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

Tito Boeri · Agar Brugiavini · Lars Calmfors

ago 2001 · OUP Oxford

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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.

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After obtaining his Ph.D. in economics from New York University, Tito Boeri was senior economist at the Organisation for Economic Co-operation and Development (OECD) from 1987 to 1996. In this position, among other things, he co-ordinated all the work carried out by the OECD in the field of human resource policies in the central and eastern European economies in transition after 1990. He was also consultant to the International Monetary Fund, the ILO and the World Bank. He is currently associate professor of economics at Bocconi University, Milan, where he teaches courses on labour economics and the economics of transition, and is affiliated with the Innocenzo Gasparini Institute for Economic Research (IGIER). He is Director of the Fondazione Rodolfo Debenedetti, which operates in the field of labour market and social policy reforms in Europe. Lars Calmfors is Professor of Economics at Stockholm University. Agar Brugiavini is Associate Professor in the Department of Economics at the University of Venice.