded wage increases that were totally unacceptable to the exposed industries. Another example is the decentralized 1984 bargaining round in which public sector wages broke the proposed six percent pay norm.
73. Unit labor costs rose much faster than in the rest of OECD, and in eight of the ten years since 1980 hourly earnings in manufacturing increased faster in Sweden than in Denmark.
74. The concerns of cost-sensitive employers were addressed in 1989 when SAF agreed to return to centralized bargaining with LO (while VF and Metall conducted separate negotiations). The resulting two-year SAF-LO agreement became pattern-setting for other bargaining areas and thus resembled the traditional centralized system.
75. See Jonathan Moses, "Abdication from National Political Autonomy: What's Left to Leave?," Politics and Society, 22 (1994), 125-48.
76. Rianne Mahon, "From Solidaristic Wages to Solidaristic Work: A Post-Fordist Historical Compromise for Sweden?," Economic and Industrial Democracy, 12 (1991), 295-325.
77. The cartel encompasses employees organized in Metall, the white collar union SIF, and the civil engineering affiliate of the SACO/SR academic and professional union federation.
78. See European Industrial Relations Review (September 1992).
79. Steen Scheuer, "Struktur og forhandling: Aspekter af fagbevæsgelsens strukturudvikling i efterkrigstiden: Ektern struktur, medlemstal samt strukturen i de kollektive overenskomstforhandlinger," in Svend Aage Andersen et al., Årbog for abejderbevœgelsens historie, 1990 (Copenhagen: SFAH, 1990);
80. Steen Scheuer, "Denmark: Return to Decentralization," in Ferner and Hyman, eds., Industrial Relations in the New Europe.
81. Due et al., p. 190.
82. The so-called wage quota (Lohnquote) provides the benchmark for determining wage increases. Basically, wage increases are permitted if they do not bring the functional division of income between capital and labor out of synch with macroeconomic requirements. See Randall Kindley, "Rational Organization: Labor's Role in the Emergence and Reproduction of Austrian Neo-Corporatism" (Ph.D. diss., Duke University, 1992), pp. 202, 243, 354.
83. See Randall Kindley, Rational Organization: Labor's Role in the Emergence and Reproduction of Austrian Neo-Corporatism ibid., pp. 375-83;
84. Edwald Walterskirchen, Unemployment and Labour Market Flexibility: Austria (Geneva: International Labour Office, 1990), pp. 54-7;
85. Robert Rowthorn, "Corporatism and Labour Market Performance," in Jukka Pekkarinen, Matti Pohjola, and Bob Rowthorn, eds., Social Corporatism (Oxford: Clarendon Press, 1992).
86. Peter Katzenstein, Corporatism and Change: Austria, Switzerland, and the Politics of Industry (Ithaca: Cornell University Press, 1984), pp. 47, 61.
87. Since all companies are compulsory members of the Federal Economic Chamber which negotiates wages on their behalf, virtually all employees are covered by collective agreements.
88. Arend Lijphart, The Politics of Accommodation (Berkeley: University of California Press, 1968).
89. Katzenstein, Corporatism and Change, pp. 181-90.
90. Katzenstein, Corporatism and Change, Ibid., p. 189.
91. Scharpf, Crisis of Social Democracy, pp. 178-80, 188-90, 193-94.
92. See Kindley, pp. 375-83.
93. Atle Midttun, "Norway in the 1980s: Competitive Adaptation or Structural Crisis? A Comment on Katzenstein's Small-State/Flexible-Adjustment Thesis," Scandinavian Political Studies, 13 (1990), 311. It should be noted that the use of the term "sheltered" in this context deviates from the previous use of the term. These industries were not necessarily sheltered from international competition but rather benefited directly from the oil boom and therefore enjoyed a unique advantage over other industries in their capacity to pay higher wages.
94. Lars Calmfors, "Wage Formation and Macroeconomic Policy in the Nordic Countries: A Summary," in Lars Calmfors, ed., Wage Formation and Macroeconomic Policy in the Nordic Countries (Uppsala: SNS Forlag, 1990), pp. 26-8;
95. Jon Dolvik and Dag Stokland, "Norway: The 'Norwegian Model' in Transition," in Ferner and Hyman, eds., Industrial Relations in the New Europe, p. 155.
96. Robert L. Flanagan, David W. Soskice, and Lloyd Ulman, Unionism, Economic Stabilization, and Incomes Policies: European Experience (Washington, D.C.: The Brookings Institution, 1983), pp. 168-69.
97. Denmark and Sweden experienced an increase of about ten percent in the same period. See Mjøset et al., Norden Dagen Derpå, p. 233.
98. See Erling Steigum, "Olijan och den norska ekonomin," Economisk Debatt, 6 (1984), 375-85.
99. Flanagan et al., pp. 184-91; Lars Mjøset, "Norway's Full-Employment Oil Economy: Flexible Adjustment or Paralysing Rigidities?," Scandinavian Political Studies, 12 (1987), 330.
100. Calmfors, pp. 15-22.
101. Midttun, pp. 313-21.
102. Mjøset, p. 334; Calmfors, p. 33.
103. See Swenson, "Bringing Capital Back In."
104. See Moses; Dølvik and Stokland.
105. Dølvik and Stokland, p. 161.
106. Ibid., pp. 161-63.
107. Jelle Visser, In Search of Inclusive Unionism (Boston: Kluwer, 1990), pp. 156-65.
108. In weighing bargaining levels, the monthly monitoring of collective bargaining in the European Industrial Relations Review has been invaluable. It has been supplemented with information from other sources, including Flanagan, Soskice, and Ulman, Unionism, Economic Stabilization, and Incomes Policies; and
109. Femer and Hyman, eds., Industrial Relations in the New Europe. Union membership data were obtained from ÖGB, Tätigkeitsbericht (Austria); Statistisk Årbog (Denmark); Statistisk Årbok (Norway); and Statistisk Årsboke (Sweden).