How can competitiveness be achieved in post-crisis Europe: deregulating employment relations or enhancing high performance work practices?

Abstract

The recent Eurozone crisis has reinvigorated neoliberal policies and brought to the fore an academic and policy debate over the deregulation of employment relations’ institutions ‘in the name of competitiveness’. In the context of this debate, we ask the following question: have firms with employment relations institutions been less able to improve productivity during the crisis? We consider this question by examining data from the European Company Survey. We also look into different models of capitalism to gauge whether there are context-specific institutional effects that may mediate firm-level outcomes. Contrary to the dominant neoliberal discourse, we do not find any strong evidence that employment relations institutions are negatively associated with productivity increases. Instead, we find that certain high performance work practices are positively and significantly associated with productivity increases across EU-15 and in particular institutional contexts. Taken together these results challenge the neoliberal ‘low road’ policies that are focused on dismantling employment relations institutions and suggest shifting the attention towards context-sensitive ‘high road’ policies and practices.

Keywords:

• Productivity
• institutions
• competitiveness
• practices
• Europe
• regulation

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Erratum

Acknowledgements

An earlier version of this paper was presented at the Manchester Business School Seminar Series, the LSE Employment Relations Seminar Series, and the 2015 International Labour Process Conference (ILPC); and the authors would like to thank the participants for their questions and comments. We would also like to thank the Editor Stephen Procter and the three anonymous referees for their incisive and constructive comments that improved this paper. Any remaining errors are our own.

Notes

1. EU-15 consists of the fifteen EU member states (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom) prior to the accession of the ten candidate countries in May 2004.

2. A coding mistake in the survey did not offer the option to managers in Spain to record trade union presence in their workplaces (Bryson et al., 2012, p. 31, fn. 21). Thus, to avoid the misclassification of Spanish establishments in the different employee representation categories we decided to exclude Spain from the analysis.

3. The choice of bargaining level indicators is dictated by the way the relevant question is asked in the ECS: the respondents cannot distinguish among different types of higher level bargaining. Moreover, other, more qualitative, aspects of the practice of bargaining that may be thought to be of relative importance, such as the degree of bargaining coordination within and between sectors and firms in different countries, is not available in the ECS.

4. Modelling country-level heterogeneity with the inclusion of country dummies is the most appropriate choice when the interest lies in within-country variation, the number of countries is small, and there is no interest in and explicit modelling of country-level variables as predictors of the outcome of interest (see Bryan and Jenkins (2016) for a detailed discussion). As a robustness check though, we also estimated model specifications without country dummies. The results were very similar to the ones reported.

5. Sample means for the rest of control variables are available from the authors on request.

6. For ease of exposition only the results for the variables of interest are presented. Full results are available from the authors on request.

7. For each marginal effect calculated, the rest of the variables are set at their sample means.