Markets, Collective Bargaining and Legislation: A Comparison

• Author: Noel M. Cowell and Morley Gunderson
• Pages: 151-166

151

CHALLENGE OF WORKPLACE GOVERNANCE

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Legislation: A ComparisonLegislation: A Comparison

Legislation: A ComparisonLegislation: A Comparison

Legislation: A Comparison

There are three main mechanisms for regulating the employment

relationship: the unregulated market (sometimes termed private ordering);

collective bargaining; and legislation and regulation. Each of these mechanisms

has its proponents for dealing with policy issues. Economists tend to emphasise

the labour market through mechanisms such as compensating wage

differentials and market incentives. Industrial relations analysts tend to

emphasise the role of collective bargaining and such ancillary procedures as

joint committees. Policy makers, legislators and legal analysts tend to emphasise

the role of legislation and regulation for addressing policy problems.

Unfortunately, there is little cross-communication amongst these different

groups and disciplines for dealing with common labour market and industrial

relations policy issues.

The purpose of this paper is to discuss the pros and cons of these three

mechanisms for regulating employment relations in countries such as those

of the English-speaking Caribbean. Emphasis will be placed on the extent to

which they are complements or substitutes, the extent to which their effects

can be offset by responses from the other mechanisms, and the extent to

which each is subject to policy control. The emphasis will be on developing

the optimal combination of the three mechanisms, a combination that may

differ depending upon the specific policy in question.

Particular attention will be paid to the viability of the different mechanisms

under changing economic circumstances such as global competition, trade

liberalisation, increased capital flows and wider and deeper economic

integration with other economies. While the emphasis will be on the generic

framework of the three mechanisms, the policy relevance will be illustrated

by applying it to a number of issues that are of current policy relevance to

Caribbean countries such as labour adjustment, training, public sector

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152 HUMAN RESOURCE DEVELOPMENT

restructuring, and occupational health and safety. Some comparisons will

also be made with Canada because of certain similarities that exist between

Canada and the Caribbean. Such similarities include economies which are

small, open and dependent upon trade and foreign investment; resource based;

host to multinationals; lie in close proximity to the US and an emerging

integrated trade bloc throughout the Western Hemisphere; face a risk of being

left out or marginalised by those emerging trade arrangements, especially of

Spanish speaking countries (Hinojosa-Ojeda and McCleery, 1999). In

addition, Canada and the Caribbean are similar in having a variety of political

jurisdictions. In the Caribbean, labour matters are under the jurisdiction of

the separate countries while in Canada they are mainly under the jurisdiction

of the ten provincial governments. This latter point highlights the common

importance to both Caribbean countries and to Canada of fostering internal

competitiveness, respectively within the Caribbean and within Canada, as a

precondition for external competitiveness within or against the emerging larger

trading blocs.

Before discussing the pros and cons and interrelationship amongst the

mechanisms of the market, collective bargaining and legislation, a brief picture

is drawn of the external or environmental forces that are transforming the

employment relationship and hence placing pressures on the different

mechanisms for regulating that relationship.

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The employment relationship and the three mechanisms for regulating

it are shaped – indeed sometimes dictated – by a series of forces affecting the

demand and supply sides of the labour market and the institutions and legal

rules that permeate it.

Since the demand for labour is derived from the demand for the goods

and services produced by firms, then the market forces affecting firms will

have an obvious impact on the labour that is employed by those firms. Global

competition and trade liberalisation are putting pressure on firms to be flexible

and adaptable, to emphasise productivity to be competitive. For example,

with respect to labour inputs, countries can be competitive by enhancing

productivity or lowering real wages. The latter, however is a socially and

politically unpalatable option and a number of Caribbean writers have

documented the importance of enhanced productivity in fostering sustainable

growth in real wages (Brewster,1969; Downes et al.,1990). Economic

integration across countries has been both wider (more countries in regional