Industrial Relations
Central and Eastern Europe
MGT 4330
Introduction

End of WWII (1945)~~Fall of Socialism
(1989)
◦ Broadly similar among central and eastern
Europe countries.
◦ Lead by Communist Party.
◦ Trade unions were “transmission belts” to
assist in the implementation of state policies.
◦ State determine the pattern of industrial
relations
◦ Union membership was universal
Introduction

Fall of Socialism (1989)~~Present
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Communist parties was destroyed
Parliamentary democracies were established.
Government frequently lost power
International Trade
 Soviet Union Western Europe
◦ State owned enterprises were privatized.
◦ European Union (EU) membership
Country List
◦
Estonia - member of the European Union
◦
Latvia - member of the European Union
◦
Lithuania - member of the European Union
◦
Poland - member of the European Union
◦ Czech Republic - member of the European Union
◦
Slovakia - member of the European Union
◦
Hungary - member of the European Union
◦
Romania - member of the European Union
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Bulgaria - member of the European Union
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Slovenia - member of the European Union
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Croatia - an acceding state of the European Union
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Bosnia-Herzegovina
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Serbia
◦ Albania
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Montenegro
◦
Macedonia
Economy
Catastrophic Decline in 1990s
 By 2000, GDP exceeded the level of 1989.
 Growth rate substantially higher than in
Western Europe.
 High unemployment rate (Poland 19.4% in
2003)
 High deficits (Hungary 9% in 2006)

Core Values
Most post-communist citizens still strongly
mistrust and avoid organizations.
 Many of the private and informal networks
that developed under communism still
persist.
 Many post-communist citizens are extremely
dissatisfied with the new political and
economic system.
 Members often viewing their unions as part
of the enterprise organization, rather an
independent means of representing their
interests effectively.

Industrial Relations Segmentation
The state budget segment
 The privatized segment
 The private segment
 The multi-national corporate segment

Industrial Relations Segmentation

The state budget segment
◦ Senior officials were dismissed or demoted, after
collapse of socialist regime.
◦ System of centralized pay determination survived,
but its ability to provide for employees was
destroyed by inflation and crises in public sector
finances.
◦ Employees resigned for positions in private sector.
◦ To control deficit, government enforce wage
restriction on public sector workers.
 High turnover
 Increased corruption
 Sharp decline of living standard
Industrial Relations Segmentation

The privatized segment
◦ This segment refers to privatized, or about to
be privatized, major industrial sectors,
including coal mining, iron and steel,
transportation and telecommunication.
◦ Industrial relations determined by product
markets, labor markets, and political leverage.
◦ Privatization of manufacturing resulted in an
employment decline.
Industrial Relations Segmentation

The privatized segment (cont’d)
◦ Unions successfully used political pressure
and industrial action to protect employment
level in coal mining and iron and steel industry.
 Number of employee generally remain the same
from 2000-2003
 Relatively higher salary than other sector. ( See P. 97)
Industrial Relations Segmentation

The private segment
◦ Refers to small- and medium-sized firm in
distribution, tourism, financial service, and
small scale manufacturing.
◦ Limited organizations for both employees and
employers.
◦ Industrial relations are informal, based on
personal networks.
◦ Income level varies among industries. (Finance
sector vs. national average is 266:100)
Industrial Relations Segmentation

The multi-national corporate segment
◦ Multi-national firms from Western Europe
◦ Similar with North Mexican regions
 Cheap labor
 Low value added manufacturing and service
industry (Example, German clothing industry in
Poland; automobile industry in Czech Republic)
Industrial Relations Segmentation

The multi-national corporate segment
(cont’d)
◦ Follow their international human resource
policies and practice.
 Reduction in employment level
 Low union membership
 High flexibility (new payment system)
Poland
Collective Bargaining Coverage: 30%
Trade union density : 15%
24,000 local union
Firm level collective bargaining
NSZZ Solidarność, OPZZ, and FZZ
Significant number of union members are in small
local unions not affiliated to any of the main
confederations.
 Union membership is highest in education,
science and health, followed by transport and
communications, and mining and manufacturing. It
is lowest in commerce and services.
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Poland
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“Bonuses at Discretion”
◦ Based on the employer’s assessment
◦ Rather than objective justification

Employers in financial difficulties are able
to suspend collective agreements for up
to 3 years.
◦ By law this should be agreed with the trade
union organization in the workplace that
initially signed the agreement.
◦ Many employers ignore this legal requirement.
Poland

Union organizations should negotiate
jointly.
◦ At least 10% of the workforce in membership
– or 7% if the union organization concerned
belongs to one of the three nationally
representative unions, Solidarność, OPZZ and
FZZ.
◦ If no union represents at least 10% of the
workforce, then the agreement should be
signed with the largest union in the company.
Poland
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Poland has a national minimum wage which
is set by the government following
negotiations in the Tripartite Commission.
Works Council (in 2006)
◦ More than 50 employees
◦ EU directive on providing a national framework
for information and consultation.
◦ Powers works councils are limited to receiving
information on economic issues and being
consulted on employment and work organization
issues.
Macedonia
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Trade union density: 27.95%
Collective Bargaining Coverage: 100%
High level of unemployment (constantly over
32%)
Low level FDI and local investment
Trade unions are not important social actors,
as they are unable to promote and protect
the interests of employees.
Dominated by one trade union: the
Confederation of Trade Unions of Macedonia
(75%–80%)
Macedonia

Employer’s Union
◦ Employers’ Organization of Macedonia (ORM)
◦ The Business Chamber of Macedonia (BKM)
Labor Code apply a general collective
agreement for all employees in private
and public sector.
 Collective agreement at firm level covers
workers who are not members of union.

Macedonia
Public sector- National level collective
agreement
 Private sector- Firm level collective
agreement
 Union representatives

◦ legal assistance to its members and represent
the employees

Representatives for safety and health at work
◦ National wide expert advisory body