Role of the State in Employment Relations

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Globalisation and varieties of capitalism

The ability of a state to intervene in labour disputes is also increasingly being reduced due to the effects of globalisation and emergence of powerful multinational corporations. Both economic and financial characteristic of globalisation affect employee relations (Kuruvilla and Lakhani, 2013). These characteristics include; more integrated product markets as barriers to trade continue to be brought down, growth of internationalised financial markets as restrictions to capital flows are brought down, sharing of new technologies across borders and multinationals being able to coordinate production from different countries (Bamber, Lansbury and Wailes, 2013). Globalisation poses a threat to most employment institutions, which are based on national values and traditions. Therefore, economic requirements become the most important determinants to employment relations. When foreign firms who have different systems of doing business are competing in a host nation, the national institutions of the host nation do not influence their behaviour. Many multinationals are adopting organisational structures where production is outsourced to developing countries but the managerial decisions are made by the parent company in a developed nation.

Theother concept that can be used to explain the diminishing ability of governments to dictate employment relations policies is varieties of capitalism. This concept suggests that firms and financial markets in capitalist markets are becoming more important in influencing employment relations than the state or workers’ unions (Howell, 2005). The main actor in employee relations according to this concept is the firm while different institutions have the role of complementing each other. This concept values the input of institutions in employment relations, training and education that is related to the job, corporate governance,the relations between different firms and the employees. A state’s competitive advantage lies in their institutional arrangements and thus most will not be willing to change these institutions. This means that institutions in a state are hard to change or be influenced by market pressures (Hall and Soskice, 2001). The different institutions in a state give rise to different institutional modelsnamely the centrally controlled economy, liberal market economy and the coordinated market economy. The liberal market economy model is characterised by market-oriented provision of labour and capital; the coordinated market economy is characterised by coordination between stakeholders on labour and capital provision, while the centrally controlled market economy is characterised by a government run economy. In order to understand the different employment relation policies by different countries, it is important to examine the employment relations systems of three different countries that fall in the different sets of economies (Martinez-Lucio, 2014).

Russia isa country with a centrally controlled economy. This country is characterised by a pattern of low membership numbers in trade unions, a slow development in collective bargaining, limited numbers of workers’strikes and a tendency of trade unions to incorporate politics in their strategies (Esping-Andersen, 1990). The main employers are trade and servicesectors where earnings are mostly at poverty level with high levels of unemployment. The umbrella Russian trade union federation (FNPR) uses the centralised national model and the sectorial model, which often result in weak and ineffective agreements (Ashwin and Clarke, 2003). Russian employment relations system is also characterised by yellow unions, which areunions set up by a company to replace legitimateworkers’ unions if it successfully convinces a majority of the workers to join it (Domsch and Lidokhover, 2007). Thesecompany-backed unions usually serves the interests of the employer rather than that of the employees. The current labour code used in the country was last updated in 2001, giving more rights to employers by according them more freedom to decide on employment matters. However, this code weakened the union’s ability to challenge managerial decisions like termination of employee contracts, overtime work, working hours for employees and disciplinary actions taken. Although this code clearly defines legally, accepted minimum terms and conditions of labour that can be re-negotiated on both collective agreements and contracts for individuals, managers usually ignore these terms. Under this code, rights negotiated under a collective agreement supersede those provided for by the law and only the president of a union is immune to a termination of their jobs for involvement in union activities.

United Kingdomfalls under states with a liberal market economy. The history of U.Klabour relations can be defined through the various governments who throughout their history have had different employment relations policies. In the period between 1979 and 1997, conservative governments encouraged free markets and side lining of trade unions. They also limited individual rights of employees, which they associated with restrictive labourpractices, which were contributing to the high levels of unemployment. There was also the privatisation of numerous companies whereby the private sector was viewed as a model example for employment relations (Frege and Kelly, 2013). Trade unions were also greatly weakened. Trade unionists were no longer were protected from prosecution for involvement in disputes and they were to be held responsible for the actions of their members. In addition, laws were passed that made it easier for employers to dismiss employees. The next period in U.K employment relations is between 1997 and 2010 where there were major legal interventions like on national minimum wage,unions were also recognised in collective bargaining and more family friendly policies were formulated. Trade unions registered less members in the private sector as compared to the high rates of membership in the public sector in the U.K(Coates, 2005). Employer organisations are weak and so is employment protection. In addition, strikes are highly restricted due to laws against unionism (Brown,Deakin and Ryan,2009). The number of issues covered in a bargaining agreement are also very limited covering only wages, hours and holidays (Wanrooy et al. 2013).

Germanyhas a coordinated economy. The employment relations of this country are characterised by a wide coverage of the collective bargaining, wages that are kept high motivating employees to train for more effectiveness in their jobs and all stakeholders are involved in formulating employment relations policies.

Case Study

The institutions in either the