Labour relations in a changing industry

Labour relations in a changing industry

Bert Essenberg
(Sectoral Activities Department, ILO)

Symposium on the Social and Labour Consequences of Technological Developments, Deregulation and Privatization of Transport

Discussion Paper No. 1

Geneva, 1999

Discussion papers are preliminary documents circulated
to stimulate discussion and critical comment

Following the recent reorganization of the International Labour Office and the creation of the Social Dialogue Sector, it was felt that there was a need to elaborate on the importance of negotiations and consultations between the social partners in the transport sector in order to stimulate further discussion on this important topic.

The paper was prepared by Mr. Bert Essenberg, Transport Sector Specialist, as an addendum to the background document for the Symposium on the Social and Labour Consequences of Technological Developments, Deregulation and Privatization of Transport.

It is extremely difficult to write a paper on labour relations in the transport sector. First, even a paper on labour relations in any of the subsectors -- civil aviation, railways and the roads, including the transport of goods and passengers, would require a detailed study of the various national laws and practices. Second, the rapid developments in corporate structures, particularly in civil aviation, have profound and, as yet, unknown consequences for the relations between management and workers and their unions. This brief paper is thus an attempt to describe some general trends and is largely based on available literature. In the transport sector, like in other industries, formal and informal systems of relations between employers and their associations and workers and their organizations (trade unions) -- and in some countries other forms of elected worker representatives -- have developed so that the two groups "can deal with each other in such a manner that conflicts are minimized without doing injustice to the reasonable demands of the less privileged".⁽¹⁾ The future and role of these systems are presently subjects of discussion at both the national or central level and at the sectoral level. Third, the emerging supranational regulation of certain aspects of working conditions (for example in the European Union), which traditionally were agreed upon through national and/or sectoral negotiations, may necessitate the development of forms of supranational labour relations.

At the central level the traditional channels for relations between public authorities, employers' associations and trade unions are being questioned in several of the countries where tripartite labour relations systems are in existence. More fundamentally, the compromises -- of a political nature -- which had been established between economic constraints and social justice -- are being affected in every instance. Wherever one looks, people are challenging what used to be taken for granted, many policies are being queried and traditional attitudes as well as the structures of social relations themselves are being shaken.⁽²⁾

At the sectoral level, the traditional labour-management relations systems have been or will be subject to change as a result of the process of globalization in the industry as well as the drive for deregulation and privatization. The biggest factors affecting collective bargaining in general are privatization and the replacement of national agreements with enterprise and local agreements and/or individual contracts and the subcontracting of work to non-transport undertakings.

The paper will first describe some of the major factors affecting the social partners -- governments (ministry of labour), employers' organizations and trade unions -- and the challenges they face at the national level. It will then look at some of the challenges in the transport sector itself. In the section on labour relations and collective bargaining some cases will be presented. Finally, the paper will link the findings of these cases with the idea of social dialogue.

The World Labour Report 1997-98: Industrial relations, democracy and social stability raised the question of whether the existing labour relations systems were still performing their traditional functions satisfactorily at a time when the pace of immense political, economic and social change has suddenly rushed ahead.⁽³⁾

Collective bargaining first evolved in the industrial democracies, where the aim was clear -- to enable the parties themselves to participate in devising and applying safeguards for the working man that were the necessary corollary of economic progress. The bargaining procedure did at least mean that the weak did not become steadily weaker. Today, that risk is again very much in the minds of all those who are now facing insecurity from unemployment or precarious contracts.

First, there are the public authorities, whose scope of action is curtailed by the internationalization of the market economy but who, at the same time, are increasingly called upon to adapt and modernize their institutions or restore stability to a severely battered social fabric. Traditionally, the ILO's government partner has been the ministry of labour. Here too, however, the situation has become more complex. Over the years, the position of ministries responsible for labour has been changing. Many ministries of labour now have relatively narrow areas of responsibility and, when it comes to broader issues of economic and social policy, their voices are often not heard. Indeed, many countries no longer have a ministry of labour at all; employment and labour affairs are handled through a unit that might address such related issues as competitiveness, enterprise development or gender. Government policy also has an impact on workers and employers through many other ministries, particularly those of finance, transport or planning.⁽⁴⁾

Second, the difficulties of the trade unions are common knowledge although the issues vary greatly from one country to another. They stem, among other things, from the dispersal of the workforce resulting from the accelerating movement toward labour market flexibility, the growing rift between workers with stable jobs and the growing number of other, often less skilled, workers with unreliable employment opportunities, and the challenges of the global economy. In many industrialized countries, for example, trade unions have been weakened by the extension of enterprise-level bargaining, which has made it more difficult for them to sustain national solidarity. They have suffered from the expansion of the service sector where they find it more difficult to organize. In transition economies trade unions are struggling to carve out a new role, while in developing countries, where the formal sector is typically small, trade unions may have a political influence that exceeds their membership base. Moreover, a surprising number of countries still impose crippling legislative restrictions on trade union organizing and collective bargaining. Throughout the world, trade unions are having to come to terms with the effects of globalization and international competition.

Third, as things are today, the balance of power has evidently changed, and it is often the entrepreneur's objectives that are given priority consideration. But here too tensions are emerging. Small and medium-sized enterprises, whose concerns are quite different from those of larger firms, are proliferating, while the most powerful companies are increasingly clamouring for autonomy. A significant determinant of the role of employers' organizations has tended to be the degree of centralization. Where bargaining is conducted at the sectoral or central level, central employers' organizations remain strong, but where bargaining has been more enterprise-based they have tended to form decentralized structures. With the shrinking of collective bargaining generally, the influence of employers' associations in these areas has been diminishing. They have also been encountering competition from private consultancies and other types of association that offer similar services.⁽⁵⁾

The transport sector, by its very nature, is an international industry, which in recent years has witnessed important moves towards globalization, diversification of ownership and/or management, deregulation and privatization. Each of these developments has had an impact on the labour relations in the various subsectors.

The world's civil aviation industry -- and the workforce who comprise it -- is experiencing a period of change unprecedented in its history. Three interlinked developments are combining to transform the structure of the industry, namely the progressive liberalization of the product market, the drive to privatize those carriers remaining under public ownership, and airline management's accelerated pursuit of "globalization", both in terms of their product markets (through expanded route networks) and their labour markets (through the dispersal of operations to different parts of the globe). These developments have had a profound effect on the industry's labour force and will continue to do so in the next millennium. The new operating environment presents airline management with greater opportunities to initiate fundamental changes to the terms under which labour is hired, deployed and rewarded, and the ways in which labour performance is measured, controlled and evaluated. Throughout the world, airline management's demand is for increased labour performance at a lower cost, with workers performing their tasks ever more flexibly and more productively.⁽⁶⁾

This has become an issue of great concern to individual unions as well as to the international trade secretariats in the sector. They are now developing new strategies (for example the organization of regular meetings between all unions active in companies participating in the same airline alliance) to face these challenges.

At the same time, airlines are spinning off what they consider to be non-core activities. Such activities are either contracted our or put into independent companies, which then seek to serve other airlines. Hence, the development of a number of specialist transnational service companies as well as a few dominant catering groups.

With the exception of North America, where Canadian and United States railway companies have owned railway property and maintained train operations on each other's territories for a considerable period of time, railways have been largely national in the scope of their activities. This is particularly true of state-owned railway undertakings which, by their very nature, were confined to providing services on the territory where they were established. The situation started to change radically in the early 1990s (in the United States the process started with the passage of the Railroad Revitalization and Regulatory Reform Act of 1976 and the Staggers Rail Act of 1980), driven by the forces of restructuring, privatization, commercialization, deregulation and open access. Private companies have seen opportunities in taking over former state-undertaking activities, particularly in countries where governments have decided to divest themselves of the responsibility for operating railway services. Furthermore, European Union railway policy, as delineated in Council Directive 91/440/EEC, has sought to encourage the entry to the railway market of new operators or new groupings of companies. These new companies and groupings bring with them their own philosophies of railway management and have objectives which are often fundamentally different from those of the state-owned undertakings which they have replaced.⁽⁷⁾

The deregulation of road freight transport has had implications for employment, wages, working conditions and, possibly, for safety. These have been major concerns for trade unions, employers, several governments and supranational organizations, as observed, for example, at the 12th Session of the ILO's Inland Transport Committee in 1992 and other international conferences.⁽⁸⁾ The explicit objectives of deregulation have been to liberalize barriers to entry in order to increase competition among road freight carriers, and to promote improvements in efficiency, overall productivity and quality of service, with a view to strengthening the competitive position of the road freight industry. In the United States, for example, the Motor Carrier Act of 1980 brought about the de facto deregulation of the motor carrier industry. This had a significant impact on the industry and its customers -- competition has increased, prices have fallen, and productivity and service have improved in the face of competitive pressures. The impact of deregulation has been dramatic in both the less-than-truckload (LTL -- less than 10,000 pounds) and truck load (TL) segments of the industry. Market structure has evolved, with a fall of 78 per cent in the number of LTL carriers between 1976 and 1993 and a 40 per cent fall in revenue. While the number of LTL firms has fallen since deregulation, there have been new competitive pressures from other sources. In particular, United Parcel Service (UPS) and the express air package industry have grown rapidly. In 1976, the LTL industry handled 72 per cent of the small package market. By 1992, this share had fallen to 47 per cent, indicating substantial erosion, particularly from UPS and air freight carriers such as Federal Express.⁽⁹⁾ The consequences of deregulation for collective bargaining will be discussed below. Road freight transport was also deregulated in many other countries, including some developing countries.

The 1992 Treaty on European Union (TEU) introduced major changes in the area of social policy. With the Protocol on Social Policy and its Agreement annexed to the Treaty, a new legal base for social dialogue between organizations of management and labour (called the social partners) was institutionalized. After the entry into force of the Treaty of Amsterdam in 1999, this setting will become part of the social chapter of the TEU. The Social Protocol offers extended opportunities for the social partners to shape the future of European social policy, under the auspices of the renewed principle of subsidiarity. With this major step, the social partners have the opportunity of formulating policy options on their own. They can find alternative ways of complying with European legislation if they manage to negotiate voluntary framework agreements. The Commission will then refrain from its own initiatives and grant priority to implementing their private regulations. The Protocol applies at both the inter-professional and sectoral levels. One could argue that this sectoral component could be of major importance because sectoral collective bargaining represents the backbone of the bargaining structure in most continental European countries. The question is whether social dialogue could become an instrument of European social policy in general, and of industrial relations in particular.

At least some of the sectoral organizations are forced to cope directly with the Europeanization of product markets, and in some cases of labour markets, in their sectors. Thus, it is vitally important for them whether or not the supranational level can provide instruments to face new, transnational challenges.

The transport sector, which faces transnational labour mobility and business activities, consists of four subsectors: road, rail, sea and air transport. Its heterogeneity is reflected in the existence of a joint committee (recently replaced by a social dialogue committee, the scope of which is still under discussion) for each subsector. The officially recognized social partner on the employee side is the Federation of Transport Workers' Unions in the European Union (FST). (In June 1999, the FST was replaced by the European Transport Workers' Federation (ETF), bringing together the European Committee of the International Transport Workers' Federation (ITF) and the Federation of Transport Workers' Unions in the European Union.) Its strategies include lobbying at the European level to improve working conditions, while its long-term aims include collective bargaining with European employers' associations.

On the employers' side, the International Road Transport Union (IRU) is the interlocutor of the FST for road transport issues. The IRU's European committee seeks to represent the interests of the transport business vis-à-vis European actors. Because of the heterogeneity of industrial relations systems across Europe, the IRU is faced with difficulties when formulating common policies. The IRU, in general, restricts is activities to lobbying the European Commission.

In 1985, the Commission established a joint committee for road transport with equal representation from the FST and the IRU. The joint committee set up three working groups to cover vocational training, new technologies and working time. The aim of the committee is to provide information for policy formulation by the Commission. For the time being, the social partners have adopted four non-binding joint opinions. Of lasting importance has been the Working Time Directive (Council Directive 93/104/EC of 23 November 1993), which excluded, among others, the transport sector. The FST tried to enter into negotiations with the IRU to find a solution for the road sector, emphasizing the importance of sectoral regulation, but the employers' organization refused to negotiate. In general the IRU is more in favour of non-binding recommendations at the European Union level. In the case of regulating working time, it stressed that the application of already existing regulations should be improved.⁽¹⁰⁾

In November 1998, in the absence of an agreement between the social partners, the European Commission proposed a new directive aimed at normalizing working time in those transport sectors which were excluded from the European Union Working Time Directive. In its proposals, the Commission integrated the contents of agreements reached between the social partners in the maritime and railway sectors, and included the points on which agreement was reached in the road transport sector notwithstanding the breakdown in negotiations.⁽¹¹⁾

Economic deregulation has transformed the trucking industry in the United States in three ways since 1977. First, the trucking industry before 1977 was a utility, regulated and tied to the public trust. The Interstate Commerce Commission (ICC) authorized carriers to haul specific commodities over specific routes and, through rate bureaux, supervised pricing structures. Regulatory restructuring has forced carriers to repackage themselves as niche producers.

Second, economic deregulation has accelerated the deunionization of the industry. The trucking industry was formerly one of the most heavily unionized industries in the United States. At the beginning of the 1970s, the Labor Department claimed "local and intercity" trucking was 80-100 per cent organized, and scholars considered general freight to be "very close to 100 per cent" unionized in local and long-haul freight. However, unionization began to decline during the 1970s, and practitioners reported the Teamsters Union's share of freight dropped by 20-25 per cent between 1967 and 1977 as private carriers, owner operators, and special commodity carriers grew. Although the Teamsters continue to represent the majority of workers in some sections of the industry, they have lost representation in others. In particular, the general freight sector -- comprising motor carriers that carry non-specialized freight requiring no special handling or equipment -- has fragmented broadly into truckload (TL) and less-than-truckload (LTL -- less than 10,000 pounds) operations, and the Teamsters have lost most of their ability to represent truckload workers.

Third, bargaining within the general freight sector of the trucking industry has become more decentralized since economic deregulation. Bargaining between the Teamsters and general freight motor carriers has taken place at the national level since bargaining was consolidated under the National Master Freight Agreement (NMFA) in 1965. Centralized bargaining brought remarkably uniform wage levels and working conditions across industry sectors and regions. With the decentralization of bargaining that occurred after 1977, the coverage of the NMFA has declined by two-thirds and variation in wages and conditions has increased.

In trucking, as in other deregulated industries such as airlines and telecommunications, the market dynamics stemming from industry restructuring strongly affect union bargaining power. The study provides evidence that the Teamsters are still influential in the TL segment, although less so than before economic deregulation. Whether due to custom, to drivers' unwillingness to accept lower wages, to the threat effect, or to actual bargaining power, union wages in the truckload industry remain somewhat better than non-union wages and conditions. Although TL drivers will not do as well as their LTL counterparts, they clearly are better off with a union than without one.

The evidence confirms the assessment that virtually all workers and most motor carriers have suffered substantial losses as a result of economic deregulation. Average wages dropped by 26.8 per cent between 1978 and 1990 inclusive, and for non-union TL drivers the decline was closer to 50 per cent. LTL driver wages have remained relatively stable, although the evidence suggests they are weaker in regional markets than in national markets.

Finally, this study contradicts claims that the bargaining power of the Teamsters has collapsed. Although little union bargaining power exists in the national TL segment of the industry, the Teamsters retain bargaining power within LTL markets. However, the combination of lower wages and lower profits supports truckers' contentions that bargaining power has shifted to shippers, who lie outside the trucking industry and outside the collective bargaining relationship.⁽¹²⁾

Deregulation has produced monumental changes in the rail industry's labour force. Prior to deregulation the heavily unionized rail industry operated in a high labour-cost environment, reflecting the use of an excessive amount of labour, costly work and pay rules, and high wage rates. In the regulatory period, increases in labour costs were typically passed on to customers through higher rail rates. Adhering to this strategy became increasingly difficult in the post-deregulation period, as railroads faced growing competition from the trucking industry as well as from one another.

One central strategy for reducing labour costs has been to decease the size of the labour force. In 1975, the industry had 548,000 employees; by 1993, the number had declined to 271,000. This decline has been facilitated by the industry's adoption of labour-saving technologies. For example, electronic-based communications and information systems have made it possible to automate almost every phase of traffic control, signalling, car management, train dispatching and make-up, and train movement as well as administrative functions such as waybill transmission and the handling of freight and loss-and-damage claims. The decline further reflects reductions in the labour force attributable to abandonments of lines, mergers and sales of lines to short-line railroads, and to modifications in restrictive work rules. Finally, the evolution towards fewer but longer and heavier freight trains as well as towards longer runs without crew changes has reduced the need for train and engine employees. Dramatic changes have occurred in train crew composition in the United States. In 1980, railroads typically operated four-man crew trains with one locomotive engineer, one conductor and two brakemen, although in some cases crews were larger, including an extra brakeman and/or a fireman. The reduction in crew sizes reflects the elimination of residual work-rule redundancies carried over from the earlier steam to diesel conversion, the substitution of end-of-train devices for cabooses and track-switching automation, making the brakeman's primary job of manually switching track unnecessary.

The elimination of rail jobs has been facilitated by the erosion of labour protection programmes -- the Staggers Act was passed without rail employee guarantees. Thus, in situations in which jobs are being eliminated, it is the conditions surrounding the reduction, rather than the reductions themselves, that are negotiated. Implementing agreements are required between the individual unions and railroads involved. These arrangements are negotiated under protective conditions specified by the ICC, for example with respect to minimum pay guarantees or separation payments. The advent of a politically conservative environment in the deregulatory period that was less supportive of union objectives has also been a critical force in job elimination. Several factors have made the elimination of jobs more palatable -- the railroad industry's willingness to provide generous labour buy-out programmes paying workers to leave the industry; using attrition rather than lay-offs to eliminate jobs; and the potential for retaining a high wage structure for remaining workers through improved productivity.⁽¹³⁾

India, with its large size and population, poses a daunting challenge for providing efficient and adequate transportation facilities. It has been a major concern of the Government to provide and maintain road transport facilities for people within the country in order to cater for the growing social and cultural needs of the people.

In 1950, with the passage of the Road Transport Corporation Act, state participation in providing bus services in India formally began. At present there are 60 nationalized transport organizations including municipal undertakings and government departments providing passenger road transport services. They employ about 800,000 people.

The transport sector is labour-oriented and its employees, especially drivers and conductors, play a vital role in providing better transport services. The State Transport Undertakings (STUs), in addition to providing efficient services to the public, were assigned the role of model employers. The plight of transport workers earning low wages and negligible benefits was of particular importance to the Government, which sought to protect them from exploitation.

During the first decade of the nationalization of the bus transport industry, workers were provided with better conditions of service. During the initial years workers felt secure in their jobs and were satisfied with the working conditions, especially their hours of work which were in conformity with the Motor Transport Workers (MTW) Act. The strategy of the unions during the first decades was mostly to concentrate on improving working conditions by securing more than the statutory welfare benefits. The STUs concentrated on introducing employee welfare schemes and appointing welfare officers. Superannuation benefits were incorporated. The practice of periodical union-management negotiations and settlement of demands was pursued. Industrial conflicts were at local levels on local issues. The number of organization-wide strikes resulting in work stoppage was negligible.

In 1975, the Government of India announced a scheme for workers' participation at the shop-floor and plant levels. Shop councils were set up in depots and various regions, representing all categories of employees and with equal representation of management and workers. The effectiveness of the councils was not adequately felt because of the informal way of tackling issues outside the councils. The unions also took up the same issues and management felt more comfortable taking an informal approach. The reasons to explain the lack of success of shop councils include the following:

The above cases demonstrate some of the repercussions of social dialogue on labour relations at the European level, the consequences of deregulation on collective bargaining in the trucking industry as well as on the labour force in the rail industry in the United States and, finally, some of the industrial relations problems in state-owned bus companies in India. In each of these cases, the social partners developed relationships based on national legislation, economic conditions, the prevailing political climate and the expectations of their members. Periods of transition have raised many difficult issues that are best addressed by negotiation and consultation or, in other words, social dialogue in its many forms and levels from (supra)national tripartite consultations and cooperation to plant-level collective bargaining and consultative machinery. Social dialogue is a powerful tool that has helped solve difficult problems and it can foster social cohesion. But it cannot be taken for granted. Developing a reflex for consultation and negotiation takes time and commitment. It also needs social partners that have the capacity and will to engage in the process responsibly, and the strength and flexibility to adjust to the contemporary circumstances and exploit new opportunities.

The State has an important role in enabling and fostering all forms of social dialogue. It needs to create an environment in which the contributions of employers, workers and other groups are solicited and valued. Despite its proven worth, social dialogue is far from being fully utilized. In some countries freedom of association is still restricted, and in many others the opportunities for collective bargaining have narrowed in recent years.

As well as facing familiar problems, social dialogue has been undermined by a number of recent developments that have tended to favour individual over collective action. More complex and flexible types of employment, for example, have loosened many social ties and have widened disparities between various groups in society. Together with high levels of unemployment, these widening gaps have weakened the solidarity that previously sustained social dialogue.⁽¹⁵⁾

1. A. van Zweeden: Macht en tegenmacht: Vergelijkende studie van de arbeidsverhoudingen in West-Europa en de Verenigde Staten (Alphen aan den Rijn, Samson, 1976), p. 11.

2. ILO: World Labour Report 1997-98: Industrial relations, democracy and social stability (Geneva, 1997), p. 221.

4. ILO: Decent work, Report of the Director-General, International Labour Conference, 87th Session, Geneva, 1999, pp. 41-46.

6. P. Blyton, M. Martinez Lucio, J. McGurk and P. Turnbull: Contesting globalisation: Airline restructuring, labour flexibility and trade union strategies (London, International Transport Workers' Federation (ITF), 1998), p. 3.

7. International Transport Workers' Federation (ITF): "New international railway operators", Agenda item 3c, Railway Workers' Section Conference, Berlin, 5-7 Nov. 1997 (London, 1997), p. 3c/1.

8. Y. Suzuki: Deregulation of road freight transport: Labour implications, Sectoral Activities Programme Working Paper No. 98 (Geneva, ILO, 1996), p. 1.

9. C. Grimm and R. Windle: "Regulation and deregulation in surface freight, airlines and telecommunications", in J. Peoples (ed.): Regulatory reform and labour markets (Boston, Kluwer, 1998), pp. 27-28.

10. B. Keller and B. Sörries: "The sectoral social dialogue and European social policy: More fantasy, fewer facts", in European Journal of Industrial Relations (London, SAGE, 1998), Vol. 4, No. 3, Nov. 1998, pp. 331-348.

11. ILO: Symposium on the Social and Labour Consequences of Technological Developments, Deregulation and Privatization of Transport, Background document (Geneva, 1999), p. 26.

12. M. Belzer: "Collective bargaining after deregulation: Do the Teamsters still count?", in Industrial and Labor Relations Review (Ithaca, Cornell University, 1995), Vol. 48, No. 4, July 1995, pp. 636-655.

13. W. Talley and A. Schwarz-Miller: "Railroad deregulation and union labor earnings", in Peoples, op. cit., pp. 125-153.

14. S. Padam and V. Paranjpe: "Industrial relations in state transport: A review", in C. Venkataratnam and A. Verma (eds.): Challenge of change: Industrial relations in Indian industry (New Delhi, Allied Publishers Ltd., 1997), pp. 415-440.