Among candidate countries, those from Central and Eastern Europe are those that have known the most radical changes in labour-management relations practices at enterprise level. The collapse of the Communist regime led to large scale privatization, deep restructuring and the birth of a myriad of new private enterprises.
This brought a general decline in trade union membership. There is also little formal institut- ionalisation of labour relations in terms of trade union recognition and of signing of collective agreements in newly-created private enterprises; the rapid growth of small and medium size enterprises –for example in services- has also found trade unions in difficulty of mustering an appropriate response. This is a trend in a context in which 50-60 per cent of all employees in candidate countries work for small units with less than 50 employees. In Slovakia, more than 97 per cent of workers are in units with less than 50 employees; among them, more than 80 per cent work for a micro enterprise with less than 10 employees.
Significant differences have also started to appear between property forms with regard to the contents of collective agreements. Private enterprises have been found to be signing fewer collective agreements, which in addition are less likely to cover particular issues, such as task assignment, job mobility, and work organisation.
Many foreign investors are not in favour of collective agreements. Considering the weight of foreign investment in the economies of candidate countries, especially those from Central and Eastern Europe –above 4 per cent of GDP in countries like Hungary, the Czech Republic, Latvia, Estonia- but also in small Southern countries like Malta and Cyprus, their im- pact on industrial relations practices is not negligible.
5 6
5 6 % GDP in recipient country CY: no data available
Foreign Direct Investment flows from the EU to the candidate countries, 1995-99
Their influence has also been important in the economic and social reforms, in countries such as Hungary, Poland and the Czech Republic where they have been most important so far in the region.
Foreign investment seems to be particularly important in certain sectors, such as textiles and clothing in the Czech Republic and Slovenia, food, drinks and tobacco in Bulgaria and Lithuania, chemicals in Estonia, Metal and mechanical engineering in Slovakia, vehicles in Poland, Slovenia, Czech Republic and Hungary. Their good performance in terms of exports could help
candidate countries to reach a better trade balance with EU countries, which remains negative for the time being (see below). At the same time, a relatively high proportion of foreign investment is in the service sector rather than in the trade sector, which suggests that a large part of it is directed at supplying the domestic market.
In terms of employment and economic growth, new private small and medium companies also constitute an important engine of economic development. Their performance in terms of industrial relations however are so far not satisfactory. Not only they generally do not adopt collective agreements, but they were also found, in countries like Bulgaria or Romania, not to provide workers with individual labour contracts on a significant scale. This tendency can be witnessed in many other Central and Eastern European countries.
Finally, the high proportion of self-employed people and the growth of a large informal sector also escape trade union control and state welfare regulations, and therefore operate in the same direction. More generally, the number of collective agreements signed at the enterprise level is very low, even in countries where collective bargaining is most prevalent, such as Hungary and Poland. Compared to enterprises in the EU, ownership structures are also much more complicated, with a much greater variety of property forms, a situation that contributed to the instability of industrial relations at the enterprise level. There can be a combination of public capital, domestic private capital, foreign investment, employee share- ownership, and sometimes even vouchers owned by either citizens of investment funds. Sometimes the management does not know which employers’ organisation it should belong to for the purpose of collective bargaining. In such a context, dominated by multiple owners, trade unions have also difficulty in elaborating a clear strategy. This 0 5 10 15 20 25 30 35 40 45 50 LT BG SI EE LV SK RO TU HU CZ PL 0 5 10 15 20 25 30 35 40 45 50 1995-97 1997-99
% Total EU FDI to candidates CY: no data available Distribution of EU foreign direct
investment flows to candidate countries, 1995-1999
Source: Eurostat, FDI
110 0 10 20 30 40 50 60 70 80 90 100 BG CZ EE LV LT PL SI SK 0 10 20 30 40 50 60 70 80 90 100 % FDI in manufacturing
Vehicles, other transport equip Electrical engineering, Radio, TV Metal, mechanical engineering Chemicals, petrol, plastics Food, drink, tobacco Textiles, clothing, misc manufactures
Distribution of EU foreign direct investment flows to candidate countries, 1995-1999
Source: Eurostat, FDI
111 0 10 20 30 40 50 60 70 80 90 100 BG CZ EE LV LT PL SI SK 0 10 20 30 40 50 60 70 80 90 100
% FDI inservices Business services, leasingBanking, insurance Transport, communications HORECA, other basic services Distributive trades Division of FDI in services
by sector, 1995-99
Source: Eurostat, FDI
112 0 10 20 30 40 50 60 70 80 90 100 BG CZ EE LV LT PL SI SK 0 10 20 30 40 50 60 70 80 90 100
% FDI inservices Business services, leasingBanking, insurance Transport, communications HORECA, other basic services Distributive trades
Trade flows between the EU and central and eastern Europe, 1992-2000
Source: Eurostat, External Trade
situation is even more complicated where works’ councils are in place.
Trade unions remain vulnerable with regard their presence in small and medium enterprises, although this category represents more than 90 per cent of enterprises in the ten CEE applicant countries. Although many EU Member States are also characterised by a large proportion of SMEs, their industrial relations’ culture and human resources’ management are better established than in these new market economies, where this process can thus be much more detrimental for working and employment conditions. It is a feature that should also be seen in the light of the absence of sectoral agreement and mechanisms and practices of extension. As a result, the percentage of employees covered by a collective agreement, either at sectoral or enterprise level, is rather low in candidate countries. This is also the case in Southern countries like Malta or Turkey where collective agreements would be covering less than 20 per cent of the labour force.
Finally, the above trends of collective bargaining casts some doubts on the ability of social partners to participate in the implementation in SMEs of certain elements of the acquis, such as health and safety or other technical requirements. that directly depends on management decision.
This sheds light on the necessary developments of forms of workers’ participation.