HRM, INSTITUTIONS, AND

THE ECONOMY

Dr Horen Voskeritsian
 • How are HR practices determined?
• Varieties of Capitalism
• The role of institutions
LECTURE • The importance of economic structure
CONTENT • Labour Market Deregulation &
Decentralisation
• Case study: Changes in the Greek Labour
Market
 DETERMINING HRM POLICIES AND
PRACTICES

• Hard (Low-road) vs Soft (High-road) HRM →

how do you decide which policies to implement?
• Remember the core management function: max
surplus value, min cost, min conflict
• Decision is not only strategic but, most
importantly, institutionally constrained
 VARIETIES OF CAPITALISM TYPOLOGY
( H AL L & SOSK I CE 2 0 0 1)

• Companies in different countries implement different HR policies

• Although we do observe within-country (and within-industry) divergencies,
macroscopically we can classify business behaviours and actions based on country
specificities
• One theory we use to do so is the Varieties of Capitalism typology
• Main principles:
• Firm-centred theory
• Capitalisms are different, as they have different types of institutions: labour markets, ER
systems, education and vocational training, corporate governance, intra-firm relations
• Two broad capitalism categories: Liberal Market Economies (LMEs) and Coordinated
Market Economies (CMEs)
 VARIETIES OF CAPITALISM TYPOLOGY
( H AL L & SOSK I CE 2 0 0 1)

LMEs CMEs
• Neo-liberal economic policies • Socially-oriented
• Focus on the market and on
• Important role of stakeholders
individualisation
• Shareholder-driven • Strong CB and SD institutions
• Deregulated LMs • The state is not just a regulator but drives
• Weak collective bargaining and social the LM outcomes
dialogue institutions • Strong vocational training and educational
• Weak TUs
systems
• Emphasis on the firm-level to derive
decisions about HR/ER • Strong labour market institutions
• Weak welfare state • Firms are important, but decisions also
• Weak vocational training – mostly firm- reached at sector/industry level; important
based role for organised labour
 VARIETIES OF CAPITALISM TYPOLOGY
( H AL L & SOSK I CE 2 0 0 1)

• Although this classification provides a rough guide to how

different capitalisms work, it has been challenged in recent
years due to changes in the characteristics of many CMEs
(e.g. Germany)
• ‘Silent’ about the role of power in ER
 THE INSTITUTIONAL CONTEXT

• The processes that determine how labour market outcomes will be reached – and the
quantitative and qualitative characteristics of such outcomes – constitute the institutional
context
• The institutional context is the set of rules that govern an employment relations system,
and define each actor’s rights and obligations
• E.g. labour law, collective bargaining rules, role of Trade Unions
• As such, the institutional context is the outcome of a power struggle between the three
actors
• E.g. trade unions were not always legitimate organisations, nor did they have the right to collective
bargaining
• The institutional context changes frequently – but it enjoys relatively long spells of stability
 THE INSTITUTIONAL CONTEXT

• Different institutional contexts generate different labour market

dynamics – and different outcomes
• The power of the actors differs according to the institutional
context
• Hence, labour market outcomes in Greece are different from
labour market outcomes in Sweden or in Germany or in the UK,
due to their different institutional contexts
 LABOUR MARKET ACTORS

• Much of the differences we observe in LM outcomes depends on the role and

power of ER actors in the LM:
• Labour
• Organised Labour (Trade Unions) & Unorganised Labour (Individual Workers)
• Capital
• Organised Capital (Employers’ Associations) & Unorganised Capital (Individual
Firms)
• State
• Welfare state
• The state as employer
• Role in the regulation of the market
 WHY ARE ER ACTORS IMPORTANT?

• Remember some of the core questions HR policies try to manage:

1. How much (are you going to pay a worker)?
2. What will be done (the job description)?
3. How will it be done (the labour process organization)?
4. For how long (working time and contractual type of the employment relationship)?
• The answer to these questions have important implications for an individual
firm’s and worker’s productivity, performance, compensation, work-life balance, etc
• But not only!
 WHY ARE ER ACTORS IMPORTANT?

• The answers to these questions also have implications far beyond the 1-1 relationship between an employer
and an employee. E.g.:
• The level of wages influences the aggregate wage bill in the economy, with important repercussions for inflation, growth
policy etc.
• How long workers work has important repercussions on their health and wider social relations (esp. family)
• The terms and conditions of employment implemented in one company may create adverse competitive conditions for
the rest of the industry
• Consequently, the State, as well as the trade unions and the employers’ associations, are interested in the
prev. Qs
• That is why there are policies and institutions beyond and outside the realm of the firm, that influence the
answer to these Qs.
• E.g. NMW, Health and Safety Regulations, Employment tribunals, Equality legislation, ALMPs, EPL etc.
• So, who determines the answers to these questions? To answer this we need to look closer into each LMs
characteristics and institutional framework
 LABOUR MARKET CHARACTERISTICS

• Levels of employment and unemployment

• Skills quality and availability
• Vocational training and general educational level
• Role and quality of collective bargaining
• LM flexibility
→ Types of jobs in the LM (FT vs Flexible or Atypical Employment) and their regulation
→ Entry barriers in a specific LM (e.g. closed shops; guilds; occupational licensing etc)
→ Employment Protection Legislation (EPL) (i.e. how easy is it to fire your employees?)
 BEYOND REGULATION

• The regulatory framework sets the context in which a variety of strategies may be
implemented
→ Despite the regulatory framework, a company may still decide to opt for hard or soft HR
policies
→ The regulatory context just defines the limits in which these policies can be implemented
→ E.g. it is illegal to pay someone below the NMW – but paying the NMW is regarded as a
‘hard’ HRM policy
• How companies interpret and implement the limits of the regulatory framework is a
strategic decision that depends on a variety of factors
 CAPITAL’S STRUCTURAL
CHARACTERISTICS

• The demographic characteristics of business units define their relative power, their HR
policies and practices, and the quality of ER at the shop-floor
• E.g. a small family business, employing two or three employees can be expected to have
quite different quality of ER than a large company
• Some important characteristics:
• Workplace size and firm structure
• Age of workplace
• Ownership and governance
 TYPE OF PRODUCTION PROCESS

• Manufacturing vs service → what kind?

• What kind of staff is required?
• Competing on price or quality? → i.e. emphasis on cheap mass production or on quality
products or services?
• Role of technology → augmenting or substituting labour?
• What role for your staff? → Cost to be reduced or value generators?
 POWER OF LABOUR (IN THE
WORKPLACE)

• Collective labour organisation (e.g. trade unions)

• Individual labour power (e.g. skilled labour, position in the labour
process)
• Labour’s power needs to be taken into consideration, as implementing
certain HR policies may be met with resistance
• Resistance may lead to overt conflict (e.g. strikes) or covert conflict
(e.g. withdrawal of cooperation, ‘exit’, decrease in productivity etc)
 DEREGULATION & DECENTRALISATION
OF LMS

• In the past decades LMs are going through a process of deregulation and decentralisation
(e.g. UK, Germany, South Europe)
• Deregulation: reducing the regulatory barriers to the operation of markets; increasing
flexibility in the LM
→ Introducing flexible forms of employment
→ Lifting entry barriers (e.g. closed shops, occupational licencing)
→ Reducing Employment Protection Legislation
→ The market is allowed to operate more ‘freely’
• Decentralisation:
→ Collective bargaining at sectoral level becomes weaker
→ Decisions are determined at firm-level either unilateraly or via individual bargaining
 IMPACT OF DEREGULATION ON HR
POLICIES

• Deregulation and decentralisation have two major effects:

→ Alter the power dynamics in the LM
→ Provide incentives to Capital to challenge the frontier of control
• How are HR practices affected?
→ Changes in types of employment
→ Impact on working time
→ Impact on wage policies
→ Impact on human capital development
→ Restructuring of labour process
 IMPACT OF DEREGULATION ON HR
POLICIES

• What policies are eventually followed is an empirical question

• Companies react to the same external changes in different ways
• Some follow hard practices, others soft, others a bundle of practices (combination
of hard and soft HRM)
• Which set of practices will be adopted depends eventually on the relative power of
C and L
• When L is strong (due to collective organising, or scarcity, or its position in the
production process) it can counteract the C’s offensive
 CASE STUDY:
DEREGULATION IN THE GREEK LM

• The 2008 financial crisis did not hit Greece as it did other industrial nations but was primarily manifested as a debt
crisis in 2009. Greece was the first EU member-state to face such a serious challenge – Portugal, Spain and Cyprus
soon followed suit, albeit in a different context
• In December 2009 the newly elected Greek government was involved in negotiations with the EU to address the
situation - very soon, the IMF was invited to assist, and the so-called Troika (IMF, ECB, EU Commission) was formed
• The aim of the Troika was to devise and suggest policies that would help Greece manage its debt problems and put
it back on a path of economic development
• In May 2010 the first (of eventually three) Memorandum of Understanding (MoU) was signed
• The MoU introduced a series of changes in public policy, macroeconomic management, public administration etc.,
building on a neo-liberal agenda
 INTERNAL DEVALUATION IN THE GR LM

• Due to Greece’s membership in the Eurozone, the Greek govt could not use monetary measures (i.e.
currency devaluation) to address the situation
• The solution promulgated by the Troika was a process of internal devaluation and product market reforms
• Emphasis on reducing labour cost – through structural reforms in the labour market
• That way, it was believed that Greece would increase its competitiveness in the external markets leading to a
spiral or economic growth
• However, limited improvements wereobserved…
• … primarily because Greece’s capitalistic model heavily depended (and still does) on internal consumption…
• … and because the profit-margins remained largely intact…
 THE NEW LM ENVIRONMENT

• A series of laws since 2010 transformed the IR institutional framework.

• Liberalisation of EPL:
• Changes in the collective redundancies framework;
• Flexibilisation of the labour mkt (atypical forms of employment, different T&C for young employees (i.e. >25 yrs),
flexible working time arrangements etc.)
• Structural changes in collective labour law:
• Reduction of the NMW (25%-35%) and statutory regulation of its level
• Decentralisation of CB
• Changes in the institution of mediation & arbitration (which were revoked as unconstitutional by Greece’s
Supreme Court in 2015)
 CONSEQUENCES

On the Labour Market: On Employment Relations:

• Rise in unemployment (esp. among young and
women)
• Decline in wages
• Increase in flexible forms of employment (PT,
Temporary work) as well as in involuntary
PTE
• Brain-drain, esp. of high-skilled employees
• Decline in TU reach and power
• Decline of social dialogue and in sectoral and
occupational CA; increase in company level CA and
individual agreements
• Rise of paternalistic and/or adversarial managerial
practices
• Rise of ‘yellow’ unions
• Rise of illegal activities
• FT employment ‘disguised’ as PT employment
• Non-payment of wages
• Non compliance with NMW
• Working time violations
 Forth, J. & Reberioux, A. (2016) “Workplace Structure and
Governance: How do Employers Differ Between Britain and
France?”. In Amosse, T. et al. (eds.) Comparative Workplace
Employment Relations. London: Palgrave.
Forth, J. & Reberioux, A. (2016) “Workplace Structure and
Governance: How do Employers Differ Between Britain and
France?”. In Amosse, T. et al. (eds.) Comparative Workplace
Employment Relations. London: Palgrave.
Kornelakis, A. and Voskeritsian, H. (2014) “The transformation of
employment regulation in Greece: Towards a dysfunctional
liberal market economy?” Relations Industrielles/Industrial
Relations, 69 (2): 344-65.
Koukiadaki, A. & Kokkinou, C. (2016) “Deconstructing the Greek
SUGGESTIVE system of industrial relations”, European Journal of Industrial
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Voskeritsian, Horen, and Andreas Kornelakis. 2019. “Power,
Institutional Change, and the Transformation of Greek
Employment Relations.” Pp. 14–30 in Greek Employment
Relations in Crisis: Problems, Challenges and Prospects, edited
by H.Voskeritsian, P. Kapotas, and C. Niforou. London:
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