Indusrial relations and the management of flexibility

Labour flexibility has been heralded as ‘the way forward’ in the response to the challenges of the global economy in general and the European Union (EU) in particular (Baglioni, 1990; Casey et al, 1997). However, the EU comprises member states with different societies, institutional structures, cultural traditions and historical contexts, that give rise to both similarities and differences in their respective approaches (Cousins, 1999; Ferner and Hyman, 1998). Thus to facilitate the identification of patterns, the focus is upon two member states: Austria and Sweden.

Following a discussion on the interpretation of ‘flexibility’ as it shall be used throughout this paper, two groups of theoretical issues concerning industrial relations (IR) are introduced to assist comparative analysis. The current context of each state in terms of current flexibility trajectories and key economic and labour market indicators is then examined, followed by an exposition of Dunlop’s (1958, 1993 update) systems framework to explore the interactions giving rise to these outcomes. Finally, it will be argued that the fundamental relations between capital and labour is the bedrock from which flexibility trajectories are launched.

Defining Flexible Labour

Labour flexibility is a value-laden term, especially when linked to phrases such a ‘improved economic growth’ (Casey et al, 1997). Its synonyms have few negative connotations: adaptability, responsiveness, adjustability and so on, and is invariably described as ‘a good thing’. The wealth of literature on labour flexibility suggests it can be defined in many different ways (Boyer, 1988).

Four sources of labour flexibility can be identified (Blyton and Morris, 1992):

1. Functional or task – internal flexibility in labour deployment across tasks through job design, and adaptability by multiskilling through training and development;

2. Numerical – external flexibility in the supply of labour, achieved through ‘atypical’ working, policies of ‘hire and fire’ and subcontracting;

3. Temporal – flexibility in labour deployment through the variation in patterns of working hours: decoupling working hours from operating hours;

4. Financial – flexibility in labour costs through variable and contingent reward systems.

Aspects of temporal and financial flexibility appear to be achieving greater prominence across western economies, while the general focus of the debate has tended to rest upon the development of increased functional and numerical flexibility. These two approaches have been characterised as ‘offensive’ versus ‘defensive’ (Boyer, 1988), with the key distinction being made between dual systems of ‘permanent’ and ‘contingent’ labour (Cousins, 1999). Temporal and financial flexibility may be associated with either.

However, in distinguishing two broad ‘ideal’ types of labour flexibility, the influence of capital-labour relations has been ignored. Consequently, a brief theoretical discussion follows to highlight how the relationship between capital and labour may (pre)determine approaches to the management of flexibility .

Industrial Relations – a theoretical perspective

The comparative study of IR and its effect upon particular strategies of flexibility raises two groups of theoretical issues. These can be grouped into issues raised by the institutionalist approach and those concerning the relationship between capitalism and the state.

Institutional theory (Ross and Hartman, 1960) argues that industrial conflict generates the institutions of its own regulation. Thus it is hypothesised that open conflict declines as institutionalisation develops. There have been four broad challenges to this model based on critiques of pluralism (see Fox, 1973; Goldthorpe, 1974; Hyman, 1972). First, power relations between the primary parties are assumed to be equal thus legitimising fundamental inequalities. Second, the state is assumed to be neutral, when one of its primary functions is the maintenance of the capitalist system. Third, by marginalising conflict, fundamental ideological issues are ignored. Finally, fourth, open conflict has not declined.

With regard to the relationship between capitalism and the state, there are two pertinent perspectives: corporatism and labour movement theory. Theories of corporatism rest on the notion that the increasing organisation of capital (eg: conditions of monopoly and oligopoly) leads to a decline in the efficiency of market mechanisms (Schmitter, 1974). As the state acquires additional functions to compensate, interest organisations become increasingly concerned to influence its machinations. Increased economic conflict (or military conflict) pressurises the state and interest groups to co-operate in the national interest. It is hypothesised that ‘industrial peace’ is a result of the integration of labour into the capitalist state. This approach has been challenged from apparently radical perspectives (see, for example, Pontusson, 1984). It is countered that institutions used to control labour come to represent labour, which will ultimately lead to ‘rationality crises’ that endanger the capitalist economy.

Theories of Labour Movement centre on the notion that industrial rationalisation and concentration speeds up the maturation of capital and paves the way for socialism. (Lewin, 1975; Scase, 1976). Planning is seen as a more effective method of extending public control, enabling the state to gradually assume the the functions of capital until capital itself is functionless. Progression is thus achieved from political, through social, to economic democracy, legitimising collective ownership in terms of the democratisation of society. It is hypothesised that ‘industrial peace’ is the result of labour acquiring political control of the state apparatus to advance its own interests. This approach, as above, is not without criticism (see Gamble and Walton, 1976). First, it is countered that the state is ultimately dependent upon the international capitalist system which constrains its instrumentality. Second, it assumes that the conflict can be overcome between the labour movement’s political dependence upon labour and its economic dependence upon capitalism.

Austria and Sweden in Context

Austria and Sweden are industrial societies of similar size, with strong labour movements and similar patterns of IR, though their differences have been accentuated in recent years. The table overleaf lists some key economic and employment indicators.

Austria is one of the smallest states in the EU. In 1998, it had a population of just over eight million, including a total labour force of just over five million, of which approximately four million were in employment (Employment in Europe, 1999). A key element of the relatively high employment and low unemployment, is the traditional consensus approach of the social partners, smoothing out business cycle effects (European Economy, 1998).