The Impact of the Crisis on Collective Bargaining in Manufacturing in Portugal: Between Formal Resilience and Disorganized Decentralization

Thursday, 2 July 2015: 8:30 AM-10:00 AM
TW2.3.04 (Tower Two)
Isabel Tavora, University of Manchester, Manchester, United Kingdom
Pilar Gonzalez, Universidade do Porto, Porto, Portugal
The sovereign debt crisis in Portugal was a period of far-reaching labour market reform to an extent that had not been witnessed since the 1974 revolution. Following Greece and Ireland, in April 2011 Portugal became the third European Union member state to request financial support and was granted, in May 17th, a 78 billion euro loan under the terms of the European Financial Stabilisation Mechanism. In exchange, this required the commitment to a three year long austerity plan laid out in a memorandum of understanding (MoU). The substantive measures prescribed by the MoU and dutifully adopted by the Portuguese government were aimed at achieving fiscal consolidation and internal devaluation. To a great extent these aimed to increase labour market flexibility. In particular, the reforms to collective bargaining were introduced with the stated objective of promoting ‘organized decentralization’. This paper examines the extent to which these objectives were achieved, considering their impact on the process, character and outcomes of collective bargaining.

The research involved the gathering of primary and secondary data on the state of collective bargaining and on the responses of social partners’ at the national, sectoral and firm level. This included thirty in-depth interviews with social partners and a three hour workshop with twenty participants from employers and union organizations and government officials.  The interviews at the firm level were conducted in the context of 10 case study firms in three manufacturing industries: metal, textiles and footwear and food and drinks. These data were complemented with the collective agreements in the cases where these existed and were made available.

The research indicated that while systemic changes to collective bargaining were already clearly under way in Portugal, these circumstances accelerated that process. In the face of long standing blockages to collective bargaining associated with both employers’ strategies of cost-minimization and unions’ resistance to negotiate flexibility systems that would reduce workers’ (already low) earnings, the government had initiated in 2003 a process of regulatory change that favoured the employer side. The economic crisis that started in 2008 and the entry of the Troika in 2011 further weakened the bargaining position of trade unions and created opportunities to taking these reforms further. These circumstances also reduced the scope for social dialogue at national level. While employers and union confederations were initially involved in the design of the measures, the government progressively disregarded commitments made in tripartite agreements and increasingly took unilateral decisions when consensus proved difficult and negotiations time-consuming.

The findings also suggest significant erosion of the system of collective bargaining in Portugal. This is evidenced by the significant challenges to the institutional set up that supported industry bargaining, which has been the dominant level of bargaining in Portugal. The measures included the introduction of rules allowing the expiration of agreements and reducing their after-effect period and of representativeness criteria that severely restricted the extension of industry agreements. Rather than helping to resolve the long-standing disputes between employers and unions over flexibility and the compensation of overtime work, these measures intensified the existing problems. The legal reduction of overtime pay rates that included dispositions (temporarily) suspending collective agreement clauses that set more favourable rates constituted a further challenge to bargaining that exacerbated a climate of adversarialism  both at the industry and the firm level.

Within sectors, the responses of trade unions to these new and increasingly unfavourable circumstances varied. Depending on their ideological traditions, some union organisations adopted a pragmatic approach and started engaging in concession bargaining to avoid the expiration of agreements while others refused to compromise on what would result in lower overall earnings for workers in the industry. This appeared to be leading to a repositioning of actors as cooperative unions gained prominence in industry bargaining even in cases where they are not the most representative. Nevertheless, the incidence of sectoral bargaining decreased sharply during the crisis, resulting on an alarming decrease of coverage (of new and renewed agreements).  Even though the number company agreements also initially decreased during the crisis years, their proportion relative to sectoral agreements increased and in 2012 and in 2013 their number surpassed that of sectoral agreements. Still, despite the growth of company agreements from 2012, their numbers are still significantly below those before the crisis and by no means are they filling the void left by the decrease of sectoral bargaining. Even though these developments resulted in an increasing scope for managerial prerogative and individualised arrangements at the firm level, many employers and particularly employers’ associations were supportive of industry bargaining which they regarded as preventing unfair wage competition and promoting joint industry-specific solutions that contributed to stability and industrial peace.

While the changes to the rules to collective bargaining weakened trade unions and reduced labour costs for firms - certainly contributing to the achievement of the EC-prescribed objective of ‘internal devaluation’, the costs for workers were significant – particularly in terms of earnings and employment security. Moreover, the recipe failed to facilitate a process of ‘organized decentralization’.  Instead, the reduced role for trade union and employer organizations in the regulation of employment at national and sectoral level, the continuing low coordination and lack of vertical articulation of bargaining, the decreased bargaining coverage alongside the increasing proportion of firm agreements in relation to sectoral agreements and the increasing scope for managerial prerogative and individualized contracting are all signs of disorganized decentralization (as defined by Traxler, 1995 and in European Commission 2004).

While a recent increase of industry agreements following a new regulatory change that re-enabled their extension may signal a degree of resilience of the system, this may be more formal than effective. As the new rules significantly weaken unions, industry bargaining only takes place if they are prepared to make significant concessions in each bargaining round. Under these circumstances, as unions lose their ability to protect the interests of workers, the relevance of bargaining for regulating employment at the industry level may continue to decrease.