The Role of Unions in the Twenty-first Century : A Report for the Fondazione Rodolfo Debenedetti

## Abstract Current theories of unions are mainly theories of what unions were and did rather than theories of what unions will be and will do. Thus, the purpose of this book is to help make economic thinking about unions in Europe more forward‐looking and to discuss the role that unions are likely to play in the changed economic environment of the new century. The volume consists of two reports that are the results of coordinated efforts by some of the most authoritative scholars in the field. The first study addresses a number of issues related to the question of how the primary role of trade unions—collective bargaining over wages and work conditions—is likely to evolve in the early decades of the new millennium. Starting from the widespread impression of a trend toward weakening union power, the main aspects considered by the analysis are membership, wage effects, organization and presence of unions, bargaining structure, macroeconomic performance, future scenarios, and strategies. The second study investigates the interactions between trade unions, welfare systems, and welfare reforms. The overall theme is the policy dilemma created by the many different activities of trade unions in the field of welfare provision, notably pension policies and unemployment protection. Throughout the analysis, a tension emerges between the role of unions as voice of atomistic agents and insurance providers—that may contribute to increasing aggregate welfare by remedying market failures—and as rent‐seeking monopolist, underlying the intergenerational conflicts present within unions. The studies point to measures and strategies enhancing this second efficient role of the unions that draws mainly on their capacity to internalize to the employer–employee relationships costs that would otherwise fall on society at large. Contents......Page 14 List of Cotributors......Page 17 Part I. The Future of Collective Bargaining in Europe......Page 18 1. Introduction......Page 20 2. Union Membership......Page 28 2.1. Membership trends in the twentieth century: increased cross-national variation......Page 29 2.2. Union membership decline......Page 31 2.3. Why join a trade union?......Page 34 2.4. Cyclical explanations of union membership developments......Page 36 2.5. Structural explanations......Page 41 2.6. Institutional explanations......Page 49 2.7. Centralization and unionization......Page 51 2.8. Some additional empirical evidence on union membership......Page 53 2.9. New organizing strategies......Page 59 2.10. Conclusions......Page 62 3.1. Review of literature on union wage effects: theory and evidence......Page 64 3.2. The impact of trade, integration, and FDI in Europe on union bargaining power......Page 73 3.3. Conclusions......Page 76 4.1. What else do European unions do?......Page 78 4.2. How do they do it?......Page 87 4.3. The future of union presence......Page 100 4.4. Conclusions......Page 102 5.1. The conventional wisdom......Page 103 5.2. The interaction between bargaining structure and economic policy......Page 115 5.3. Bargaining structure and macroeconomic shocks......Page 121 5.4. Bargaining structure and the EMU......Page 126 5.5. Conclusions......Page 129 6.1. Prospects for union membership......Page 132 6.2. Four scenarios for collective bargaining in the future......Page 135 6.3. Possible union strategies......Page 149 Villy Bergström......Page 152 Robert Flanagan......Page 155 References......Page 160 Part II. What do Unions do to the Welfare States?......Page 174 1. Introduction......Page 176 2. Unions' Involvement in the Welfare State......Page 180 2.1. Unions and the welfare state development......Page 181 2.2. Unions and membership structure......Page 189 2.3. Unions as a political movement......Page 192 2.4. Unions and social insurance administration......Page 194 2.5. Unions and occupational welfare......Page 198 2.6. Institutional and political veto points......Page 200 3.1. What unions do to pensions: economic theory......Page 204 3.2. The importance of institutional setting......Page 212 3.3. What unions do in practice: empirical evidence on unions and pensions......Page 214 4. Learning from Welfare Reforms: The Case of Public Pensions......Page 228 4.1. Long-term and short-term reform pressures on pay-as-you-go systems......Page 232 4.2. Tax financing or payroll contributions?......Page 234 4.3. Reversing early retirement......Page 237 4.4. How to calculate benefits fairly......Page 240 4.5. Privatization by mandated or voluntary occupational pensions?......Page 242 4.6. Towards more funded private pension systems......Page 245 4.7. Unilateral or negotiated reforms?......Page 247 5.1. Unemployment insurance and the demand for union membership......Page 251 5.2. Unemployment insurance, wage bargaining, and unemployment......Page 255 5.3. How do unions influence unemployment insurance policies?......Page 258 5.4. Unemployment insurance reforms......Page 261 5.5. How could a Ghent system help other European countries?......Page 264 6.1. Do unions interact with the welfare state? How do they do it?......Page 265 6.2. What explains union policies towards welfare outcomes?......Page 267 6.3. Which institutional structure best increases union welfare-enhancing activities relative to rent-seeking activities?......Page 268 6.4. Can unions contribute to a reform of welfare systems?......Page 269 A1. A model of trade unions and long-term benefits......Page 271 A2. Bargaining......Page 281 A3. Political economy considerations within the union......Page 282 A4. Endogenous membership......Page 290 A5. Proofs......Page 292 Gilles Saint-Paul......Page 295 Michele Salvati......Page 298 References......Page 303 Olivier Blanchard......Page 309 Stephen Nickell......Page 313 C......Page 316 F......Page 317 L......Page 318 P......Page 319 U......Page 320 Z......Page 321 In this book, first-rate international scholars in the field explore the role that unions are likely to play in the changed economic environment of the new century. Questions discussed include: What will unions look like in the years to come? Which kind of interest groups will they represent? How important will be the broader political role of unions? To what extent do unions care about future generations? Part One documents a tendency towards greater decentralization in collective bargaining and declining union membership rates in most European countries. The process of decentralization may only be partly reversed by social pacts of the type that occurred in several EU countries in the run-up to EMU. Yet this type of co-ordination is likely to be increasingly unstable in a context where membership is falling, hence will inevitably require government intervention. Not all governments may wish to intervene in wage setting, however, as there are strong reasons to believe that such intervention could impose wage rigidities in some parts of the economy and lead to non-enforcement in other parts. Moreover, under EMU what matters is ultimately co-ordination of bargaining at the pan-European level rather than simply at the national level. Such higher-level, transnational co-ordination is not likely to occur for a long time to come because of the huge costs that it involves. Some transnational co-ordination may occur within multinational firms, however, as costs are likely to be much lower at this level. Part Two characterizes the intergenerational conflicts present within unions. Unions may be able to better respond to the needs of the unemployed without losing the support of current employees when they become involved in the running of unemployment benefit systems, as has been the case in those countries applying the so-called Ghent system. They may also succeed in making the system more efficient by, for example, contributing to the reduction of moral hazard problems associated with the provision of unemployment insurance. Unions are, however, unlikely to solve the latent conflict between their younger and older members in a context where the population is ageing, since they tend to preserve the status quo when it comes to cutting pension benefits in order to deal with demographic transition. The cost of these dynamic inefficiencies may be accepted by younger generations as long as an intergenerational contract can be enforced whereby unions guarantee that the status quo will be preserved, and are credible in their commitment. Unions could play a key role in this implicit intergenerational pact because they are long-lived agents---certainly longer-lived than many governments---but, under present conditions, this pact may be no longer credible. Pt. I. The Future Of Collective Bargaining In Europe / Lars Calmfors, Alison Booth And Michael Burda / [and Others]. Union Membership. Wage Bargaining, Union Power, And Economic Integration. Wider Dimensions Of Unions' Presence. Bargaining Structure And Macroeconomic Performance. The Future Prospects For Trade Unions In Europe. Comments / Villy Bergstrom -- Comments / Robert Flanagan -- Pt. Ii. What Do Unions Do To The Welfare States? / Agar Brugiavini, Bernhard Ebbinghaus And Richard Freeman / [et Al.]. Unions' Involvement In The Welfare State. Unions And Pensions: Theory, Evidence, And Implications. Learning From Welfare Reforms: The Case Of Public Pensions. Unions And Unemployment Insurance. Conclusions. Edited By Tito Boeri, Agar Brugiavini, Lars Calmfors, With Alison Booth ... [et Al.]. Includes Bibliographical References And Index. This book, which includes contributions from first-rate international scholars in the field, discusses the role that unions are likely to play in the changed economic environment of the new century. Questions discussed include: What will unions look like in the years to come? Which kind of interest groups will they represent? How important will be the broader political role of unions? To what extent do unions care about future generations? Focusing on the role and functions of trade unions, this collection of essays by a team of international scholars looks to the future and explores their broader political and social remits and responsibilities. Comprises two reports which discuss the role that unions are likely to play in the changed economic environment of the next century