Introduction to Employment Relation

5TH EDITION
INTERNATIONAL
& COMPARATIVE
EMPLOYMENT RELATIONS
Globalisation and change
Edited by Greg J Bamber,
Russell D Lansbury and Nick Wailes
© Allen & Unwin, 2011. These slides are support material for International and Comparative Employment Relations 5th edition. Lecturers using the
book as a set text may freely use these slides in class, and may distribute them to students in their course only. These slides may not be posted on
any university library sites, electronic learning platforms or other channels accessible to other courses, the university at large or the general public.
CHAPTER 1
International and comparative employment relations:
An introduction
Nick Wailes, Greg J. Bamber and Russell D. Lansbury

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Chapter 1:
Introduction
International & Comparative
Employment Relations 5th edition
Russell D Lansbury & Nick Wailes
Copyright Allen & Unwin, 2011
Lecture outline
• International and Comparative Employment Relations
– Definitions
– Objectives of the field of study
– Research challenges
• Theories of convergence and divergence in employment relations systems
• Views on the impact of globalisation and employment relations (ER)
• The Varieties of Capitalism (VoC) approach
– Main features of the approach
– Applying the VoC approach to ER
– VoC, globalisation, and the convergence/divergence debate
– Limitations of the approach
• Transnational employment relations
– Capital and labour as transnational actors
• International labour organisations
• International employer organisations
• Multinational corporations (MNCs)
– Transnational regulatory bodies
• International Labour Organization (ILO)
• World Trade Organization (WTO)

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Chapter 1:
Introduction
What is ‘employment relations’?
• Employment relations (ER) can be seen as encompassing the
study of all aspects of people at work.
• It is concerned with the relationship between employers and
employees and their interaction at the workplace.
• It is also concerned with employers’ and employees’
representative bodies, such as trade unions and employer
associations, and with how they interact at the workplace,
industry, national and international levels.
• It encompasses both industrial relations and human resource
management.

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Introduction
Industrial relations and human
resource management
• Industrial relations (IR) traditionally focuses on
formal and informal institutions of job regulation.
• Human resources management (HRM) focuses on
the level of the individual organisation and is
concerned with issues such as recruitment, selection,
pay, performance and human resource development.

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Key elements of industrial relations
• The Parties include:
– Employers
– Employees
– Unions and professional associations
– Government and state agencies
• The Processes include:
– Collective bargaining between unions and employers or employer associations
– Industrial disputes and dispute resolution mechanisms
– Employee participation at the workplace
• The Outcomes include:
– A collective agreement between employees (and their unions) and employers
(and their associations)
– A decision by a tribunal or conciliation committee that resolves a dispute
– An agreement between employees and an employer on an issue at the workplace

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Chapter 1:
Introduction
What is international and comparative ER?
• International ER
– Transnational: institutions and phenomena which cross
national boundaries, e.g. multinational corporations
(MNCs); international labour movement; European Union;
International Labour Organization (ILO)
– Foreign: studying employment relations systems in other
countries
• Comparative ER
– A systematic method of investigating ER in two or more
countries which is analytic rather than descriptive

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Chapter 1:
Introduction
Objectives of international and comparative
ER as a field of study
• To learn about ER in different countries
• To provide insights into our own system of ER
• To develop theories and explanations for different
patterns of ER
• To guide policy-making by learning from successful
ER systems

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Chapter 1:
Introduction
Challenges in comparative ER research
• There are important international differences in ER
– The meanings and significance of key ER terms differ across countries
(e.g. differences in the nature and role of unions)
– Data is collected in different ways (e.g. differences in how industrial
disputes are defined, categorised and how their incidence is recorded)
• Therefore, effective comparisons require detailed
understanding of each national context
• Researchers choose a comparative research design:
– Most similar cases: two or more countries that are similar in as many
respects as possible except for phenomenon under study
– Most different cases: two or more countries that differ in almost every
respect except the phenomenon under examination

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Chapter 1:
Introduction
Convergence and divergence in
national patterns of ER
• One of the most enduring debates in
international comparative ER is:
– whether national patterns of ER are converging (becoming
more similar)
– whether they are diverging (becoming more different)
– whether a more complex pattern of convergence and
divergence is taking place

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Introduction
Convergence theories of comparative ER
• Convergence theories assume that there are common
pressures across societies to adopt a particular (‘best
practice’) ER system
• Original convergence thesis was developed by Kerr et al. in
Industrialism and Industrial Man (1960)
– Logic of Industrialism: industrialisation creates pressures across societies to
adopt a certain, American-style ER system.
– Critique of this argument: technological determinism; American perspective
– Later revised by Clark Kerr: convergence as a tendency among democratic
industrialised societies
• Dore (1973) suggested convergence may be towards the
Japanese ER model rather than an American one. He argued
that countries which industrialised at later stages were able to
develop ER institutions that are well suited to industrialisation

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Chapter 1:
Introduction
Divergence or partial convergence theories
• Comparative ER research has found that:
– Some country differences persist and some even increase
– But overall there may be convergence towards 2 or more
patterns of ER
– Some aspects of ER are converging while others are
diverging
– Common trends don’t necessarily result in common
outcomes
– There is increasing variation in ER practices within
countries

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Chapter 1:
Introduction
Globalisation
• Globalisation is used to characterise changes in the
international economy
• It normally refers to growing interconnectedness of the
international economy
• It is associated with growth in:
– Cross-national trade
– Foreign direct investment (FDI)
– Growth in international financial transactions
• It is argued that globalisation has created a common set of
economic pressures across all markets (products and factors)
which may impact on ER

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Chapter 1:
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Globalisation and ER
Two views on how globalisation impacts on employment
relations:
1. Simple globalisation approach
– economic pressures associated with globalisation will result in a convergence
of employment relations policies and practices
• “race to the bottom” in terms of wages and labour standards as mobile capital
seeks lowest labour costs
• governments lose autonomy in policy making and can no longer guarantee labour
rights
• Instead, legislation to accelerate decentralisation and deregulation of the labour
market and to attract capital investment
2. Institutionalist approach
– Despite common economic pressures associated with globalisation, diversity
in national patterns of ER will persist
• existing ER institutions mediate and filter those pressures, and will do so
differently in different countries

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Chapter 1:
Introduction
The Varieties of Capitalism approach
• Main features of the approach
• Applying the VoC approach to ER
• VoC, globalisation, and the
convergence/divergence debate
• Limitations of the approach

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Chapter 1:
Introduction
Main features of VoC 1
• There are two ideal-typical forms of capitalism
– Liberal market economies (LMEs)
– Coordinated market economies (CMEs)
• Each of these forms of capitalism include a set of
‘complementary’ institutions that form the basis of a
country’s economic competitiveness and lead to good
economic outcomes
• The firm is at the centre of their analysis
• In order to develop, produce and distribute goods and
services profitably, a firm must effectively coordinate with a
wide range of actors e.g. investors, employees, unions, the
state, suppliers, buyers.

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Main features 2
• A firm must coordinate with other actors in 5 spheres:
– Industrial relations
– Vocational training and education
– Corporate governance
– Inter-firm relations
– Relations with its own employees
• The relations with actors in these spheres are problematic
• Firms can resolve coordination problems
– Internally within the firm (hierarchies)
– Externally (market or non-market institutions)

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Chapter 1:
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Main features 3
• National institutions shape how firms resolve these
coordination problems
– In LMEs, firms resolve coordination problems mainly through hierarchies
and markets – i.e. arm’s length relations and high levels of competition
– In CMEs, firms resolve coordination problems not only through
hierarchies and markets but also through non-market institutions – i.e.
strategic interaction
• Both these solutions to coordination problems form
institutional equilibria which have comparative advantage
– In LMEs, the comparative advantage arises from the flexibility of these
coordination arrangements
– In CMEs, the comparative advantage arises from cooperative behaviour
among actors, based on information exchange, monitoring and
sanctioning of defections

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Chapter 1:
Introduction
Liberal market economies
• Classic example: United States
– Corporate governance: outsider shareholder dominated;
performance represented by current earnings and share
prices; management agency controlled by shareholder exit
– Employee relations: short term, market relations between
employee and employer; top management has unilateral
control of the firm
– Industrial relations: employer organisations and unions
relatively weak; decentralised wage setting; insecure
employment (hire and fire; fluid labour markets)
– Vocational training/ education: vocational education offered
on market; labour force has high general skills
– Inter-firm relations: market relations, competition; use of
formal contracting and subcontracting relationships.

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Chapter 1:
Introduction
Coordinated market economies
• Classic example: Germany
– Corporate governance: long-term bank-dominated insider
systems; cross-directorships; cross-shareholding; management
agency controlled through ‘network reputational monitoring’
– Employee relations: long term, formalised participation of
employees; consensus decision-making with management
– Industrial relations: trade unions and employers organised;
industry-wide collective bargaining and pay determination;
employment relatively secure
– Vocational training: elaborate industry-based training schemes;
labour force has high industry-specific and firm-specific skills
– Inter-firm relations: development of collaborative networks;
cooperation among firms in diffusing technologies

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Chapter 1:
Introduction
Institutional complementarity
• Complementarity occurs where the presence of one institution enhances
the returns from another institution
• In this way comparative advantage arises from the ‘bundling’ of
complementary institutions
• Hence, countries cluster around bundles of complementary institutions –
two distinct clusters are LMEs and CMEs
• This important departure from comparative IR studies which sought to link
single features (e.g. collective bargaining structure) with economic
performance
• The effect of single institutions may be misleading as performance may
arise from a constellation of institutional arrangements
• Implications for ‘bolt on’ policy responses
• Comparative institutional advantage: the institutional frameworks (either
LME or CME) provide nations with comparative advantages in performing
certain activities and producing certain kinds of goods and services

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Chapter 1:
Introduction
Applying the VoC approach to ER
• ER concerns are a central feature of the VoC model (e.g.
collective bargaining, unions and employer associations,
skill development, relations with employees at the
workplace)
• VoC approach places ER in a broader political economy
context
• Focus on institutional complementarity overcomes
tendency to treat ER institutions in isolation
• VoC approach brings firms and employers into the
centre of analysis

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Chapter 1:
Introduction
VoC, globalisation, and the
convergence/divergence debate
• VoC approach emphasises the importance of institutions
(‘institutions matter’)
• Different sets of institutions will mediate and refract the
pressures associated with globalisation in different ways
• Regarding ER:
– in LMEs, we can expect deregulation and a ‘race to the bottom’ as
outlined in the ‘simple globalisation approach’
– in CMEs, we can expect firms and workers to resist deregulation as
that threatens comparative institutional advantages
• This results in a bifurcated response to globalisation;
globalisation will have a different impact on IR in LMEs than in
CMEs

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Chapter 1:
Introduction
Limitations of VoC approach
There is a large literature criticising the VoC approach, in part
because it has been so influential.
1. Not enough variety
– LME/ CME distinction doesn’t capture all of the diversity of market economies
(several OECD countries that don’t fit)
2. Ignores differences within varieties
– Especially among CMEs
3. Static and Determinist
– Compares two countries at the same point of time
– Only 2 varieties of capitalism are viable; change to other category is impossible
– Makes it difficult to explain change
– Downplays role of agency, conflict, power, politics
4. Downplays or ignores international factors
– Neglects linkages between nation states

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Chapter 1:
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International industrial relations
• Capital and labour as transnational actors
– International labour organisations
– International employer organisations
– Multinational companies MNCs
• Transnational regulatory bodies
– International Labour Organization ILO
– World Trade Organization WTO

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Chapter 1:
Introduction
Labour internationalism
• Labour as a passive victim of globalisation or
as a global actor?
• International union confederations
– Global confederations e.g. International Trade Union Confederation ITUC (was
ICFTU)
– Regional confederations e.g. European Trade Union Confederation ETUC
– Global union federations which link together national unions from a particular
trade or industry e.g. International Metalworkers’ Federation IMF
• European works councils

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Chapter 1:
Introduction
Activities of international union organisations
• Representational activities at ILO and other
international forums
• Services to member unions, especially in less
developed and newly industrialising countries
• Information sharing
• International campaigns
• International Framework Agreements IFAs on
minimum labour standards between global union
federations and MNCs

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Chapter 1:
Introduction
Employers – international dimensions
• International Employers’ Associations, e.g.
– International Organisation of Employers IOE represents employers at
ILO
– BUSINESSEUROPE (formerly Union of Industrial and Employers'
Confederations of Europe UNICE) represents employers in EU
institutions
• Multinational companies
– Country of origin/home country effect and host country effect shape
ER practices in subsidiaries
– Current questions about ER in MNCs:
• Do ER practices of MNCs spill over into other (local) companies in the
industry?
• Is there any reverse diffusion, i.e. transfer of ER practices from foreign
subsidiaries to the headquarters of MNCs?

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Chapter 1:
Introduction
The International Labour Organization (ILO)
• Established in 1919 in association with the League of Nations
• In 1946 became first UN agency
• Has a unique tripartite structure - government, employers and
union representatives
• Key contribution is a series of Conventions and
Recommendations which set international labour standards
• Major source of international labour law: 181 conventions,
188 recommendations
• Important role in technical advice and assistance to less
developed countries (LDCs) and newly industrialising
economies (NIEs)

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Chapter 1:
Introduction Copyright Allen & Unwin, 2011
International Core Labour Standards
Source: Hughes, S (2005) ‘The International Labour
Organisation’, New Political Economy, 10 (3): 413-
425.
Ratification of conventions by
member states of the ILO
create binding obligations to
put their provision into effect
(181 conventions ratified so
far).

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Chapter 1:
Introduction
Criticisms of the ILO
• Bureaucratic structures and procedures which are resistant to
reform
• Inadequate monitoring of compliance and ‘policing’ of
conventions
• The tripartite model of governance of the ILO is outdated and
impotent.
• The governing body of the ILO is dominated by the advanced
industrialised economies although less developed economies
comprise the majority of ILO members
• It has lower status and is weaker than many other
international bodies, e.g. WTO and the World Bank (which are
competing with the ILO is some areas)

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Chapter 1:
Introduction
Proposals for reform of the ILO
• The adoption of more innovative and pragmatic
approaches to issues (e.g. the current campaign for
‘Decent Work’)
• Focus on fewer issues on which it can have a major
impact
• Build stronger linkages with other international
bodies e.g. non-governmental organisations (NGOs)
• Place more emphasis on technical assistance to the
less developed economies
• Provide for greater representation of third world
countries on the governing body of the ILO

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Chapter 1:
Introduction
World Trade Organization
• Established 1996
• United Nations agency
• Aim is to promote free trade and provide
mechanisms for the resolution of trade
disputes
• There was debate around whether labour
standards should be included in the rules of
the WTO – not included

© Allen & Unwin, 2011. These slides are support material for International and Comparative Employment Relations 5th edition. Lecturers using the
book as a set text may freely use these slides in class, and may distribute them to students in their course only. These slides may not be posted on
any university library sites, electronic learning platforms or other channels accessible to other courses, the university at large or the general public.
Conclusion
• Globalisation is having a profound influence on the
way that work is regulated.
• Studying internationally comparative employment
relations allows us to develop an understanding of
our own and other employment relations systems.
• The Varieties of Capitalism approach is a useful
framework for studying internationally comparative
employment relations. It allows us to study
employment relations within a broader institutional
context.

Introduction to Employment Relation

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