The Efficacy of Hybrid Collective Bargaining Systems: An Analysis of the Impact of Collective Bargaining on Company Performance in Europe

Interest in the efficacy of different collective bargaining systems on the productivity of companies (re-)gained both political and academic interest in recent years. Political interest increased, in particular in the European Union (EU), after the adoption of the Europe 2020 strategy aimed at promoting “smart sustainable and inclusive growth”. A part of this strategy aims at fostering the productivity of European companies to enable them to compete successfully in the world market. While Europe 2020 does not directly refer to collective bargaining, several countries received recommendations to review their bargaining systems to ensure that labour costs, i.e. wages and working time arrangements, support competitiveness and productivity growth. Furthermore, political interest in the efficacy of collective bargaining increased since in recent years the European Commissions, the European Central Bank and the International Monetary Fund, included reforms of collective bargaining systems on the agenda of their Memoranda of Understandings. In fact, reforms of collective bargaining systems were the predominant policy recommendations given by European and international organizations. Due to this increase in the political relevance of collective bargaining systems, academic interest gained momentum in recent years. 

In academia interest increased as in many European countries “well known” national collective bargaining systems transformed into more perforated, multi-layered, and complex systems of collective bargaining, i.e. in hybrid systems, of which little is known regarding their efficacy. In fact, the organizational and structural framework of collective bargaining changed significantly in the past three decades. Most notably, individual bargaining increasingly supplanted collective bargaining and because of the trend of decentralization the number of collective bargaining units increased significantly which made collective bargaining systems increasingly hybrid, i.e.  perforated, multi-layered and multi-dimensional. However, little is known about how the productivity of companies is affected by different hybrid systems of collective bargaining. In this paper we develop a fine-grained categorization of collective bargaining systems in Europe and argue that both the level and in particular the degree of integrative interaction at the same and on different level is important for firms’ productivity. It is hypothesized that coordinated and governed systems of collective bargaining enable companies achieve the best performance. Different to previous analyses our results show that company and individual bargaining are associated with no superior performance. Our results also show that past transformation of collective bargaining systems, i.e. decentralization, lead to a dampening effect of companies’ productivity if not vested with integrative interaction between different bargaining units. In fact, it is shown that coordination and integrative interaction between collective bargaining units is crucial for the efficacy of collective bargaining. The hypotheses are tested on the basis of recent micro data on collective bargaining for all EU member states. As the question on the role of collective bargaining regarding the aim to increase the productivity (re-) entered the political debate in many European countries the article finishes with highlighting the relevance of the results for current attempts to reform collective bargaining in Europe.