Unit 6, Lecture 3 - Towards a living wage triangular industry-wide bargaining
A necessary though not sufficient precondition for sustainable wage growth is productivity growth. Unregulated competition will trigger a race to the bottom wherein higher profits or lower product prices are not the result of increased productivity, but merely a redistribution of income from wages to profits or to lower consumer prices. Fair and efficient competition means that all competitors should pay the same wage for the same work. Industry wide bargaining speeds up the structural transformation towards more productive enterprises in an economy. Less productive enterprises will resist industry wide bargaining, as it would put them out of business. Employers as a whole might also prefer the unregulated market because it increases their power as an employer vis-a-vis the individual workers.
In a highly mobile sector like apparel, national unions, employers and global companies need to become a part of the bargaining process or national producers risk losing orders from international buyers as soon as they collectively agree to raise wages.
Engagement between unions and employers at an industry or sectoral level can be of key importance in creating and implementing an effective strategy for developing an industry. A shared ability to determine agreed standards on pay, terms and conditions – establishes a level playing field that marginalizes firms seeking an advantage through undercutting the competition.
Sectoral level bargaining remains a common feature of northern and western European states.
Joint Industry Councils (JICs) and Wage Councils in the UK were voluntary arrangements of union and employer organizations in a sector actively promoted by Government to stimulate collective bargaining in order to encourage the adoption of minimum employment standards to minimize a race to the bottom.
Unions can be a considerable source of knowledge on the broader market conditions facing a sector; on how different employers are responding to technological or workplace innovations in a sector and are often the conduit of good practice that can encourage further innovation.