Employment and Social Developments in Europe (ESDE) 2024

Box 2.3: Social partners’ role in promoting upward social convergence

Social partners play a key role in supporting social investment and convergence, including through collective bargaining. Social dialogue results in more informed decision-making in policy development and can lead to more effective and sustainable solutions that benefit employers and workers. Through collective bargaining, social partners can support living standards and improve social outcomes.

Eurofound’s “industrial democracy” index indicates the rights of employees and employers to participate in governing the employment relationship, and countries with a higher score on the index fare better in economic and social terms. ⁽¹⁾ Furthermore, an ILO study investigating convergence of the EU28 in the period 2000-2016 found that high collective bargaining coverage not only relates to higher social and economic outcomes but also to a more equal distribution of those outcomes. ⁽²⁾

The last decade has seen no clear link between the speed of real wage convergence and collective bargaining coverage in the EU. This reflects that real wage convergence was driven by large productivity gains in eastern European countries, which tend to have lower collective bargaining coverage.

Strengthening and tailoring collective bargaining settings can nevertheless be an important lever for upward convergence by raising real wages and contributing to fairer sharing of productivity gains. It enhances the bargaining power of those workers covered and a fall in collective bargaining coverage rates is associated with a drop in the relative pay of those covered. ⁽³⁾( ) Trade unions might support real wage convergence by indirectly improving productivity in the economy through their influence on local working conditions, training and re-training opportunities, leverage of other labour market institutions (such as unemployment benefits and active labour market policies) and their role in wage coordination. ⁽⁴⁾ Shoring up and promoting social dialogue can serve as a crucial catalyst for accelerating the catching-up process of eastern European countries. In this context, at the end of 2022, Romania adopted a law to promote collective bargaining as well as collective agreement coverage to empower trade unions to enhance wages. ⁽⁵⁾ ( ) This favours the catching-up process of a comparatively low-performing country and thus upward convergence.

In addition, social partners promote diverse strategies for skills development and training and reinforcing social investment and enhancing economic and social convergence as well as the fair green transition. For example, a joint project among EU social partners in the textile, clothing, leather and footwear sector identified actions and tools to assess skills needs and respond to those needs through training and re/upskilling initiatives. ⁽⁶⁾ ( ) In the SAWYER project, the social partners of the furniture sector take a holistic approach to meeting skills needs in the pursuit of transformation towards a circular economy. ⁽⁷⁾ ( ) IndustriALL Europe launched the Digital Youth Academy, a programme aimed at young trade unionists that focuses on the green transition and the future of trade unions. ⁽⁸⁾

To develop targeted policy responses to the COVID-19 pandemic, the energy crisis and inflation, trade unions and employers’ organisations were involved in 41% and 45% out of 1 706 legislative acts, respectively, in recent years. ⁽⁹⁾ To manage the COVID-19 pandemic, across Europe, trade unions negotiated with employers and governments on adequate short-term work models. ⁽¹⁰⁾ The resulting job retention schemes led to a much more moderate shock of COVID-19 on the economy and labour markets compared to the impact of the economic crisis in 2008. ⁽¹¹⁾

Despite the positive impact of social dialogue, some challenges persist, and others may emerge. While there is a trend towards increasing membership of women in trade unions, the overall membership of trade unions is decreasing. Further, the estimated average share of workers covered by collective agreements in the EU dropped by 10 pp between 2000 and 2019 (from 66% to 56%). ⁽¹²⁾ Current transformations such as the green and digital transitions as well as new forms of work (e.g. platform work) underline the need for robust and inclusive social dialogue models to foster an effective and fair transition that facilitates upward convergence within and between Member States and leaves no one behind. By requiring Member States to spend parts of their ESF+ funds on supporting capacity-building of social partners and/or NGOs, the EU is committing to continue the promotion of social partners to strengthen the European model of sustainable and inclusive social welfare. ⁽¹³⁾ In addition, the Directive on adequate minimum wages ⁽¹⁴⁾ is similarly supportive of social partners’ capacity-building, promoting an institutional framework that fosters a strong social dialogue in wage-setting and collective bargaining coverage.

In 2023, the Commission presented a new initiative to empower social dialogue to adapt to the changing world of work and new trends on labour markets. A Council Recommendation on strengthening social dialogue in the European Union ⁽¹⁵⁾ seeks to support Member States in promoting social dialogue and collective bargaining at national level. This can help to enhance the representation of workers, including those categories of workers at risk of being left behind in some Member States. Furthermore, in the Commission’s recently adopted action plan for labour and skill shortages, social partners have committed to addressing poor working conditions through collective bargaining in sectors characterised by inadequate working conditions.