Wage Determination in Australia, Britain, the United States of America, Germany, Sweden and Japan

WAGE DETERMINATION IN AUSTRALIA, BRITAIN, THE UNITED STATES OF AMERICA, GERMANY, SWEDEN AND JAPAN

Industrial relations systems and processes of wage determination vary depending on the relevant country. Historically Australia, Britain, Sweden Germany, The Untied States of America (USA) & Japan all have strong centralized industrial relations systems. All countries have undergone transformations in their processes of wage determination with a general trend towards decentralization with Sweden experiencing the most drastic transformation. Collective bargaining has been usurped by enterprise bargaining and individual contracts, such as the Australian Workplace Agreements (AWA's). The State plays a nominal role in the implementation of processes in each system remaining mostly as an implementer of the legislative framework and guidelines in almost all countries. Trade union density is declining in all countries due to economic and demographic issues. It is evident that a trend towards decentralization will continue throughout the various countries (EIRO 2002) due to the ever-increasing global competitiveness and labor market changes. Thus wages are more and more being negotiated and set at the enterprise or individual level. In light of the increased international competition it is apparent that decentralization of wage determination systems is advantageous. It allows for greater flexibility in job roles and links pay to performance-based criteria. Workers are more capable of establishing the rate they believe they are worth as they can individually negotiate pay rates with organizations.

The history of the establishment of industrial relations systems in countries is a crucial aspect when comparing and contrasting wage determination in each country. It sets the parameters to comprehend the use of divergent systems as well as putting into context the changes that each country has and is currently undergoing. For example, Sweden has embraced a dramatic transformational change towards decentralization, as well as to a lesser extent, Germany, Australia and Britain. Moreover the membership rates of the trade union is vital in representing drift towards decentralization of wage determination from collective bargaining agreements to enterprise and individual contracts.

Germany, Britain, Sweden, and Australia are countries that have historically had centralized wage determination systems in place with a current move towards decentralisation. Germany and Sweden represent countries that have shifted towards wage determination at predominantly the sectoral level (Carley 2001) with Australia also displaying this level of bargaining alongside enterprise level bargaining. Britain, the USA and Japan represent countries that determine wages predominantly at the company or individual level (Carley 2001). Whilst all countries participate in wage determination processes at both sectoral and company level in varying degrees, Japan represents a country that takes part in company level bargaining only (Carley 2001). Thus it is evident that collective bargaining for determining wage parameters remains more centralized in the European countries and Australia than in Japan and the USA. Table 1 highlights the wage bargaining levels in each country.

Germany, Sweden, Australia and Britain represent countries with traditionally highly centralized wage determination systems in place. Sweden is a nation where wages were developed at the national level utilizing collective bargaining with a low degree of wage differentials. Germany too utilised collective bargaining as a system of wage determination and work practices. The German system is seen to be highly 'ritualized' and 'formalized' (Furstenberg 1998). The same can be said about Sweden and Japan. However the Japanese system is based on ritualisation of policies at the company level. Australia also began with a highly centralized system based on the federal conciliation and arbitration system deployed in 1904 (Wailes & Lansbury 2000). Multi-employer bargaining or national bargaining had a well-established history in Britain (Goodman et al 1998) highlighting the 'formalized' approach to wage determination. The USA has experienced a longer history of implementing enterprise level bargaining structures. Whilst centralized agreements have been in place in the unionized sector (Wheeler & McClendon 1998) of the country, for the most part of the twentieth century the USA is a country with a strong focus on decentralised approaches.

Trade union density and membership rates have decreased in all countries with the move to decentralization (Carley 2001), which in turn, affect the way in which wages are determined in several countries. In order to remain globally competitive countries have adopted policies that allow the infrastructure to be more flexible. As systems have shifted to increasing the use of enterprise bargaining to establish wages the need to join a union has diminished. The role of the union to 'protect and advance the interests of its members by negotiating agreements with employers on pay and conditions of work' (ACAS 2004) has become more of an intermediary role providing assistance, training and guidance to its members. Trade unions have had to reinvent themselves. Trade unions density has declined in Germany, Australia, Sweden & Japan (Hassel 1999). Germany has seen a drop to about 30% (Schmidt & Dworsak 2003) membership and Japan at about 21% membership (The Economist 2003). Australia too has experienced a drop in trade union density (Wailes & Lansbury 2003) with a density of 31% in 1996 (Davis & Lansbury 1998). USA & Britain have maintained a fairly constant density rate (Carley 2001). The role of the trade union was principally to negotiate collective bargaining agreements and assure suitable working conditions for employees. As countries moved towards enterprise level agreements, the role of the trade union decreased. Yet, trade union activity is a major constituent of how wages are determined in each country.

In Sweden 87% of the workforce is unionized (NetCent Communications 2003). Union formation is an accepted part of the countries system. Unions are strong due to their 'organisational and political power' (Regini 1997, pp. 271). Trade unions do not require government approval to be founded. Moreover any trade union that is established is automatically covered by labour legislation. Therefore, it is rare for a new union to be founded as the unions in place perform well for their members. There is no minimum wage in Sweden as in Germany (Seibert 2002) and wages were established primarily by way of collective bargaining contracts. In addition unemployment benefit schemes were managed and maintained by the unions. The system was so well