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A well-functioning economy is required to deliver goods and services to citizens, therefore a desirable outcome is economic efficiency at multiple levels, national, industry and organisational. The achievement of economic efficiency may be measured by several indicators, among others competitiveness and productivity. Parsons (2013) makes the point that productivity as a concept is ideologically neutral in that it is not linked to capitalism or socialism. Thus, if the benefits of productivity are shared through fair distribution, it can build consensus and social cohesion.

At a national level, the World Economic Forum’s (WEF) Global Competitiveness Report (GCR), proposes that competitiveness is delivered by productivity. The GCR, the International Labour Organisation (ILO) studies on productivity improvements, and South African labour market texts emphasize the societal factors that need to be in place to promote productivity. These factors may include infrastructure, health and education systems to ensure a quality workforce, financial systems, labour and product markets, social-political consensus and stability (Barker, 2015; Prokopenko, 1987; Schwab, 2016).

In the labour market, flexibility is considered a key component of productivity. The two ideal forms of Varieties of Capitalism, LME and CME approach labour market flexibility differently. In the LME approach, labour market flexibility looks for cooperative labour-management relationships; decentralisation of wage-setting and wage flexibility; flexibility of contract, which would include atypical work, the ease with which employees may be hired or fired and retrenchments; the alignment of pay and productivity; flexible working conditions and work organisation featuring team work and multi-skilling (Barker , 2015; Schwab, 2016).

In the CME’s, securing flexibility and cooperative labour-management relationships is approached differently. The concern is that labour market flexibility should not impact labour

46 rights. Regulated flexibility, or flexicurity as it is called in Europe, is a term which combines limits and mechanisms to find a balance between an employer’s interest in flexibility and the employees’ interest in security. Here employment security has been expanded beyond job security to consider protection against unjustified or unfair dismissal, life-long training and development and support during job transitions through social security (Van Eck, 2013; 2014). The WEF GCR report gathers information from business people in each country. The questions in the labour market functioning section reflect the underlying principles of a Liberal Market Economy, deregulated market approach. To illustrate the differences between the LME and the CME approaches to the labour market, the rankings of countries considered to represent models of the two ideal forms of LME and CME are taken from the 2017 WEF GCR and shown below in Table 2.1. In the table the lower the number, the more favourable the result. The competitiveness of each country shows that they are all considered highly competitive economies. However, the rankings illustrate interesting differences in the approach to the labour market. Of interest was the flexibility of wage determination, hiring and firing practices and social security for job losses in the form of redundancy pay across the five economies. The CME countries generally favour more centralised wage determination, have more labour friendly rules regarding hiring and firing practices, and offer better social security.

Table 2.1: Comparison of competitiveness and labour market efficiency, LME versus CME

WEF 2017 LME CME

US UK Germany Netherlands Sweden

Competitiveness 3 7 5 4 6

Labour market efficiency 4 5 22 14 18

 Labour-management cooperation 30 15 25 6 5  Flexibility of wage determination 19 14 126 127 132

 Hiring and firing practices 7 9 43 49 109

 Pay and productivity 8 19 10 25 31

 Redundancy pay -weeks 1 28 94 23 58

(Reference Schwab, 2017)

Factors at the national level provide the context for industry and organisational level competitiveness. At an organisational level there is reasonable consensus from human resource management, employment relations and labour market writers that competitive advantage and productivity is affected by the knowledge, skills and competence of management and employees, the rewards policies and practices, the flexibility of organisation, work design and the internal labour market, the decision-making structures which include the participation and involvement of employees and the resultant quality of the relationships between management and employees either as individuals or collectives (Barker, 2015; Brewster , et al., 2003; Prokopenko, 1987).

47 A well-functioning economy could also be defined as that which delivers, not only goods and services, but quality of life to all its citizens (Douwes Dekker, 1998). This requires that the goals are expanded beyond economic efficiency to include social justice. While a just society may be said to be one that distributes wealth, rights, power and opportunities in the right way, the right way is embedded in different ideological views (Freeden, 1998; Sandel, 2010).

The International Labour Organisation (ILO) offers a normative definition of social justice which is based on equality of rights and the possibility for all human beings, without discrimination, to benefit from economic and social progress everywhere. It is about promoting rights, dignity and voice as well as economic, social and political empowerment (ILO, 2011).

Employment relations theorists, in conformance with the ILO perspective, state that efficiency, as promoted by orthodox economists, is focused on market performance whereas the objective, from an institutional perspective, is to achieve a balance of economic performance, equity and voice. This encompasses fairness and justice, human development and self-actualisation, and participation in the economy through industrial democracy and social dialogue at all levels (Bennett & Kaufman, 2008; Budd, 2004; Delaney, 2008). Such an approach encourages trust and both Brewster, et al., (2003) and Parsons (2013) highlight that low trust inhibits economic activity and high trust is associated with better economic performance.

Social justice is viewed as very difficult to measure and there is no single agreed set of measures. However, in the analytical framework (Figure 2.1), the social justice indictors outlined in the European Union Index report were used. The index groups social justice under six pillars: poverty prevention, equitable education, health, labour market access which includes unemployment and atypical employment, social cohesion which includes non- discrimination, inequality, social inclusion and integration and lastly, intergenerational justice which looks to secure the future and offer social protection (Schraad-Tischler, 2015). All the social justice indicators are outcomes of agreements forged between the economic actors at national, industry or organisational level.

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Figure 2.3: A model of the employment relations system outputs and economic system outcomes17

The proposed relationship between the outputs of the employment relations system, institutional architecture, relational factors, attitudes and behaviours and agreements and the outcomes of economic efficiency and social justice is shown in figure 2.3 above.

In the diagram, the institutional architecture provides the opportunity for the emergence of multiple relationships. In interactions characterised by legitimacy, respect and perceptions of fairness, a virtuous consequence may emerge where the parties to the relationships develop trust, which is both reinvested in the original relationships but becomes social capital to be invested in the other interactions. Whether or not the virtuous circle develops within the relationships, the relationships, as independent entities, constitute intervening variables between the attitudes and behaviours of the parties and individuals and any agreements that may be forged between parties. The attitudes, behaviours and the agreements may be positive or negative and may have positive or negative consequences for economic efficiency and social justice and for modifications to the institutional architecture. It is proposed in the diagram that the level of satisfaction with agreements would also have direct consequences for the nature of the relationships. The diagram also proposes that social inclusion and social integration which contribute to the development of social cohesion may be achieved directly by the institutional architecture.

17 _{Diagram developed by the author}

Multiple Relationships Agreements Institutional architecture (Markets, organisations, actors, structures & processes) Satisfaction with agreements Legitimacy Fairness Respect Social Capital: Trust Attitudes & behaviours Relational factors Economic efficiency Social Justice Social inclusion Social integration

49 The next section, Section 2.4 deals with collective bargaining and employee participation. Sub-section 2.4.1 covers the concepts of involvement and participation, and sub-sections 2.4.2 and 2.4.3 deal with aspects of participations, namely collective bargaining and works councils. This section continues with Section 2.4.4 which considers what influences participation and the consequences of participation. Sub-section 2.4.4.1 looks at bargaining structure, sub-section 2.4.4.2 the consequences of increased wages and conditions of employment and sub-section 2.4.4.3 the consequences of trade unions active participation. Section 2.4.5 examines employee involvement in more detail.

2.4 Institutional architecture: collective bargaining, employee participation and