Industrial RelationsCentral and Eastern Europe

MGT 4330

IntroductionEnd of WWII (1945)~~Fall of

Socialism (1989)◦Broadly similar among central and

eastern Europe countries.◦Lead by Communist Party.◦Trade unions were “transmission belts”

to assist in the implementation of state policies.

◦State determine the pattern of industrial relations

◦Union membership was universal

IntroductionFall of Socialism

(1989)~~Present◦Communist parties was destroyed◦Parliamentary democracies were

established.◦Government frequently lost power◦International Trade

Soviet Union Western Europe

◦State owned enterprises were privatized.

◦European Union (EU) membership

Country List◦  Estonia - member of the European Union

◦  Latvia - member of the European Union

◦  Lithuania - member of the European Union

◦  Poland - member of the European Union

◦ Czech Republic - member of the European Union

◦  Slovakia - member of the European Union

◦  Hungary - member of the European Union

◦  Romania - member of the European Union

◦  Bulgaria - member of the European Union

◦  Slovenia - member of the European Union

◦  Croatia - an acceding state of the European Union

◦  Bosnia-Herzegovina

◦  Serbia

◦  Albania

◦  Montenegro

◦  Macedonia

EconomyCatastrophic Decline in 1990sBy 2000, GDP exceeded the level

of 1989.Growth rate substantially higher

than in Western Europe.High unemployment rate (Poland

19.4% in 2003)High deficits (Hungary 9% in

2006)

Core ValuesMost post-communist citizens still strongly

mistrust and avoid organizations.Many of the private and informal networks

that developed under communism still persist.

Many post-communist citizens are extremely dissatisfied with the new political and economic system.

Members often viewing their unions as part of the enterprise organization, rather an independent means of representing their interests effectively.

Industrial Relations SegmentationThe state budget segmentThe privatized segmentThe private segmentThe multi-national corporate

segment

Industrial Relations SegmentationThe state budget segment

◦Senior officials were dismissed or demoted, after collapse of socialist regime.

◦System of centralized pay determination survived, but its ability to provide for employees was destroyed by inflation and crises in public sector finances.

◦Employees resigned for positions in private sector.

◦To control deficit, government enforce wage restriction on public sector workers. High turnover Increased corruption Sharp decline of living standard

Industrial Relations SegmentationThe privatized segment

◦This segment refers to privatized, or about to be privatized, major industrial sectors, including coal mining, iron and steel, transportation and telecommunication.

◦Industrial relations determined by product markets, labor markets, and political leverage.

◦Privatization of manufacturing resulted in an employment decline.

Industrial Relations SegmentationThe privatized segment (cont’d)

◦Unions successfully used political pressure and industrial action to protect employment level in coal mining and iron and steel industry. Number of employee generally remain

the same from 2000-2003 Relatively higher salary than other sector.

( See P. 97)

Industrial Relations SegmentationThe private segment

◦Refers to small- and medium-sized firm in distribution, tourism, financial service, and small scale manufacturing.

◦Limited organizations for both employees and employers.

◦Industrial relations are informal, based on personal networks.

◦Income level varies among industries. (Finance sector vs. national average is 266:100)

Industrial Relations SegmentationThe multi-national corporate

segment◦Multi-national firms from Western

Europe◦Similar with North Mexican regions

Cheap labor Low value added manufacturing and

service industry (Example, German clothing industry in Poland; automobile industry in Czech Republic)

Industrial Relations SegmentationThe multi-national corporate

segment (cont’d)◦Follow their international human

resource policies and practice. Reduction in employment level Low union membership High flexibility (new payment system)

Poland Collective Bargaining Coverage: 30%Trade union density : 15%24,000 local union Firm level collective bargainingNSZZ Solidarność, OPZZ, and FZZSignificant number of union members are in

small local unions not affiliated to any of the main confederations.

Union membership is highest in education, science and health, followed by transport and communications, and mining and manufacturing. It is lowest in commerce and services.

Poland “Bonuses at Discretion”

◦Based on the employer’s assessment◦Rather than objective justification

Employers in financial difficulties are able to suspend collective agreements for up to 3 years. ◦By law this should be agreed with the

trade union organization in the workplace that initially signed the agreement.

◦Many employers ignore this legal requirement.

Poland Union organizations should

negotiate jointly. ◦At least 10% of the workforce in

membership – or 7% if the union organization concerned belongs to one of the three nationally representative unions, Solidarność, OPZZ and FZZ.

◦If no union represents at least 10% of the workforce, then the agreement should be signed with the largest union in the company.

PolandPoland has a national minimum wage

which is set by the government following negotiations in the Tripartite Commission.

Works Council (in 2006)◦More than 50 employees◦EU directive on providing a national

framework for information and consultation.◦Powers works councils are limited to

receiving information on economic issues and being consulted on employment and work organization issues.

MacedoniaTrade union density: 27.95%Collective Bargaining Coverage: 100%High level of unemployment (constantly

over 32%)Low level FDI and local investmentTrade unions are not important social

actors, as they are unable to promote and protect the interests of employees.

Dominated by one trade union: the Confederation of Trade Unions of Macedonia (75%–80%)

MacedoniaEmployer’s Union

◦Employers’ Organization of Macedonia (ORM)

◦The Business Chamber of Macedonia (BKM)

Labor Code apply a general collective agreement for all employees in private and public sector.

Collective agreement at firm level covers workers who are not members of union.

MacedoniaPublic sector- National level

collective agreementPrivate sector- Firm level collective

agreementUnion representatives

◦legal assistance to its members and represent the employees

Representatives for safety and health at work◦National wide expert advisory body