ILO is a specialized agency of the United Nations

...ILO LOGO...


Governing Body  

271st Session
Geneva, March 1998

Committee on Employment and Social Policy



World Labour Report 1997-98: Industrial
relations, democracy and social stability

1. The World Labour Report 1997-98, published by the Office in November 1997, focuses on industrial relations, democracy and social stability. It endeavours to describe how industrial relations between heads of enterprise and their associations, workers in trade unions and, sometimes, the public authorities have been developing as the century draws to a close and the pace of immense political, economic and social change has suddenly rushed ahead. The report recalls the threefold function performed traditionally by industrial relations -- economic (the distribution of the fruits of economic activity), democratic (giving workers a say at the workplace) and social (ensuring that everyone in work or seeking employment is integrated into society) -- and tries to ascertain whether they continue to fulfil these tasks satisfactorily. It presents significant facts and indicators, analysing them and highlighting future trends.

2. In the preface to the report, the Director-General expresses the hope that it will provide food for thought for all those concerned about labour and its future; it highlights the social partners' "compelling duty" to ensure that the changes currently taking place are directed towards a mutually acceptable synthesis of economic efficiency and social progress. This item on the agenda of the Committee on Employment and Social Policy is designed as an opportunity for the Committee to make its contribution to this important debate. In order to facilitate the discussion, this document will, first of all, present a summary of the trends and conclusions identified in the report. It will then examine the consequences which ensue for ILO activities.

A. Summary of the report

3. The report identifies two major trends in the development of labour relations, i.e. increased autonomy of enterprises and the individualization of labour relations. It analyses the background to these trends -- primarily the economic globalization process and change in communication technology and manufacturing techniques -- as well as the diminishing capacity of action of trade unions, employers' organizations and the State, the results of which are less effective collective bargaining and social dialogue. Consequently, the report notes that industrial relations no longer serve the purposes outlined above as effectively as in the past: income gaps are widening; unemployment and underemployment are causing social exclusion. In short, more and more people are finding that they are on their own and unable to make their voice heard on the labour market. This applies both in developing and developed countries.

4. The situation, in fact, is not as bleak as certain studies suggest. The report identifies several signs that employers' associations and trade unions are adjusting to today's realities. The most active trade unions are looking more and more like genuine social movements with a clear vision of how to defend and promote the interests, however varied, of the world of those in work. The report lists a whole range of mechanisms that are used today to govern the relations between employers and the organized workforce. On practically every continent, the State is becoming more and more involved in social issues than ever before. A new social dynamic may be developing. The report takes stock of the efforts made to adapt the structures, venues and strategies to the new economic reality and to its international dimension.

Trade unions in the throes of change

5. The proportion of union members in the labour force has declined, sometimes sharply, in a large number of countries over the past decade. Relevant statistics are supplied in the annex to the report. The document also seeks to explain the reasons for this trend. Over the last ten years, trade unions have admittedly registered an increase, in absolute numbers, in membership in several other countries. Nevertheless, in connection with general employment trends, it becomes clear that union membership (or "trade union density") has only risen in a few. The countries in which the majority of workers are trade union members are in a minority.

6. However, the report observes that trade union influence and power cannot be measured merely in terms of the number of members. Other factors must be taken into account. This can be seen, for example, in the capacity of the trade union confederations in a country like France to call for strike action, despite the low unionization rate. What is involved here is militant unionism rather than the weight of numbers. Furthermore, figures alone mask another significant trend: the emergence or reappearance of a free trade union movement in a number of countries that recently moved from a totalitarian to a democratic regime, as in Central and Eastern Europe.

7. But history marches on. Spurred by the transformations born of globalization and technological change, the union agenda nowadays is taking on a different form everywhere. Employment protection has become a priority concern. Unions' attitudes are veering towards a less adversarial and more cooperative approach. The report indicates that their efforts are being focused upon four areas:

Employers' organizations: New horizons and new services

8. Today, employers' organizations are facing difficulties not unlike those experienced by trade unions: declining membership, partial loss of influence in some regions and an uphill struggle to assert themselves in developing and transition countries. But, like their counterparts, they are learning to adapt their structures and the services they offer to meet the needs of changing times.

9. Employers' organizations of one type or another exist almost everywhere though their nature varies considerably from region to region and, within each, from country to country. They can be highly centralized, as in Scandinavia until recently, or much looser federations, as in Australia or the United States. Their history has been marked by two opposing currents of opinion. The first, very much apparent, for example, in Canada and the United States, advocates the widest possible freedom for employers themselves to organize industrial relations in their own firms. The second is in favour of regulating conditions of employment, and even other conditions of production, at a higher level (sector, region, even the whole country). The objective here is to avoid unbridled competition, which is often to everybody's disadvantage, and to ensure the kind of stability and forward-looking management that is required for long-term investment and, hopefully, training. This is manifestly the approach favoured by European employers.

10. In the former communist countries, autonomous employers' organizations are an entirely new phenomenon. They are naturally concentrated in the growing private sector while unions are most active in the declining but still large public sector, leaving the government as the main counterpart of both. Their respective roles as social actors often remain poorly understood, particularly in the Russian Federation and other countries of the Community of Independent States (CIS) where the legal framework frequently works against employers' associations. The absence of any appropriate legislation actually perpetuates the imbalances of the previous regime to the advantage of the trade unions in terms of influence and resources. This situation has favoured the emergence of a variety of groupings which purport to represent employers, whereas very few of them can rightly claim to do so. Some measure of coordination among them has been achieved in a number of countries while, in others, progress has been slower. Much will depend in the future on the policies adopted by public authorities.

11. The picture is similar in many developing countries where diverging interests and the relatively small size of the modern sector manifestly impede the development of employers' organizations. Moreover, political and economic instability in some countries have not helped the growth of free enterprise and the organizations that promote it. For example, several developing States adopted a Soviet-style organization of power, if not necessarily the Soviet doctrine itself. The refusal of those regimes to accept the expression of independent views, let alone the free collective negotiations of wages and other employment conditions, has certainly also contributed to the weakness of employers' associations.

12. In all countries, industrialized or not, small and medium-sized enterprises (SMEs) form the overwhelming majority of business undertakings. The proportion even seems to be growing. However, affiliation rates remain extremely low in developing countries and, even in industrialized countries, many SMEs balk at having to follow rules which are accepted at the sectoral or national level. They sometimes form their own groupings which may, or may not, belong to general employers' organizations. Employers' organizations in different countries have reacted by developing their capacity to provide direct support and services to SMEs in such areas as training, access to credit and to legal services, information on best practices and other topics, linkages with larger enterprises, marketing and export support. At the other end of the spectrum, the biggest undertakings are also inclined to go it alone and to opt for bargaining at the enterprise level. Ever fiercer competition is leading employers everywhere to favour autonomous action, especially in the export business.

13. In Europe, a general trend towards decentralization has displaced decision-making away from the large, central interoccupational federations towards sectoral or regional organizations and, in some cases, a combination of the two. In the United Kingdom, among other countries where the phenomenon has been most pronounced, power has been essentially devolved to the enterprises themselves; the federations and confederations have accordingly been left without any real decision-making role. There is little doubt that such developments have weakened traditional employers' organizations. Some have responded by becoming more of a service provider -- training, legal advice, strategic planning -- rather than representative bodies. Others are adjusting to the new context by seeking to improve the quality and the relevance of the services they already offer. Furthermore, streamlining and cost-cutting efforts have resulted in numerous mergers between employers' organizations with economic objectives and those concerned with social and labour issues.

14. Where industrial relations are decentralizing, the importance of the traditional public relations, lobbying and representation functions of employers' associations is growing. Just as trade unions have been driven to seek alliances with other social organizations, employers' associations have forged links with community groups -- women, young people, educational institutions -- most often with training in mind. Enterprises and their associations are also becoming increasingly involved in social integration or reintegration, endeavouring to promote employment and combating social exclusion.

15. Improved coordination at an international level is another widely shared objective. In particular, the report highlights the role played by the International Organization of Employers (IOE).

The new features of production and industrial relations

16. Increased trade flows and capital mobility are transforming industrial relations by modifying relationships between the social partners. While the advent of globalization is not necessarily leading to a large-scale industrial migration of firms fleeing high labour costs and taxes, it is generating increasing options for firms to maintain or relocate manufacturing investment. The mere existence of that option, combined with new technologies and methods of organization, is having a broad impact on enterprise culture: for countries, enterprises and individuals alike, economic openness means adjusting to change.

17. The report identifies three principal changes in industrial relations which result from capital mobility -- a reduced margin of manoeuvre for governments; greater autonomy for enterprises; and increased competition with regard to wages. The report emphasizes that these factors will need to be dealt with by evolving systems of industrial relations if the growth of economic inequality is to be reversed and if globalization is to prove politically and economically sustainable.

18. If globalization and technological innovations have potential positive consequences for growth and employment, they also have potentially destabilizing effects upon the distribution of wealth and the collective bargaining process. The extent of countries' involvement in globalization is in no way limited by the existence of strong trade unions. In fact, the openness of economies and the benefits that result therefrom are even easier to maintain when the social partners are capable of guaranteeing wage-earners a reasonable measure of security in the face of change.

19. Capital mobility destabilizes the sheltered structure of wages that national industrial relations systems produced when market competition was largely a national matter. In many respects, the result is beneficial: increased competition drives productivity, encourages firms to be more cost-sensitive, generates high-paying investments in technology and innovation and holds down inflation. With greater locational choice, the cost of labour is on the negotiating table; wages, once taken out of competition, are now back in the competitive sphere. The problem affects low-skilled labour in particular which becomes readily available to enterprises once they have a certain degree of locational freedom.

20. Trade competition and capital mobility can thus have the effect of dividing workers at the national level. Capital mobility rewards very qualified workers, given that mobile capital seeks them out and bids up their wages, but the contrary is true for the less skilled who used to be protected from wage competition. Efforts by trade unions to boost the wages and conditions of less-skilled workers can also meet with greater resistance. By making firms more sensitive to labour costs, capital mobility can also make them more sensitive to union organizing campaigns.

21. The attempt to attract investment capital can also produce important behavioural changes in the exercise of freedom of association or in the industrial relations climate. Examples cited include the United Kingdom during the inflow in the 1980s, of Japanese investments; a form of pre-investment bargaining occurred which had the effect of transforming traditional industrial relations practices, notably single union recognition arrangements and no-strike clauses in collective bargaining agreements. Decisions on car industry investment in Latin America were often made contingent on prior trade union assent to conditions demanded by firms.

22. In reducing the independence of national macroeconomic policy, globalization enhances a firm's role as the primary engine of wealth and job creation. At the same time, it exposes the firm to heightened competition. It erodes the shelter in which firms used to operate and makes flexibility essential for responding to rapid product-market changes. Enterprises have responded by transforming how they organize work and production. In the process, industrial relations at the enterprise level have taken on greater importance.

23. The effort to promote flexibility and "lean" production has led to reduction in management layers. In many cases, these managers' responsibilities have been transferred directly to the shop-floor where technological innovations and information systems have reduced overall manufacturing employment and new methods of organization -- such as cross-functional teams and multiskilling -- have radically changed the nature of employment. The process of downsizing and reorganizing work has transformed the traditional system of highly segmented jobs and rigid job descriptions that prevailed as recently as the early 1980s in a number of industrialized countries.

24. While these new methods offer certain advantages to workers in the form of greater autonomy, responsibility and decision-making power, the benefits have frequently been offset by higher unemployment, reduced employment security, limited career prospects and a growing percentage of peripheral workers on casual, temporary or part-time contracts.

25. Existing industrial relations structures have, in many cases, been circumvented by new phenomena known generically as human resource management (HRM) policies. They may cover the organization of teamwork, training, payment systems, employee participation and personnel policy but do not yet appear to have resolved the tensions inherent in labour-management relationships. They do not address the treatment of trade unions and collective agreements.

26. These policies are sometimes introduced in collaboration with trade unions, particularly in Japan and Germany; in most cases, however, the collective representation bodies are not consulted. The report asks whether, in the final analysis, the architecture of future industrial relations will be largely determined by how employers and workers resolve the tension between cooperation-based policies, including HRM, and traditional industrial relations based on the collective representation of workers. The two need to be complementary for a number of reasons.

27. First, cooperation-based policies that rely on the dedication and commitment of employees and hence on the need to ensure a certain level of employment stability only relate to part of the workforce. Because there is also evidence of increasing recourse to precarious forms of employment, it will prove difficult in the absence of collective representation for workers with a precarious status to derive similar benefits to those enjoyed by full-time workers. Some problems will remain immune to direct cooperation-based solutions and recourse to other forums, including trade unions, will remain necessary.

28. Second, the innovations have so far been diffused in a restrictive and uneven manner. The results obtained and the changes implemented by HRM style solutions will vary greatly from country to country. Finally, industrial organizations, and in particular workers' organizations, frequently have to confront issues that extend beyond the boundaries of enterprises and, for these, collective forums for negotiation will prove necessary, be it at the local, sectoral or national levels.

The various forms of collective bargaining and
social dialogue

29. With the increasing autonomy of enterprises and decline of traditional industrial relations, problems of social cohesion have become a major source of concern in many countries. In this context, the report inquires how to reconcile the present trends of decentralization and individualization with labour regulations which reduce inequality and enhance employment security. It finds that social dialogue remains the best method of securing workers' well-being in the face of the new productivity requirements of enterprises. It notes, however, that the methods and goals of collective bargaining are evolving in a variety of new directions.

30. In industrialized countries, the report says that there are two major options: a voluntarist model which originated in England, but of which the United States is today the main proponent, and one which is observed particularly on the European Continent. The first model is identified as featuring decentralized bargaining which focuses on the economic protection of workers, with minimum state intervention. In the second, collective bargaining is coordinated at a more centralized level and seeks to promote both economic protection and greater social solidarity with considerably more extensive state intervention. In a third, more recent option based on the Japanese situation, collective bargaining is both decentralized as well as coordinated at national level.

31. Economic results are frequently explained as being the consequence of a particular industrial relations model: sound economic results are, as in the United States and the United Kingdom, sometimes explained by decentralization and deregulation; sometimes, as in Sweden and Japan in the past, and in Ireland and the Netherlands today, good performance is also due to sound regulation backed by broad social consensus. The report expounds the opinion that the vicissitudes of economic fortune and the difficulties of explaining their causes a posteriori do not make it possible to formulate a single, ideal model of industrial relations that is more conducive to economic growth than any other. In countries with a democratic regime, it is vital to determine the extent to which social dialogue can, today, counter the pressure exerted on social cohesion by increased unemployment and wage inequalities.

32. Collective bargaining has always been highly decentralized in certain countries such as the United States. Recently, there has been a marked shift towards the decentralization of bargaining in countries such as the United Kingdom and New Zealand. In countries where bargaining is conducted largely at enterprise level, unionization is a pillar of the process. Trade union membership levels in general are dwindling, particularly in the private sector. The first consequence is that the number of workers covered by collective agreements has diminished and, secondly, bargaining has focused more and more on the concessions necessary to boost enterprise competitivity and protect jobs.

33. In Western Europe, where unemployment levels have been high in recent years, the trend towards decentralization is growing: on the one hand, national and industry-wide bargaining are losing ground and, on the other, there is much more scope for enterprise negotiation on day-to-day productivity issues. Although entrenched traditional bargaining structures generally maintain the neutrality of the enterprise at the bargaining level, works councils are increasingly being developed to ferment dialogue and cooperation within industries and implement human resource development policies. Nevertheless, decentralization remains limited in the majority of Western European countries and industry-wide bargaining continues to play a major role there.

34. In Western Europe, collective bargaining focuses primarily on the issue of employment. The most frequent job-related topics in collective agreements address a reduction and reorganization of working time with wage moderation -- or even reduction -- as well as measures to ease access to employment, including hiring at reduced rates and increasing the number of apprenticeship places.

35. The enterprise-level bargaining system is the cornerstone of industrial relations in Japan; however, the decentralized Japanese system features highly influential forms of national coordination. Moreover, the State is a major protagonist in industrial relations, intervening via legislative action or through measures to promote, for example, employment policies benefiting industries, regions or categories of workers which have been placed in jeopardy by restructuring. The most prominent form of national coordination is the shunto (spring offensive), which organizes annual wage bargaining, the outcome of which directly affects only about 25 per cent of Japanese workers, but which sets a benchmark for wage increases in small and medium-sized enterprises where unionization levels are low.

36. The abruptness of the political and economic changes in Central and Eastern Europe are keenly felt in industrial relations, though to differing degrees. Trade unions are a major force in the transition to a market economy and collective bargaining has played an important role in maintaining social cohesion while allowing for much needed social restructuring.

37. Already the vast majority of transition countries have legislation based on the model of Western European countries, which authorizes collective bargaining at various levels. In spite of significant progress in building an industrial relations system, much remains to be done: the unions clearly have a leading role, but it is difficult for them to assume it in the absence of a group of employers whose interests and involvement are clearly identifiable, particularly at a sectoral level. Trade unions are also experiencing difficulties in gaining a base in small private sector enterprises, the number of which is constantly on the rise.

38. In developing countries as well, social dialogue and collective agreements are inhibited by precarious forms of employment and the fact that social protection applies to only a small section of the workforce. In Latin America, industrial relations suffer throughout the continent from the tradition of state intervention in the regulation of labour relations. In Asia, the mechanisms which facilitate social dialogue are underdeveloped in several countries. The proportion of employees covered by a collective agreement rarely exceeds 4 per cent in most countries. In Africa, the dominance of the agricultural and informal sectors severely limits the potential impact of tripartite or bipartite negotiations; although unions in many African countries have managed to become a recognized force, notably in the political sphere, their influence in the labour sphere has, on the whole, been limited.

Industrial relations and the informal sector

39. Trade unions, employers' associations and governments are paying increasing attention to workers in the vast and still growing informal sector in most developing countries. However, the heterogeneous nature of the jobs performed and differences in employment status make it difficult for informal sector workers to organize themselves. An added difficulty is that informal sector units operate on the fringe, if not outside, the legal and administrative framework. The question that needs to be asked is: which institutions and which industrial relations instruments can be used to overcome problems in the informal sector?

40. Despite various grass-roots organizing efforts, no strong collective actor has yet emerged in the informal sector. The associations that do exist tend to have a limited geographical coverage and well-defined, pragmatic objectives; indeed, they often break up as soon as these objectives are attained or no longer deemed relevant. Some associations are neighbourhood-based and may enjoy a measure of political clout. Others are trade-based and set up by operators dealing with the same suppliers and middlemen. Most are extremely fragile, lack managerial skills and offer only limited services. This has the effect of further reinforcing members' distrust in the actual value of collective action to solve their work-related problems.

41. In the past few years, however, trade unions have shown increasing interest in this question. Some of these efforts have sought to integrate informal sector workers into the union membership, sometimes as part of special departments. Others have centred on the creation of strategic links with informal sector associations by providing them with guidance and capacity-training services.

42. Employers' organizations for their part are perhaps in the best position to promote the modernization of informal sector activities with a potential for growth and technical upgrading. Some employers' organizations have started to look at small and micro-entrepreneurs as potential new members. If this is to succeed, employers' organizations need to diversify the services they provide beyond such traditional fields as disputes settlement and collective bargaining.

43. Whatever may be the assistance that trade unions and employers' organizations can provide, it remains clear that the State has a major role to play to help informal workers overcome their disadvantages. Indeed, very little is likely to be achieved and sustained in the absence of a favourable regulatory framework. The right of informal sector workers to join or create representative associations of their choosing, as well as state recognition of their role as interlocutors and/or partners in policy-making or programme implementation, are key enabling factors. Beyond that, what is required are supportive macroeconomic policies and government institutions and officials capable of dealing with the conditions under which the informal sector operates. Experience also suggests that coordination between central government and local level authorities often needs to be improved as in all the cases reviewed, central government agencies proved more supportive towards informal sector operators than authorities at the local level.

B. The repercussions for ILO activities

44. Over the next few years, the Office will continue examining and attempting to widen its understanding of the various aspects described in the report to try and help the industrial relations actors adjust to the challenges facing them and to encourage the adoption of industrial relations systems and practices -- thus paving the way for a balance between economic constraints and social justice, which is vital for maintaining social stability and democracy.


45. One thing is clear from the start: there is a need to update regularly the information contained in the statistical annex on industrial relations indicators and, in particular, on trade union membership data, trade union density rates and collective bargaining coverage rates; there is also a need to supplement this information to cover the largest possible number of countries, particularly the developing countries.

46. In this respect, the lack of data broken down by gender is a serious shortcoming because it prevents any formulation or evaluation of strategies and programmes likely to increase the female participation rate in trade unions; more generally, it fails to give any indication of the repercussions on women of changes occurring in the organization of work and production and in industrial relations.

47. Apart from statistical data, the Office should have a database on industrial relations systems and practices allowing it to keep abreast of developments in this area throughout the world and to inform the constituents of these. The Industrial Relations Information Network (IRNET), started in 1996-97, will continue to operate and be expanded over the next few years.

Trade unions

48. The report shows that trade unions, although somewhat weakened, are ready to take on the challenges of globalization and adopt new strategies to recover lost ground.

49. The ILO might support their efforts by attempting first and foremost to guarantee a better respect for the right to organize. The report recalls that in many countries, including countries in which freedom of association is guaranteed under the legislation, workers are subjected to repressive practices and encounter all sorts of difficulties when they try to set up trade unions, belong to a trade union or carry out trade union activities. This might quite justifiably raise doubts about the efficiency of the relevant legal provisions and the mechanisms designed to ensure their respect. Taking into account the cases dealt with by the Committee on Freedom of Association of the Governing Body and the jurisprudence of national competent courts or bodies, a survey might be carried out on anti-union practices and on the effectiveness of measures guaranteeing the right to organize. The study could also contain recommendations on ways to guarantee a better protection of the right to organize in practice, including possibly the adoption of new standards in the area.

50. The Office might also examine, provide information on and give support to strategies adopted by trade unions to adjust to new developments. The report mentions four broad headings under which these strategies tend to fall: the provision of new services provided to members; the recruitment of new members; the expansion of international cooperation; and the forging of new alliances with other organizations. It would be relevant to examine in detail the various initiatives taken by the trade unions in these various areas and the results they have obtained.

51. Of key importance to the future of trade unions is their ability to recruit new members and defend effectively their interests. In this respect, two categories of workers are particularly significant: women and workers in precarious employment relationships. Increasing the participation rate and influence of women in trade unions must continue to be a priority objective; consequently, any difficulties encountered or progress made in this respect, as well as measures that have proved successful, should continue to be systematically documented and evaluated by the Office.

52. The report also stresses the difficulty of organizing the increasing number of workers in atypical or precarious employment relationship who are only intermittently or loosely bound to the enterprise and who have few interests, including the workplace, in common. A survey could be conducted on the legal or practical difficulties preventing these workers from belonging to a trade union, the measures taken in various countries and sectors to overcome these difficulties and the success rate of these measures; the findings could then be made available to the constituents. This would supplement the work of the International Symposium to examine trade union action to further the interests of workers in the informal sector, homeworkers and workers engaged under contract labour, which is scheduled for 1998-99.

53. An examination could also be made of the changes introduced by trade unions to their member services and programmes of action and of the ways they adapt their structures and organizational and operational methods to the changes occurring in the composition of the labour force and in the organization of methods of production and operations within enterprises -- including the new strategies they adopt to cope with the internationalization of production.

Employers' organizations

54. The report stresses the need to consolidate employers' structures, but also the need to provide them with the capacity to adjust to an environment in the throes of constant change, dominated by the demands of competitiveness.

55. The ILO might back up their efforts by encouraging adjustments to the legal or regulatory framework, whenever it creates an obstacle to the setting up or running of employers' organizations. This is particularly the case in many former communist countries in central and eastern Europe. A systematic examination of legislation which has a direct or indirect impact on the setting up or running of employers' organizations might help towards drafting recommendations for change and thus provide a basis for the assistance that the Office gives to the employers' organizations in these countries.

56. The ILO might support their efforts by helping them improve their structures, propose new services commensurate with enterprises' needs, consolidate the skills of their staff and forge strategic alliances. This would enable employers' enterprises to be better equipped to cope with major social challenges, including job promotion and attempts to combat poverty.

57. The Office might accompany this adjustment process by helping employers' organizations implement an overall planning strategy allowing them to anticipate enterprises' needs, to adjust to these needs and to increase their representativity by improving the quality and range of their services -- particularly to meet the needs of small and medium-sized enterprises.

58. The ILO might also help employers' organizations in such areas as: improvement in productivity at enterprise level; promotion of industrial relations and good practices at the workplace; occupational safety and health; and the harnessing of human resources.

The new features of production

59. The report analyses the repercussions of the opening of national borders and increased capital mobility on industrial relations, whilst pointing out that much of the available information on this matter is still far from clear. In view of the fact that globalization of the economy is bound to continue -- even increase -- it is vital that the Office should, in the next few years, continue gathering information on the various forms this phenomenon takes in various countries and sectors and analysing their impact on employment and working conditions and industrial relations.

60. The report stresses that the manoeuvrability of States seems to have been considerably reduced whilst, at the same time, the State is being increasingly called upon everywhere to restore social cohesion which has been seriously undermined by movements of exclusion resulting from market forces. There can be no doubt that the issue of the repercussions of present economic trends on the autonomy or interdependency of national social policies and its corollary, the new responsibilities of the State, are of key importance and must be closely examined over the next few years.

61. The increasing autonomy of the enterprise and the individualization of labour relations, as well as the increased role of the enterprise as a spur to economic growth and job creation, clearly shows the need to pay greater attention to developments at the level of the individual enterprise. A first observation, albeit of a general nature, is that it would be relevant to look into enterprise practices more closely and to switch from macroeconomic or industry-wide surveys to microeconomic surveys -- which is not entirely devoid of problems because of the wide variety of situations involved.

62. The report points out that enterprises increasingly need more flexibility to be able to adjust to increased competition and describes the organizational changes they are introducing to guarantee this flexibility: the reorganization of labour, externalization of production and the establishment of micro-, small- and medium-sized enterprises in the vicinity of large enterprises which work on a subcontracting basis. These new forms of organization of production have had repercussions in the areas of employment, training, working and living conditions and industrial relations; indeed, they have been the object of various major programmes within the Office during the past few years, but much still remains to be done. As yet, no answer has been found to the question which will remain crucial to social policy during the next few years: how to ensure that enterprises and the economy have the necessary flexibility and potential for adjustment which they need to expand and create employment, whilst guaranteeing individuals the vital level of protection to maintain social cohesion.

63. In the area of industrial relations, the ILO will continue to identify and promote the changes required in the approaches of individuals, enterprises and industrial relations actors, as well as in the institutions and mechanisms regulating relations between them. In 1996-97, the ILO carried out a research programme on the role that collective bargaining and agreements between trade unions and employers might play in the introduction of measures to increase the flexibility of the labour market. In 1998-99, it will carry out a survey on the contribution of industrial relations to job creation and protection in a globalized economy.

64. In all countries, the changes occurring in the organization of production have completely disrupted the traditional employment relationship based on a lasting bond between the employer and the worker; they have given rise to a proliferation of atypical forms of employment which may cover widely varying situations in practice and be regulated by very different legal regulations. From the legal standpoint, there is a blurring of the differences between labour law and commercial law (or in an interpretation of these laws), which has significant implications for the protection of the persons concerned. During the past few years, the ILO has been prompted to adopt standards for some of these categories of employment, but there are still many areas which have been as yet unexplored. In particular, the widespread growth of self-employment, both in the industrialized and developing countries, raises a certain number of questions as to the legal system which should be applied and the protection of the persons in this type of occupation (leaving aside the organization of these persons which will be dealt with more in detail below). A systematic analysis of the way in which these issues are dealt with in the various countries and under the various legal systems would help towards improving the protection of self-employed workers as well as those working in ill-defined areas which are on the fringe of labour law.

65. Until now, attention has been focused, and quite rightly so, on the negative impact of new forms of organization of production on the safety and quality of jobs. There are also examples in which enterprises have had a positive impact on other enterprises belonging to a same group or network of production, by influencing them to adopt certain working conditions or practices in the area of industrial relations and human resources management. These cases might serve as an example and should be better documented and disseminated.

66. In view of the fact that the enterprise is a primary engine in economic performance and job creation, the ILO should place greater emphasis on establishing a climate of cooperation between the workers and employer within the enterprise and try to identify the most appropriate mechanisms to bring about this cooperation. An examination should be made of the role that might be played by the staff representative bodies -- works councils and/or trade unions -- and collective bargaining, as well as the new systems of personnel management or human resource management policies described in the report. More in-depth research should be carried out on the use of human resource management policies by enterprises to determine if they are widespread and look as if they are here to stay, to examine to what extent they go hand in hand with traditional bodies of worker representation and collective bargaining and to assess their capacity to regulate employment conditions and industrial relations in a way which satisfies both the enterprise and the workers.

67. Increased capital mobility implies that the approaches and practices of transnational and multinational enterprises assume greater significance. The Office must therefore step up its activities concerning industrial relations in multinationals. In 1998-99, it will carry out a survey on the representation, information, consultation and participatory mechanisms in multinational enterprises. This survey might for instance examine the appropriateness of adopting international directives or standards in this area.

Collective bargaining and social dialogue

68. The report notes that despite the fact traditional industrial relations instruments -- collective bargaining and social dialogue -- have been badly shaken by present trends, they have nevertheless proved to be capable of resisting and adjusting. Social dialogue, in particular, is becoming more necessary than ever before because it remains one of the best ways of reconciling the requirements of productivity and competitiveness of enterprises with the needs of worker protection and the maintenance of social cohesion. The report refers to the setting in motion of a process of adjustment by consensus of the labour market these past few years in a number of European countries, which has taken the form of social pacts.

69. The ILO will therefore step up its efforts to promote social dialogue at all levels. These efforts will first and foremost concentrate on persuading all the member States to accept the principle of a constant dialogue between trade unions, employers' organizations and the public authorities on national economic policies. Experience has shown that dialogue is vital to be able to predict and optimize the impact of these policies on employment and the situation of workers. The ILO will also help member States develop the practice of social dialogue, by continuing and extending technical cooperation programmes already under way in a number of regions. Emphasis will be laid on the strengthening of the technical capacity of the tripartite partners to participate effectively in dialogue and on the establishment or improvement of the legal and institutional framework within which this dialogue takes place.

70. The tendency to form regional groups, with a view to political and/or economic integration or improved coordination, presupposes a regional coordination of social policies and practices in the area of industrial relations. The regional dimension of social dialogue will also be an important issue in the next few years and the ILO will set out to promote tripartite consultation mechanisms at the regional level so that the social dimension might be integrated into policies adopted at this level. In 1998-99, it will examine the experience of existing regional groups (European Union, MERCOSUR, etc.) and the lessons which might be drawn from these examples for groups in the process of being formed.

71. The forms and content of collective bargaining are changing to adjust to the way enterprise policies and labour force needs are developing. A vital task for the Office will be to continue monitoring closely the development of practices in various countries closely, by gathering and regularly publishing statistics on the rates of coverage of collective agreements and data on the content of these agreements, and by systematically analysing the information collected. This will help it to decide upon some sort of approach to a number of vital questions which are being raised today and which have already attracted its attention. These questions are the following: In what circumstances is collective bargaining to establish employment conditions a positive or negative factor in economic performance? What are the causes and consequences of bargaining at enterprise-, industry-wide or national level? In particular, is there a specific level or form of bargaining which is most conducive to the economic performance of a country or enterprise? What contribution can collective bargaining make to employment protection, the promotion of flexibility within enterprises and the adaptability of workers, or to improvements in productivity and competitiveness?

72. The report strongly emphasizes that upholding social cohesion is one of the major functions of industrial relations and that individual and collective labour relations should be based more on cooperation than confrontation. Trying to find a way to prevent and settle labour disputes, which have always been one of the major concerns of industrial relations systems, is today taking on a new significance. A certain number of innovations are emerging both with respect to preventive procedures and disputes-settlement machinery, which are increasingly involving bodies independent from the State -- including private organizations. Bearing in mind the stakes at play and present developments, the Office will make the prevention of disputes and maintenance of social peace a major component in its programmes during the next few years.

The informal sector

73. The informal sector has specific characteristics and is outside the realm of traditional industrial relations systems. However, the objectives of industrial relations -- economic integration, social cohesion, democracy -- should also try to be attained in this sector. What is less certain is whether the institutions and mechanisms specific to industrial relations -- trade unions and employers' organizations, collective bargaining and social dialogue -- are applicable to the informal sector and whether other formula might not be found to guarantee better the defence of the interests of those working in this sector. The report does not claim to answer this question, pointing out the scarcity of the data and research on the institutional aspects of the informal sector and the as yet limited experience of the traditional industrial actors in this sector; it merely takes stock of information in this area. The first priority of the Office will therefore be to improve its knowledge in these areas. Two aspects should particularly be examined.

74. The first concerns the persons working in the sector. The report describes their heterogeneity as well as the extreme diversity and precarity of their working and living conditions, which makes it extremely difficult to classify them under the categories of workers in the formal sector -- and thus to bring them under the types of organization and regulation of industrial relations in this sector. Self-employment seems to be the most common form of employment, but it exists alongside a whole range of other forms which are ill-defined under the legal system with respect to labour law and social security, trade law, tax law or other branches of law. This has significant repercussions on the conditions under which these people work, on the income they earn from this work and on the protection -- or lack of protection -- that they receive. Drawing up a list of the various forms of employment or jobs in the informal sector and the legal regulations applying to them in the various countries would go a long way towards better comprehending the constraints weighing on workers in this sector and finding some sort of reply to the eternal but as yet unresolved question: How to improve the legal protection of these workers? Short of being able to bring non-wage workers under labour law, a more detailed understanding of the various regulations applying to them might make it possible to recommend the change or adjustment of some of these regulations which would be beneficial to them.

75. The second aspect concerns the institutions guaranteeing the representation and defence of the interests of persons working in the informal sector. Given that an improvement in conditions in the informal sector presupposes an efficient organization of these persons, an exhaustive examination of the experience in various countries with respect to the methods of organization in the informal sector would be relevant. This could involve drawing up a list of the existing organizations which defend and promote the interests of persons in the sector and analysing: the various forms these organizations might take (trade unions, associations of micro entrepreneurs, cooperatives, mutual insurance funds, etc.); the legal and practical obstacles preventing them from being set up and operating; the capacity of action of these organizations at various levels and in various areas; and the alliances or working arrangements these organizations have forged with the trade unions and employers' organizations. The findings of this research would be placed at the disposal of the constituents so that they might draw upon the examples that have proved to be the most effective.

76. The results of the work mentioned above might help us better comprehend work in the informal sector and its precarious nature, a trend which is on the increase in the industrialized countries, thereby enabling us to be better equipped to deal with it.

Geneva, 19 February 1998.

Updated by VC. Approved by NdW. Last update: 26 January 2000.