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Can collective bargaining create a fairer economy?

Can collective bargaining create a fairer economy?

Collective bargaining allows employers, employers’ organizations and trade unions to address work-related issues together and negotiate a collective agreement. A collective agreement typically covers issues such as wages, working time and other working conditions, and outlines the rights and responsibilities of the workers and employers involved.

Explore this InfoStory to discover the impact of collective bargaining on the economy, businesses and working lives.

Garment factory workers in Jordan, 2016. © ILO

Workers around the world are finding it hard to make their voices heard

Construction workers building eco-friendly demo houses, Zambia, 2015. © ILO

The global economy is growing but labour share is falling

Scenes from the municipal market in Tucuru, Guatemala, 2018. © UN Women/Ryan Brown

Inequality between the top and bottom earners increased in many countries

Mexico City's Santa Fe neighbourhood in Mexico, 2016. © John Miller

Collective bargaining is a key means through which workers and employers can establish fair wages and working conditions

Steelworkers in the United States of America, 2014. © Espen Rasmussen/Panos Pictures

Bargaining can cover many issues that benefit both businesses and workers

Choose a country to learn about successful case studies

Germany: Flexibility and working time innovation

In February 2018 the metalworkers’ union IG Metall signed a cutting-edge collective bargaining agreement with the employers’ organization S├╝dwestmetall enabling workers to renegotiate working hours according to their preferences and thus improve their work–life balance.

The agreement includes a 4.3 per cent pay rise from April 2018, plus much greater flexibility including reduced working time to 28 hours a week for those who want or need it, and a choice for those workers who have children still in education, are caring for dependent parents, or are shift workers of an additional pay rise in 2019 or extra paid days off.

All workers will receive a supplement of 27.5 per cent of a monthly wage, to be paid for the first time in July 2019 together with a one-off payment of €400. In return, the employers can recruit a higher proportion of employees on contracts with longer working hours (up to 40 hours a week) to balance the reduction in working time.

The collective agreement covers around 900,000 workers in the metal and electrical industries in Baden-W├╝rttemberg.

Australia: Addressing violence at work

In Australia, it is estimated that some 350,000 women experience domestic violence annually, two-thirds of whom are in the labour force. The impact of domestic violence on workers is significant, with one national survey showing that 25% of employees experienced domestic violence at some point in their lives. 

Domestic violence can impact on a survivor’s ability to get to work, and to perform their job effectively once at work. Stalking and violence can also extend to the workplace itself, and workers in abusive relationships may have trouble holding down a job, exacerbating their isolation and vulnerability. Employment and a supportive work environment are seen as key factors contributing to a survivor’s economic independence, and ultimately their ability to leave an abusive relationship. 

Domestic violence has emerged as a new workplace bargaining issue. Collective bargaining on domestic violence widens the reach of the employment relationship by recognizing the intersection of the private and work domains and represents a qualitative new step. Domestic violence clauses that were pioneered in Australia represent a new topic of bargaining and a new industrial issue.

The first domestic violence clause successfully negotiated was between the Australian Services Union Victorian Authorities and Services Branch and the Surf Coast Shire Council in 2010 (Surf Coast Shire Council Enterprise Agreement 2010-2013). The clause made news in Australia as the parties negotiated up to twenty days paid leave per year for victims of domestic violence.

By 2015, 944 agreements contained a domestic violence clause, covering 804,649 employees, predominantly in the private sector, across a broad range of industries such as retail, public transport, banking, education, manufacturing, airline and maritime, and including some of the country’s largest employers.

United States: Facilitating positive change

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Kaiser Permanente is one of the largest US private health-care providers, employing over 180,000 people. In 1997, the company and the Coalition of Kaiser Permanente Unions (CKPU, representing 57,000 workers at the time) agreed on a national Labour-Management Partnership (LMP). This agreement would guide negotiations aimed at improving working conditions and employee participation, as well as improving efficiency and quality of services. The agreement has since transformed labour relations within Kaiser Permanente.

In 2012, Kaiser Permanente and the CKPU successfully negotiated the largest private sector collective agreement in the US at the time, covering workers in 28 unions at hundreds of health-care facilities in nine states. The agreement reinforces the commitment to partnership, increases wages, protects and improves benefits and provides measures to control costs. One key pillar of the collective agreement is joint workforce development, which includes training. The agreement aims to benefit all stakeholders by improving conditions for workers while simultaneously improving performance.

This regional and national collective agreement has been renewed in 2015 and 2018, the latter with an enlarged group of union signatories: the CPKU representing 83,000 workers and the Alliance of Health-Care Unions representing 49,000 workers. The agreement continues to focus on using workplace cooperation to improve productivity, efficiency and service while reducing costs, and provides both guaranteed and incentive-based wage increases, among many other benefits.

The core of the agreement is the development of unit-based work teams, who ensure that sound and productive labour relations are not confined to bargaining rounds but maintained throughout Kaiser Permanente workplaces. These teams have the ability to create real change by bringing their expertise to bear on work processes.

In 2014, the Couriers team in Colorado examined outsourcing practices, resulting in the decision to hire an additional employee and improve routes, thus reducing the use of outside contractors. The team also improved their workflow with new technology and processes. These measures resulted in considerable cost savings that would not have been possible without direct input from workers.

India: Informal workers stick together

In India, around 90 per cent of the workforce is part of the informal economy. This includes incense stick rollers, the vast majority of whom do not have a formal employer, but instead buy raw materials from a wholesaler who then buys back the finished product. In addition to earning income well below the minimum wage, incense stick rollers often conduct their work in dark, cramped conditions in the home with long working hours. However, Self Employed Women's Association (SEWA) of India has shown that perseverance makes anything possible. Founded in 1972, but not recognized as a national trade union until 2009, SEWA has become a force to be reckoned with in the informal sector.

When SEWA entered into negotiations with the Employers Association of The Incense Stick Trade, their core goal was to fix a minimum rate of pay for incense stick rollers. This proposal initially met with strong resistance from employers, who insisted that they would be forced to raise their selling prices. However, SEWA demonstrated that without a minimum wage, workers could not afford nutritious food, housing and other basic living needs. A fixed rate based on output was successfully negotiated, with provisions for review and further increase every two years.

Over the course of ten years, wages for incense stick rollers increased dramatically and standards of living improved in line with this. Most notably, workers in this sector are now more likely to keep their children in education and put income aside for the future. In addition, SEWA successfully negotiated for medical benefits, as well as toolkits and training which will allow workers to improve their skills and productivity. Informal workers have gained the voice and visibility they need to continue improving their working conditions. The President of the Employers Association of the Incense Stick Trade described the agreement as a win-win situation and expressed confidence that all future disputes can be solved satisfactorily now that mutual trust has been established.

Jordan: Productivity and equality

Jordan’s apparel industry accounts for over 17 per cent of total exports and employs nearly 60,000 workers. Two-thirds of textile workers are female and over 70 per cent are migrants, who are vulnerable to unacceptable practices such as paying fees to gain access to employment. These practices – along with poor working conditions and low wages – had resulted in industrial action, with long, drawn-out strikes impacting negatively on productivity.

In May 2013, a collective agreement was signed for the apparel industry in Jordan. The agreement covered all workers in the sector, regulating working hours and wages as well as improving occupational safety. The agreement eliminated distinctions between migrants and Jordanians, and between male and female workers.

Additionally, the parties would work to ensure that no worker is charged fees for their employment, that no worker can be made redundant for having used a labour supplier, and that all subcontractors automatically became parties to the agreement.

Further progress was made in 2015, with the parties agreeing to a unified employment contract for migrant workers that provided for common terms and conditions of employment. The Government has now made the provision of work permits subject to the use of the unified contract.

Thanks to the agreement, the number of industrial disputes has been reduced, bringing greater stability to the sector. Better working conditions have resulted in a reduction in staff turnover, which has in turn generated increases in productivity and allowed Jordan’s garment sector to grow rapidly.

The parties signed a new agreement in 2015, introducing new elements related to seniority bonuses, payslips, health care, nurseries, and training. The Agreement also commits the parties to support the establishment of workers’ centres in industrial zones.

South Africa: Regularizing casual workers

Transnet SOC Limited is a freight and transport handling company in South Africa. It has five divisions, including Transnet Port Terminals (TPT) and Transnet Freight Rail, the largest division. TPT includes both the Durban Container Terminal and the Port of Richards Bay’s mineral bulk operations (imports and exports), which operate 24 hours a day, 7 days a week. They are subject to considerable fluctuations in shipping volumes entering and leaving port, and subsequently in the demand for labour.

For years, the Terminals were staffed by a combination of full-time employees on indefinite contracts, and casual employees engaged through labour brokers. Despite performing identical work, casual workers earned less, had fewer benefits and no job security as compared to permanent staff. The Transnet Bargaining Council reached a collective agreement on fixed-term workers, committing to regularize into indefinite contracts 300 employees in TPT, and 1,472 in Transnet Freight Rail by end March 2016. The agreement provides that Transnet directly employ fixed-term workers on terms and conditions (including remuneration, bonuses, leave and a variety of other allowances and benefits) set out in the collective agreement. As a result, these workers will no longer be employed through labour brokers. Through social dialogue, parties were able to address the issue of the use of labour brokers.

The atmosphere for industrial relations has shifted from mistrust and confrontation to more positive relations. The number of days lost due to industrial action in TPT fell from an average of 13.5 days (2010-2011) at the Durban Container Terminal and Port of Richards Bay, to 0.5 days and 0.35 days (August 2014), respectively.

Uganda: Constructive dialogue

The Bujagali Hydropower Project on the Victoria Nile in Uganda was financed by the International Finance Corporation with performance requirements that emphasized respect for freedom of association and collective bargaining rights.

The Uganda Building Workers Union (UBWU) with assistance from the Building and Woodworkers International Union (BWI) was able to use these performance requirements as a lever to win recognition from the principal contractor. Three collective bargaining agreements were negotiated over the course of the construction project. The UBWU bargained for wages higher than the local construction industry average, helped to ensure that the recruitment of workers was fair and based on skills rather than connections, and guaranteed that workers had access to an on-site medical clinic. Health and Safety provisions were also comprehensive, with no fatalities occurring due to construction work.

Throughout the course of the project, disputes were solved through dialogue and not by unilateral management action. As a result, there were no wildcat strikes or sabotage, which often lead to cost and time overruns. Many development projects also suffer from cross-cultural communication problems, frequently caused by managers who are unaware of cultural sensitivities. The existence of the collective agreement and the commitment to dialogue significantly reduced such problems.


Dialogue and equity are at the heart of collective bargaining and help to build stable, decent societies

Bipartite meeting in a local garment factory, part of the Better Work Programme, Indonesia, 2014. © ILO

The key to sound labour relations

With commitment from policy-makers, and the organizing efforts and actions of employers and trade unions, collective bargaining can create a fairer economy.

Workers at a fruit processing station, Tunisia, 2016. © ILO

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