Concession Bargaining and Product Market Competition: The Experience of the Canadian Manufacturing Sector

Concession bargaining is often presented as a telling illustration of the transformation of the North-American industrial relations System — the result of fiercer product market competition. Whatever the imprecisions in definition and measurement, the notion of concession bargaining is based on an understanding widely held by unionized workers and their employers of a mutual but not necessarily equal exchange of concessions. It is generally defined as a type of bargaining which leads to union concessions on past gains in exchange, most of the time, for employer concessions on subjects which, in the North American industrial relations context, have been considered management rights.In light of the paucity of Canadian research on this subject, the present article seeks to respond to two questions. First, has concession bargaining in Canada given lise to a spiral of reciprocal concessions, signalling an indepth transformation of the industrial relations System, or to a merely temporary and contained phenomenon resulting from particularly difficult economic circumstances? Second, has this phenomenon spread to the entire Canadian economy or has it only affected the industries where competition is fiercest? The answers to these questions are based on the analysis of the evolution from the early 1980s to the early 1990s of two content indicators of a sample of 60 collective agreements in the Canadian manufacturing sector. The first indicator measures the frequency of gains and concessions made by the parties on 12 collective agreement clauses. The second indicator, the annual variations in real wages, measures a posteriori the effect of the agreements on wages and their indexation to the cost of living. The analysis of the indicator of agreement content shows that union concessions were more frequent during the economic recovery in the latter half of the 1980s, whereas employer concessions were more numerous during the 1982 recession and in the late 1980s. In fact, the number of union gains was higher than the number of concessions made for each of the four bargaining rounds studied. These results are far from being consistent with the win-win dynamic of concession bargaining. Unionized workers seem to make more concessions when they obtain fewer gains and vice versa. The significant lag between the relative frequency of union concessions and gains over time contradicts the idea of a mutual exchange of concessions between the parties. However, the type of concessions and gains corresponds more closely to the terms of exchange that have been observed in concession bargaining. Thus, the unions mainly make concessions on wages and on control over job content in exchange for improvements to the clauses related to job security and participation in management. A more detailed data analysis nevertheless shows that unions which have made these gains are certainly not those who have made concessions. The concept of a concession bargaining characterized by reciprocal concessions made on certain gains is not supported by the examination of the first indicator of the evolution of collective agreement content. If this indicator of the relative frequency of gains and concessions shows that there were fewer union concessions during the 1982 recession than during the economic recovery and expansion period which followed, it may be because the indicator did not accurately measure the real significance of these gains and concessions. The estimate of average annual variations in real wages, the second indicator examined, shows that wage conditions greatly deteriorated during the 1982 recession round, but then improved and nearly caught up in real terms during the two following rounds. On the basis of the latter findings, it is difficult to maintain that concession bargaining is other than a conjunctural phenomenon affecting more vulnerable firms and industries. The phenomenon of union (and management) concessions is far from being widespread in all industries. Although most of the agreements contained only a few union concessions in all the rounds, in a quarter of the agreements examined, there was at least one concession out of every ten clauses. Moreover, the variations in real wages indicate that the concessions might not only have been more significant than frequent, they also show the considerable differences between the improved agreements (more than 4 out of 10 agreements) and the average annual losses in real wages in the majority of agreements. In fact, it seems that nearly half of the unions involved took advantage of a more favourable context and were thus able to hold on to even improve gains made in the late 1970s.This hypothesis of the positive impact of a favourable context, and the negative impact of an unfavourable context, is supported in part by our multiple regression analysis. While the simple model of bargaining power cannot account for the relative frequency of concessions and gains, it was found that, for all the bargaining rounds, the average annual variations in real wages were negatively affected by greater product market competition, that is by a lower degree of concentration in the manufacturing sector and a higher level and growth of imports in the industry. The variations in real wages are also negatively correlated with the level of unionization. This more surprising result could be explained by the relatively significant gains made by workers in highly unionized sectors during the 1960s and 1970s, unionized workers who had more to lose in a context of strong competitive pressures on their firm.The analysis of these two content indicators for 60 collective agreements over more than a decade shows that neither the concept of concession bargaining based on a win-win dynamic nor the generalization of union concessions can be supported in the case of the Canadian manufacturing sector. The frequency and significance of the concessions fluctuate not only over time, but also by industry. In industries that are more affected by product market competition, there are more wage concessions. Although these results concur with those of American studies, they must be interpreted with caution given the limitations of the two indicators of the transformation of collective agreement content, the small size of the sample, the sometimes questionable quality of some sectoral data and the absence of indicators measuring firms' specific economic situation.Our research highlights not only the difficulty in interpreting collective agreements but also the range of compromises generated by the collective bargaining process. Union concessions do not appear to have spread in the Canadian manufacturing sector, and the very concept of concession bargaining drawn from the American literature does not appear to be highly relevant to the experience of this major sector. It may be risky to generalize the results of a study on the evolution of 60 collective agreements over a dozen years. However, these same results enjoin us to be just as cautious about generalizing the highly publieized concession bargaining cases in the 1980s and those of the social contracts negotiated more recently by several major firms in Quebec.

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