Scottish Parliament Information Session, November 2017 Presentation

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Constructing an international index of economic democracy

Press Release: DEMOCRATISING THE ECONOMY

New research highlights the links between economic democracy and inequality.

A new ground breaking international economic democracy index has been developed by researchers at the University of Glasgow and Nottingham Trent University in partnership with the New Economics Forum and Oxfam and funded by the ESRC. The index was the subject of an event that took place at the Scottish Parliament on Thursday evening (22nd November 2017). The event was well-attended by stakeholders ranging from MSPs, academics, economists including the Scottish Government’s Chief Economist, trade unionists and other organisations.

The event hosted by Bob Doris MSP for the Maryhill and Springburn Constituency andintroduced by speaker, Jamie Hepburn MSP, Minister for Employability and Training highlighted the significance of the index – which offers an important new indicator of economic development, by measuring the extent of democratic engagement and public participation in the economy.

The researchers have also found a strong causal link between economic democracy and inequality across OECD countries. In other words, countries with high levels of economic democracy have low levels in inequality. There is also a strong statistically significant and positive correlation between economic democracy and labour productivity.

The research was funded by the ESRC and undertaken by Professor Andrew Cumbers and Professor Robert McMaster and their team at the University of Glasgow as well as Professor Michael White from Nottingham Trent University. The parliamentary briefing emphasised the importance of protecting individual economic rights, strong collective associations and the spreading of decision-making powers across an economy to cultivating economic democracy in the wider sense. The Nordic countries tended to sore highest on the index with the US and UK relatively lowly ranked compared to other developed economies.

After the presentation, the stakeholder discussion provided the research team with an interesting set of questions in relation to the availability of datasets and potential future avenues to consider ensuring research robustness of the index as well as greater comprehensiveness of the data with the potential of leading to clearer picture of just how inequality impacts on democracy.

Professor Andrew Cumbers commented:

“The event provided a unique opportunity to gather together parliamentarians, government officials and key stakeholders to assess their interest in our emerging research area. There was clear support for this work at this event and I look forward to expanding the dataset with a view to rolling out the index and making it accessible to other researchers.”

Bob Doris MSP for the Mayhill and Springburn Constituency stated: –

I was happy to host this interesting and timely discussion into the invaluable work being carried out by the University of Glasgow. As the MSP for the Maryhill and Springburn constituency I represent one of the most deprived areas in Glasgow. Only too often I see constituents alienated from wider society due to inequalities which ultimately led on to disengagement from the democratic process. 

 While this research provides an insightful account of these issues, I look forward to welcoming Andy and his team back to the Scottish Parliament once their research has progressed further- this will then allow parliamentarians to better understand the fragility of democratic engagement of some in constituencies with more prevalent levels on inequality.

Jamie Hepburn, MSP, Minister for Employability and Skills pledged his interest in the research and emphasised his continued commitment to creating a fairer and more equitable society in Scotland. He stressed the importance of the issues raised in the seminar and said that he hoped that the research findings would be fed into the Scottish Government’s National Economic Strategy.

-ENDS-

Notes: –

For further information in relation to the presentation and blog please follow this link:

https://democratisingtheeconomy.com/2017/12/02/creating-the-democratic-economy/

For further details on the research project contact Professor Andy Cumbers at Andrew.Cumbers@glasgow.ac.uk

For media and public affairs related enquiries please email Gillian McCallum at democratisingtheeconomy@gmail.com or call 07581010391

Creating the Democratic Economy

How do we develop a democratic economy, which is underpinned by the values of social justice, rather than exchange value? For me, alongside tackling climate change, this is the critical economic question of our time. The alienation and marginalisation felt by many from three decades of increasingly autocratic neoliberal economic governance is becoming politically manifested in different ways but most worryingly through the resurgent economic nationalism of Brexit, Trump, Le Pen, Orban and others on the right.

A revitalised project for economic democracy

There is however a more hopeful and inspiring economic narrative emerging through the Sanders and Corbyn insurgencies on the left, as well as movements such as Podemos in Spain. In Scotland, this has been partly invoked by movements such as the Common Weal and the recent commitments by the Scottish Government to a new public bank and public ownership in the energy sector. Although, this new economic thinking is still nascent, it does build on important alternative and longer established new left traditions of a more participatory and democratic economics from the 1960s and 1970s.

Reanimating economic democracy for the twenty first century means coming to terms with a dramatically changing global economic context, characterised by growing inequalities and an increased concentration of wealth. Fundamental changes to the world of work include the emergence of the gig economy, the collapse of secure employment, and the decline of trade unions as a powerful countervailing force to capital.

Given these unpropitious circumstances, a revitalised project for economic democracy means moving beyond older forms centred upon the workplace and collective bargaining to develop a broader strategy for democratic participation across the economy more generally. Labour rights, unions and collective bargaining will still be important in the struggle for social justice, but a much greater remit is required to democratise the economy.

Developing new narratives around the economy

This is about developing new narratives around individual economic rights, public participation and deliberation of the economy itself.  In the first place, the alienation from neoliberal globalisation, which is fanning the flames of reactionary right wing economics, and the xenophobia promoted by Trump and his ilk, is partly driven by growing individual economic insecurity. This has been produced by disciplinary neoliberal labour policies around welfare, labour market deregulation, and flexibility for employers at the expense of precarity for workers. Official thinking for almost two decades at the international scale has eulogised the flexible labour market as the solution to the employment problem. Today, the most obvious outcome of this in the UK is the zero hours economy with the number of workers employed on these contracts rising from just over 100,000 to almost 1 million in the space of a decade. This is the ‘road to serfdom’ – not Hayek’s overweaning state – in the twenty first century.

Combating these developments in practical terms means rebalancing the labour market from employers to employees, but at a deeper level it requires new thinking and policy around how we generate individual economic freedoms.  Not the freedom to exercise property rights and exploit the labour of others – but freedom to choose how you exercise your own labour. This is an important, but long neglected, agenda for economic democracy, bringing together the enlightenment liberalism of John Stuart Mill with the radical political economy tradition. In this respect it is worth recalling that it was freedom from economic servitude that most animated Marx.

In an increasingly automated economy, where decent, secure and well-remunerated work becomes scarce, there is a need to rethink how individuals, families and communities secure the income and resources needed to live decent lives. This needs a fresh approach to how work is distributed, new initiatives around working time, and a rebalancing of work and leisure around the fundamental individual economic right to a decent sustainable livelihood.

A second key component of a revitalised economic democracy is the need to open up the economy, and in particular decision-making, to broader public participation and engagement. Here, one might compare favourably Denmark’s associational economy, where there is a high level of cooperative associations, strong trade unions and business associations with countries such as the UK or to a lesser extent US, where elite corporate interests dominate the economic discourse, often with the result that policy-making becomes very restrictive and tends to favour established vested interests (e.g. property owners, financial elites, media moguls).

Democratising the public sphere and decentring economic knowledge production

A more robust democracy requires a strong deliberative public sphere where economic ideas and narratives are not the preserve of elites but are the subject of debate, contestation and even conflict between competing groups. The contemporary global economy suffers a knowledge deficit in the sense that economic discourses – alongside wealth – have become appropriated and concentrated through elite interests and institutions. Faux consensuses over everything from trade policy, macroeconomics and the ownership of firms become established which fit the needs of these interests to the increasing detriment of much of the rest of the population.

Economic decision-making should be embedded within the democratic public realm as far as possible, rather than delegated to a remote class of technocratic experts who end up serving dominant vested interests. The triumph of a form of liberal capitalism globally – increasingly enshrined through the institutions of the Washington Consensus and supranational organisations like NAFTA and the EU – has not produced the much-trumpeted democracy or effective freedom of the individual, but instead over time has led to the effective suspension of democratic politics in many places: Greece and Italy for example in the wake of the Eurozone crisis.

If we accept that democracy is ultimately about offering competing alternative visions of society that are given effective voice in public debate, and individual economic rights to both flourish and participate in such public debates, the emergence of an austerity driven last gasp neoliberalism that ruthlessly represses, neutralises or incorporates alternatives to corporate capitalism is paving the way for the advance of the far right and economic nationalism, shading in to fascism, everywhere.

A more democratic economy would require greater investment in the development of popular education, engagement and participation of the citizenry in economic decision-making through institutional and organisational forms that both foster collective decision-making, but also the decentralisation and dispersal of economic knowledge and practice throughout the community. Collective learning institutions dedicated to the common good should replace elite institutions (such as the rent-seeking neoliberal university model) that appropriate knowledge and education for commercialised ends.

The appropriate question then becomes what kind of economic institutions would be needed to deal with these issues? Strong collective bargaining rights for workers and unions remains an essential element of a democratic economy but a citizen income would also be a good way to promote individual economic rights, set at a level that allows individuals the positive freedom to choose how they sell their labour. And democratic forms of public ownership are one important way to deal with the increasing capture of common wealth on behalf of the elite. The devolution of economic decision-making by the state and the increased use of participatory planning and budgeting for a are also essential ingredients. A functioning democratic economy would require a mix of planning and markets, with the emphasis in the latter on those that deal in use value rather than pure exchange value (e.g. farmers’ markets rather than stock markets). But it would require very different forms of social regulation and economic institutionsthan are currently on offer.

Andrew Cumbers, Professor of Regional Political Economy, University of Glasgow

December 2017

 

 

The strong relationship between economic democracy and income equality

Our recent work has focused upon the relationship between economic democracy and inequality across the OECD countries. A key finding – published in our recent policy brief (see figure above) – is that there is a “strong, negative and statistically significant correlation between the EDI (levels of economic democracy) and poverty and inequality measures. In other words, as EDI rises poverty rates and inequality fall. Furthermore our econometric analysis shows that there is “a strong predictive aspect of the EDI with regard to inequality.” In other words, high levels of economic democracy greatly contribute to reducing inequality. Although less statistically significant, we also find strong associations between high levels of economic democracy and countries with low rates of poverty.

 

Globalisation, Alienation and Economic Democracy

2017 begins with much hand-wringing and nervous anticipation of what the future portends for democracy, liberal values and even human rights. If 2016 brought Brexit, the election of Donald Trump and a backlash against cosmopolitan visions of a globalising and open economy and society, the fear is that further shocks are in store from the right wing populism of Geert Wilders in Holland and Marie Le Pen in France. A new and dangerous mood of intolerance, fear of the other and a more exclusionary, xenophobic politics and protectionist economics seems to be in the air.

When one drills down into the data and reasons behind the Brexit vote and Trump ascendancy, it is clear that a large proportion of those voting against the status quo are in large part voting against the alienation and marginalisation wrought by three and half decades of rampant economic globalisation. Old industrial areas in Europe and North America, where voters feel that their economic concerns about industrial closure, the flight of business to low wage countries overseas, and concerns about the job threats posed by immigrant workers, are ignored by a cosmopolitan elite that espouses free trade, labour market flexibility and deregulation. The loss of economic control and voice by many communities is leading to a rejection of the existing political order and a willingness to support populist ‘outsiders’ who successfully fashion simplistic yet ultimately flawed political and economic narratives.

Against this backdrop, there is much discussion and commentary about the perceived crisis of liberal political democracy, but a largely unconsidered element is the state of economic democracy. If it is the economically marginalised and alienated; old working classes in deindustrialised areas from South Wales, to Nord Pas de Calais, to Ohio and Michigan; that are voting for right wing anti-establishment populists, perhaps we should be asking more searching questions about the nature of the economy itself. How democratic is it? By which, we mean, how well dispersed is economic decision-making power and how much control and economic security do people have over their lives? After all, and particularly in a world of employment casualization, zero hours contracts, Uber and the Gig Economy access. to decent work and a sustainable family income remains the main fault-line between winners and losers from globalisation.

Rethinking economic democracy

When academics and activists use the term economic democracy, they usually have in mind levels of trade union influence in the economy and the extent of collective and cooperative ownership. These remain important indicators of how economic decision-making and control are spread or concentrated across an economy. In their work, (http://classonline.org.uk/pubs/item/the-importance-of-the-labour-movement-in-tackling-inequality) Richard Wilkinson and Kate Pickett have demonstrated the continuing importance of strong trade union movements, capable of pushing up the wages of the most disadvantaged, to tackling inequality. However, we wanted to establish a much broader set of measures to compare economic democracy across countries.

To this end, with funding from the Economic and Social Research Council, we have constructed an Economic Democracy Index across the OECD countries (Figure 1). The Index measures levels of economic democracy across 32 OECD countries, for the latest available data (2013), minus Turkey and Mexico for which there is too much missing data for an accurate assessment.

Figure 1 – Economic Democracy Index: results by country compiled from latest available data (2013)

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The Index is a composite of 4 different measures of economic democracy: “Workplace + Employment Rights”, which includes levels of employment protection and insecurity, employee participation and managerial attitudes; “Degree of Associational Economic Democracy” (the more conventional definition), involving levels of trade union organisation, employers organisation and collective ownership, (e.g. % of coops, credit unions); “Distribution of Economic Decision Making Powers”, a range of measures of the concentration of economic power (e.g. strength of financial sector, geographical concentration of government fiscal powers); and, “Transparency and Democratic Engagement in Macro-Economic Decision Making” (e.g. extent of different social partners in decision making; accountability and levels of corruption, central bank transparency).

For the richer developed economies, what is striking is the basic difference between a more ‘social’ model of northern European capitalism and the more market-driven Anglo-American model. The Index captures the continuing differences between the former, with their higher levels of social protection, employment rights and democratic participation in economic decision-making and the more deregulated, concentrated and less democratic economies of the English-speaking world. The US ranks particularly lowly with only Slovakia below it, but the UK too is only 25th out of 32.

The Index also highlights the comparatively poor levels of economic democracy in the ‘transition’ economies of Eastern Europe; the one very interesting exception being Slovenia which merits further study, and might reflect both its relatively stable transition from communism and the civil war in the former Yugoslavia, and the continuing presence of active civil society elements in the trade union and cooperative movements. Southern European economies also tend to rank below northern European countries, as does Japan.

Economic Democracy, Poverty and Inequality

An important set of issues relates to the rise of a more xenophobic politics and its relationship to changing levels of economic participation and empowerment. From a more normative perspective, how far might an agenda around a deepening of economic democracy address the concerns of those who feel they have been left behind by processes of global economic restructuring?

A striking finding from our research in this respect is the strong and statistically highly significant relationship (at the 99.9 per cent level between the Index and rates of poverty and inequality across countries (Figures 2 and 3). Countries that have high rates of economic democracy have lower levels of poverty and inequality. While other factors are also involved, these findings are striking and suggest for example that the attack on trade unions and policies of labour market flexibility (that reduce individual employment security and cut welfare benefits) advocated by the OECD itself until recently, and pursued most enthusiastically in the Anglosphere, may actually drive up poverty and inequality.

Figure 2 – EDI and Poverty Rate (log – full sample: – pre and post-crash)[1]

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Figure 3 – EDI and Inequality (Gini Coefficient) (log – full sample – pre and post-crash)

figer-3[1]Source: Poverty rate data from OECD (the ratio of the number of people who fall below the poverty line and the total population; the poverty line is here taken as half the median household income.). For the EDI, the data sources used were: European Association of Co-operative Banks data, European Values Survey, Fry et al. (2000) and Crowe and Meade (2008) Central Bank Transparency Index, ICTWSS database, ILOSTAT, IMF Statistics, OECD Statistics, World Values Survey, World Wealth and Income database, Worldwide Governance Indicators.

[2] Gini coefficient data from the World Bank. For the EDI, the data sources used were: European Association of Co-operative Banks data, European Values Survey, Fry et al. (2000) and Crowe and Meade (2008) Central Bank Transparency Index, ICTWSS database, ILOSTAT, IMF Statistics, OECD Statistics, World Values Survey, World Wealth and Income database, Worldwide Governance Indicators.

Countries with high levels of economic democracy such as Norway, Denmark and Iceland have much lower levels of poverty than countries such as the US and UK. While far right populism is on the march everywhere, including the Nordic countries, the greatest backlash against the global elite, as evidenced by Brexit and the Trump ascendancy and the more serious shift to the far right in Eastern Europe, is in those places with diminishing economic security and rights at work, lower collective voice by actors such as trade unions and cooperatives, and high concentration and centralisation of economic decision making in the hands of financial, political and corporate elites.

Andrew Cumbers

Susana Cabaco

Robert McMaster

Michael White

(Universities of Glasgow and Nottingham Trent)

3 March 2017

 

‘Constructing an Economic Democracy Index’ @ 2016 WES conference

Tomorrow we will be presenting at the 2016 Work, Employment and Society conference, this year at the University of Leeds – session: Global political economy, comparative analysis and the changing regulatory role of the state (15.00-16.30).

Our presentation  will focus on our theoretical framework and first empirical results. With this work, we expect to contribute to the research on the transparency and optransferirenness of economic policy-making and institutions, social and spatial diversity of economic governance and practice and, more crucially, the key public policy debates around public engagement and democratic accountability in economic decision-making.

Building community wealth and democratising the economy in the United States

By Thomas Hanna and Joe Guinan

For a glimpse of the future, look across the Atlantic to the United States. If the current direction of travel for Europe’s eroding social democracies continues, the end-point is increasingly clear: deepening economic inequality, social pain and fragmentation, political polarization and stalemate, and the rise of the carceral state.

U.S. data makes for grim reading. Real wages for around eighty per cent of American workers have been virtually flat for at least three decades.  The income share taken by the top one per cent has jumped from ten per cent in 1980 to more than twenty-two per cent today. Wealth is even more concentrated, with the top ten per cent now commanding over three quarters of the total. Together, the richest four hundred individuals now have more wealth than the bottom 186 million Americans combined.

In other words, for decades, virtually all the gains to the economy have been captured by the very rich. At the same time, for more than forty years there has been virtually no change in the percentage of Americans in poverty. If anything there is evidence of a worsening trend—from a historic low of 11.1 percent in 1973 to 14.8 percent in 2014 with the percentages for African Americans and Hispanic Americans almost double the national average at 26.2 and 23.6 percent, respectively.

Over the same period, the proportion of the population in federal and state prisons has more than quintupled, from 93 to almost 500 per hundred thousand (471 in 2014). The ratios for African American and Hispanic American men are even more outrageous (2,724 and 1,091 per 100,000 respectively). The United States now criminalizes more conduct than most other countries in the world.

Gender discrimination remains intractable with progress on narrowing the gender pay gap basically stalled for more than a decade. Health inequality is on the rise, with the life expectancy gap between rich and poor people born in 1950 up significantly over those born in 1920. The labor force participation rate has fallen steadily for the better part of two decades and is projected to decrease further. Union density, historically an important measure of countervailing power, has fallen from a post-war high of 34.7 per cent in 1954 to just 11.1 per cent in 2015 – and a mere 6.7 per cent in the private sector. These are the contours of long-term systemic crisis.

Just as with a decaying American liberalism, the writing is on the wall for residual social democracy. Europe’s increasingly deregulated, marketised, and privatised economies continue along their own neoliberal path of subordinating employment and social protection to goals of low inflation, debt reduction and increased competitiveness. There is however some good news that can be gleaned from recent American experience – if only we can see past social democratic stalemate to more radical political-economic strategies and solutions.

As U.S. federal and state fiscal transfers have been drying up, social pain has been intensifying in communities that have long suffered high levels of unemployment and poverty. Precisely because traditional liberal remedies such as large public expenditures for jobs and housing are politically stymied, more and more people have been turning to alternative approaches in which capital becomes more widely owned and controlled and new wealth is built collectively and from the bottom up.

The United States’ somewhat decentralised federal governance allows for a diversity of approaches at different levels of the system, and this is permitting a variety of different ownership forms to develop and even prosper. Economic democracy has begun to establish toeholds across a range of sectors and geographies.

In the conservative Midwestern state of Nebraska, for instance, every single resident and business receives electricity from one or another commonly-held provider among a constellation of 121 publicly-owned utilities, 10 co-operatives, and 30 public power districts – a legacy of the Populist and Socialist movements that swept across parts of the country in the late nineteenth and early twentieth centuries. Roughly 120 million Americans are members of one or another form of cooperative, and more than 10 million are employee-owners – mostly through Employee Stock Ownership Plans, or ESOPs.

Our own organisation, The Democracy Collaborative (TDC), was founded in 2000 as a research centre dedicated to studying and pursuing democratic renewal, civic participation, and community control and development in line with democracy_collaborativea long-term vision of creating a more just, equitable, and sustainable political economic system. Through our community wealth building approach – which seeks to build community-controlled, inclusive, and collaborative local economies – we have extensively documented and mapped the extent and spread of efforts that fall firmly within the framework of democratisation of the economy, usually from the bottom up. These include broad-based ownership strategies such as worker cooperatives, ESOPs, social enterprises run by non-profits and community development corporations, public/municipal enterprises, and community land trusts, as well as other intersecting strategies and institutions, including community development financial institutions, sustainable local small businesses, shifting the practices of large non-profit anchor institutions, and leveraging public funds (including pension funds).

In 2008, inspired in part by the Mondragón cooperatives in the Basque region of Spain, TDC joined with several organizations and institutions (including the city government) to launch the Evergreen Cooperative Initiative in Cleveland, Ohio – a city hard hit by deindustrialisation and population loss. The Evergreen Cooperatives are linked together with a community-building nonprofit corporation and a revolving fund designed to help create more such connected, community-building cooperative businesses as time goes on. These linked worker-owned companies include, at present, a large-scale ecologically-advanced laundry, a solar panel installation and weatherisation business, and a three-and-a-quarter-acre hydroponic greenhouse.

One component of this strategy is to use the city’s anchor institutions – including hospitals and Universities in Cleveland’s University Circle business district that purchase more than $3 billion a year in goods and services – to provide a long-term market for the new worker-owned cooperatives. These businesses provide living-wage jobs and the benefits of collective ownership to residents in the surrounding low-income communities. This in turn creates an ongoing stabilising effect on neighborhoods and on the local economy. The Cleveland Model has given rise to a similar effort in Preston, Lancashire, that has itself become a touchstone for Shadow Chancellor John McDonnell’s New Economics.

Currently, in addition to continuing to work in Cleveland, TDC is involved with a variety of on-the-ground economic democratisation efforts. Some of these include working with Native American communities – some of the most disenfranchised in the nation – in the Midwest and Pacific Northwest and a new effort designed to bring a wide variety of organisations and institutions together around the goal of increasing the number of worker-owners in the US economy from around 11 million to 50 million by 2050 – a goal that, if achieved, would represent a significant restructuring of the U.S. economy in a more democratised direction.

Simply expanding the number and scale of exiting alternative ownership forms, while exciting and necessary, is clearly insufficient in and of itself to bring about genuine economic democracy and systemic transformation. It must be accompanied by a focus on democratic participation, transparency, community engagement, environmental sustainability, and much more. To this end, in March of 2015 we launched the Next System Project (NSP), an ambitious multi-year initiative aimed at thinking boldly about what is required to deal with the systemic challenges – economic, political, social, and ecological – the United States faces now and in coming decades. Responding to real hunger for a new way forward, and building on innovative thinking and practical experience with new economic institutions and approaches being developed in communities across the country and around the world, the goal is to put the central idea of system change, and that there can be a “next system,” on the map.

Working with a broad group of researchers, theorists, and activists, and using the best research, understanding and strategic thinking and on-the-ground organising and development experience, NSP seeks to refine and publicize comprehensive alternatives and approaches that are different in fundamental ways from the failed systems of the past and present and capable of delivering superior social, economic, and ecological outcomes. By defining issues systemically, we believe we can begin to move the political conversation beyond current limits.

There are real alternatives. Arising from the unforgiving logic of dead ends, the steadily building array of promising new proposals and alternative institutions and experiments, together with an explosion of ideas and new activism, offer a powerful basis for hope. There is obviously still a great deal of hard work to be done, and there will doubtless be many setbacks along the way. But as we shrug off the legacy of dead ideas and connect to the new institutions and experiments emerging across the United States and around the world, it is becoming possible to believe, for the first time in a good while, that we may yet come to see the establishment of widespread economic democracy in our lifetimes.

 


Thomas Hanna is Director of Research at The Democracy Collaborative. Joe Guinan is a Senior Fellow at The Democracy Collaborative and Executive Director of the Next System Project. They are based in Washington, DC.

Participation and involvement in the workplace: contemporary trends in Europe

 

In a time of transformation of individual labour market trajectories and economic crisis, the debate about the capacity that workers have to influence their work and work organisation gains renewed attention. Work is very important both at the individual and social level as it potentially enables economic security, human development, socialisation and unleashes human potential and creativity. It should be “recognised as a matter of common interest, subject to public deliberation among participants presumed free and equal” (Lopes, 2015: 21). Employee participation can assume different forms, namely trade union representation through consultative committees and collective bargaining, workers assemblies and other mechanisms designed to provide channels for employee participation in organisational planning and decision. However, there is clear evidence that working life is deteriorating and labour market insecurity has been growing in many economies (Jaumotte et al., 2015; Eurofound, 2015a). In fact, according to the latest Eurobarometer on this topic, most respondents say working conditions in their country have deteriorated in the last 5 years (European Commission, 2014).

In the last decades, the process of economic globalization and neoliberal policies contributed to reconfigure labour market integration in many countries. These changes were accompanied by the contraction of welfare transfers due to the implementation of austerity policy packages in many countries. According to Sen (1999), some of these trends contributed to erode two crucial instrumental freedoms, indispensable to safeguarding decent working conditions: protective security and transparency guarantee. For example, Smith et al. (2008) compare two European cities (Bratislava and Krakow), examining the transformations of urban labour markets and observe the emergence of working poor (and the economic vulnerability they experience): “working poor are impelled to rely on more than capitalist labour processes, to engage in a diversity of income earning and livelihood activities with which to supplement earnings from primary employment” (2008: 306).

The calls for increased involvement and participation in the workplace derive from a growing emphasis on the need to ensure the protection of workers’ rights, as well as the recognition that corporate capitalism contributed to growing levels of inequality and neglected employee representation and voice (Dahl, 1985). In fact, a recent IMF discussion note alerts to the fact that weaker labour market institutions (like trade unions) can “limit workers’ influence on redistributive policies, thus contributing to the rise of net income inequality” (Jaumotte et al., 2015: 5). Historically, even across advanced economies, wages remain low and stagnant for many workers, a situation that further contributes to economic deprivation and inequality (wages in many cases lagged behind productivity growth). Low wages and growing inequality will not only affect social justice goals, but will also produce adverse economic effects.

In order to assess how workers view their capacity to influence their work organisation, we turn now to the results of the European Working Conditions Survey with the aim of analysing the variation on organisational participation across European countries (Figure 1). In this survey, almost 44000 workers were interviewed in the 27 EU member countries (at that time), plus Norway, Albania, Croatia, Kosovo, Montenegro, Turkey and the Former Yugoslav Republic of Macedonia. Figure 1 shows a mixed picture concerning the perceptions about the capacity to influence decisions in the workplace and being involved in improving the work organisation[1], with Northern European countries leading on both fronts[2].

Figure 1 – Organisational participation – able to influence and get involved in improving the work organisation

organisational involvement 1

According to the Eurofound report ‘Work organisation and employee involvement in Europe’ (2013) – based on the results of the European Working Conditions Survey (2010) – the role of trade unions should not be neglected: “the strength of trade unions would therefore appear to be an important factor underlying national differences in employee involvement over and above differences in the demographic composition of the workforce and economic structure” (2013: 43). Trade unions have played a significant role in the working lives of many, although presently their influence appears to be declining (accompanied by a downward trend in membership)[3]. In the case of the UK, Wright (2011) argues that “labour market fragmentation, the international integration of product markets and production systems, and a single employer model of employment law have combined to make it more difficult for unions to maintain a strong presence in the British workplace” (2011: 13).

Figure 2 – Prevalence of indirect employee participation by country

indirect employee participation 2

Besides direct methods of participation, there are indirect forms of employee representative engagement, as shown in Figure 2: limited participation (opportunities and channels for participation are scarce); resource-oriented (resources such as training and external funding for employee representatives is relatively high; however, the time available for employee representation duties is relatively limited); information-oriented (employee representative is extensively provided with high-quality information and time for representative duties); and extensive participation (the organisation provides the employee representative with resources – training, expertise and time – as well as information relevant to interest representation and bargaining) (Eurofound, 2015b). According to these data, employee representatives are best equipped in terms of information and resources in Czech Republic, Germany, Hungary, Austria, and the Netherlands.

It is important to note that the degree of involvement and participation is certainly different across activities and organisations, as well as the level at which employees (or their representatives) are involved in management decisions. Other factors affecting employee involvement range from the nature of employment regulation, ownership characteristics to the type of management. In Figure 3, the focus is on managerial practices: the survey questions asked respondents if their manager/ supervisor respected them as a person and if they were encouraged to participate in important decisions[4].

Figure 3 – Managerial practices: your manager/ supervisor respects you as a person; encourages you to participate

managerial practices 3

These two variables – your manager/ supervisor respects you as a person; encourages you to participate – give us an indication of the subjective feelings of the respondents regarding the managerial practices they experience at work. It is important to note the diversity across European countries, which is similar to Figure 1 – again, Northern European economies dominate on what concerns good managerial practices, with Greece, Poland, Italy, France and Turkey scoring lower on what concerns the encouragement employees receive to participate in important decisions.

Furthermore, Summers and Hyman (2005) review the literature on employee participation and company performance and conclude that a combination of participation incentives and welfare measures (such as equal opportunities and family-friendly policies) appear to have a positive effect on organisational performance and quality of working life.

As mentioned before, there are a number of reasons that might help explain these results and, more generally, the cross-country differences in economic and political institutions – e.g., the work of Esping-Andersen (1990), The Three Worlds of Welfare Capitalism, considers the relationship between labour markets and welfare regimes. In this work, it is argued that the welfare state is strongest where workers managed to mobilise to protect themselves against commodification. On the other hand, the literature on the varieties of capitalism is also useful to understand different types of industrial relations in ‘liberal market economies’- which include the U.K., U.S., Ireland, Canada – and ‘coordinated market economies’ – Austria, Germany, Sweden, Japan; this approach is actor-centred, with firms playing a central role in the capitalist economies. The differences between countries are understood in the context of formal and informal rules and it follows that “national political economies can be compared by reference to the way in which firms resolve the coordination problems they face” (Hall and Soskice, 2001: 8).

Overall, we believe it is important to further explore the causes of the differences observed at the national level but also to explore the degree and level at which employees participate in the organisational life, in order to better understand the impacts this has – both in contexts of high and low employee involvement – and the prospects for more participative and democratic workplaces.

 

References

Dahl, R. (1985). A Preface to Economic Democracy. Berkeley: University of California Press.

Esping-Andersen, G. (1990). The Three World of Welfare Capitalism. Cambridge: Polity Press.

Eurofound (2013). “Work organisation and employee involvement in Europe” report. Luxembourg: Publications Office of the European Union.

Eurofound (2015a). Developments in working life in Europe: EurWORK annual review 2014. Dublin: Eurofound, accessed online at http://www.eurofound.europa.eu/sites/default/files/ef_publication/field_ef_document/ef1551en.pdf.

Eurofound (2015b). Third European Company Survey – Direct and indirect employee participation. Luxembourg: Publications Office of the European Union, accessed online at http://www.eurofound.europa.eu/sites/default/files/ef_publication/field_ef_document/ef1545en_0.pdf.

European Foundation for the Improvement of Living and Working Conditions (2012). European Working Conditions Survey, 2010. [data collection]. UK Data Service. SN: 6971, http://dx.doi.org/10.5255/UKDA-SN-6971-1.

European Commission (2014). “Working conditions: new survey reveals deterioration and wide disparities in worker satisfaction”. Press release, accessed online at http://europa.eu/rapid/press-release_IP-14-467_en.htm.

Hall, P. and D. Soskice (2001).  Varieties of Capitalism. The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press.

Jaumotte, F. and C. Buitron (2015). “Inequality and labour market institutions”. IMF Staff Discussion Notes SDN 15/14, accessed online at https://www.imf.org/external/pubs/ft/sdn/2015/sdn1514.pdf.

Lopes, H. (2015). “The political and public dimension of work. Towards the democratisation of work”. Journal of Australian Political Economy, 76: 5-28.

Sen, A. (1999). “Global justice: beyond international equity”, in Inge Kaul, Isabelle Grunberg and Marc Stern (eds.), Global Public Goods: International Cooperation in the 21st Century”. New York: Oxford University Press.

Smith, A., Stenning, A., Rochovská, A. and Świa̧tek, D. (2008). “The Emergence of a Working Poor: Labour Markets, Neoliberalisation and Diverse Economies in Post-Socialist Cities”. Antipode, 40: 283–311.

Summers, J. and J. Hyman (2005). “Employee participation and company performance: a literature review”. Joseph Rowntree Foundation, accessed online at https://www.jrf.org.uk/report/employee-participation-and-company-performance-literature-review.

Visser, J. (2015). ICTWSS Database. Version 5.0. Amsterdam: Amsterdam Institute for Advanced Labour Studies AIAS.

Wright, C. “What role for trade unions in future workplace relations?” ACAS Future of Workplace Relations discussion paper series, accessed online at http://www.acas.org.uk/media/pdf/g/m/What_role_for_trade_unions_in_future_workplace_relations.pdf

[1] Pearson correlation: .574** (significant at 0.01 level).

[2] The high levels of involvement in Nordic countries are evident even when a wide range of factors relating to individual characteristics are controlled for.

[3] Trade unions, in the majority of advanced economies, have lost membership in recent decades, according to ICTWSS (2015) data.

[4] Pearson correlation: .273** (significant at 0.01 level).

 

 

 

Labour market insecurity and trade union membership: contemporary trends

According to the latest ILO report, World Employment and Social Outlook (2016), 1.5 billion people globally (approximately 46% of total employment) are in vulnerable employment, a situation that usually translates as, at best limited, or frequently non-existent social protection coverage, poor working conditions, and frequently volatile and relatively low earnings. The scale and intensity of the international financial crisis has been pointed out as one of the main factors driving the growth of precarious contracts, low-paid employment (and risk of poverty) and labour market insecurity. The existing evidence also shows that some groups are persistently more exposed to precarious jobs and more economic insecurity (see for example Blossfeld et al., 2005). Labour market insecurity encompasses not only the risk of unemployment and expected duration of unemployment, but also the existence (and level) of unemployment benefits (Hijzen and Menyhert, 2016).

In this context, the opportunities to achieve “decent and productive work, in conditions of freedom, equity, security and human dignity” (Sen, 2000: 120) seem to be under threat for many worldwide. Besides the unequivocal repercussions in terms of income uncertainty and labour market insecurity have impacts on many levels of individual welfare (for example, social relations and mental health), as well as social participation and engagement (and can even help explain political alienation (Verba et al., 1995). From our perspective, at a structural level, this contributes to create a more fragmented and less inclusive democratic economic system.

In its most recent Human Development Report (2015), the United Nations Development Programme focused on labour market insecurity; highlighting a number of serious consequences: the incapacity to earn a livelihood, exposure to hazardous working conditions and lack of adequate social protection.

Figure 1 – Labour market insecurity in OECD countries.

labour_market_insecurity

Captura de ecrã 2016-07-04, às 18.03.28

There are disturbing trends evident from labour market statistics in many advanced economies of OECD countries (see figure 1). During the period 2009-2013, the populations of several countries, in particular Greece and Spain, were heavily impacted by increases in labour market insecurity – Greece (18.07% in 2010 to 37.6% in 2012); Spain (18.16% in 2010 to 28.5% in 2012) –, in parallel with austerity policies that included large cuts in social protection. However, these trends are not common to all OECD countries. Notably, some northern European countries (e.g. Finland, Germany or Norway) did not experience analogous levels of labour market insecurity.

Figure 2 – Trade union density in OECD countries.

trade_union_density

Captura de ecrã 2016-07-04, às 18.04.42

Given this scenario, we believe it is important to focus on how membership of trade unions has been evolving in the past decades (figure 2). Reference to figure 2 reveals a mixed picture: despite the overall decrease in the average trade union density in OECD countries, the decline seems to be stabilising after the sharp decrease in the 1980s. However, there are some exceptions among these countries: Belgium, Chile, Norway and Spain.

It is also interesting to note that in the Southern European countries most affected by the Troika’s policy package there are different trends emerging on what concerns trade union membership: an increase in Spain (15.73% in 2007 to 17.47% in 2013); a decrease in Greece (24.51% in 2009 to 21.26 in 2012); and stability in Portugal (20.8% in 2007 and 20.54% in 2013). However, there are also important dimensions that are beyond the scope of this briefing note, namely the variations across economic sectors, individual and job characteristics and public/ private sector divide.

Figure 3 – Average levels of labour market insecurity and trade union density across OECD countries.

correlation

Captura de ecrã 2016-07-04, às 18.04.59

To conclude, we present a graph combining these two indicators for the period 2009-2013 (figure 3). It is fair to say that there appears to be two distinct groups according to the data: one group composed of countries with low average levels of labour market insecurity and relatively high levels of trade union membership (Belgium, Denmark, Finland, Iceland, Norway and Sweden) and a second group with countries with high levels of labour market insecurity and lower levels of trade union membership (Greece, Hungary, Italy, Poland, Portugal, Slovakia and Spain).

Overall, there is a negative correlation between the two indicators (-.284[1]), contrary to what could be initially expected, given the levels of labour market insecurity. It is crucial that we gain a better understanding of the reasons behind lower levels of trade union membership in countries with high labour market insecurity. In fact, a recent IMF Discussion Note shows compelling evidence of the negative consequences of the weakening of trade unions: “The erosion of labour market institutions is associated with the rise of income inequality […] the decline in unionization is related to the rise of top income shares and less redistribution” (Jaumotte and Buitron, 2015: 4). Different labour market histories and institutional arrangements in each country, alongside new types of integration in the labour market and weak trade unions might help explain why, in crisis-ridden economies many workers are not members of trade unions.

These trends also need to be integrated in broader analyses (labour market dynamics: temporary contracts, underemployment; legislation and rights; employee involvement and participation in the workplace; social partner organisations and employment protection, just to name a few), so that we gain a better understanding of labour market integration and security, as well as employee representation and the role of trade unions in a context of (prolonged) economic turbulence. We argue that this discussion is fundamental to both an understanding of the broader aspects of economic democracy as well as in tackling crucial public policy goals such as reducing inequalities and promoting greater economic resilience.

 

References:

Blossfeld, H., E. Klijzing, M. Mills and Karin Kurz (eds.) (2005) Globalization, uncertainty and youth in society. Abingdon: Routledge.

Eurofound (2015) Developments in working life in Europe: EurWORK annual review 2014. Dublin: Eurofound, accessed online at http://www.eurofound.europa.eu/sites/default/files/ef_publication/field_ef_document/ef1551en.pdf.

Hijzen, A. and B. Menyhert (2016) “Measuring labour market security and assessing its implications for individual well-being”, OECD Social, Employment and Migration Working Papers, No. 175. Paris: OECD, accessed online at http://www.oecd-ilibrary.org/docserver/download/5jm58qvzd6s4.pdf?expires=1461331448&id=id&accname=guest&checksum=AD10DA4A3E0761510C3E20CE7AD9BBD6.

International Labour Organization (2016) World Employment Social Outlook 2016. Geneva: International Labour Office, accessed online at http://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_443480.pdf.

Jaumotte, F. and C. Buitron (2015), “Inequality and labour market institutions”. IMF Staff Discussion Notes SDN 15/14, accessed online at https://www.imf.org/external/pubs/ft/sdn/2015/sdn1514.pdf.

Sen, A. (2000) “Work and rights”. International Labour Review 139(2), 119-128.

United Nations Development Programme (2015) Human Development Report 2015. Work for Human Development. New York: UNDP, accessed online at http://hdr.undp.org/sites/default/files/2015_human_development_report.pdf.

Verba, S., K. Schlozman and H. Brady (1995) Voice and Equality: Civic Voluntarism in American Politics. Cambridge, MA: Harvard University Press.

[1] Statistically significant (p<.01).

Reclaiming Public Ownership

In this video, Andrew Cumbers discusses the political arguments and neoliberal narrative used to criticise nationalisations and to discard, more generally, public ownership in favour of privatisation policies (that did not deliver on their promises). In his book ‘Reclaiming Public Ownership’, Cumbers advances an alternative conception of public ownership, one that encapsulates a more pluralistic and accountable form of collective ownership. In a context of growing levels of concentration of economic power in the global economy we believe it is crucial to discuss alternative forms of ownership and control of the economy, that enhance democratic accountability and public engagement.

Video courtesy of We Own it https://weownit.org.uk