Institutions and Wage Formation in the New Europe

Institutions and Wage Formation in the New Europe

Edited by Gabriel Fagan, Francesco Paolo Mongelli and Julian Morgan

Institutions and Wage Formation in the New Europe addresses the role played by institutions in European wage formation with a focus on EMU and institutional change in labour markets.

Chapter 10: Centralized bargaining and reorganized work: Are they compatible?

Assar Lindbeck and Dennis J. Snower

Subjects: social policy and sociology, labour policy


Assar Lindbeck and Dennis J. Snower* 1 INTRODUCTION A large and growing literature documents the widespread reorganization of work within firms in advanced market economies. The evidence, as summarized in Section 2, indicates that the new breakthroughs in information and production technologies have made it profitable for firms to flatten the hierarchies of control and responsibility and to allow for greater decentralization of decision-making. In the traditional firms, work was divided into well-defined families of tasks, each often performed in a different department, such as the production, marketing, sales, accounting and product development departments. Production workers were often assigned highly specialized and monotonous tasks. Labour, like capital equipment, was treated as a single-purpose input; and this, in fact, is also the way labour and capital are depicted in mainstream production theory. In the contemporary reorganization of work, by contrast, firms use labour in more flexible and versatile ways. Workers increasingly combine different tasks in wide varieties of ways to suit the new production technologies, workers’ preferences for more varied work, and customers’ varied needs. Recent evidence suggests that the new forms of work are often organized around small, customer-oriented teams rather than large functional departments, with considerable discretion for both teams and individual workers. We will call the traditional organization of work, with substantial specialization by task and centralization of responsibilities, a ‘Tayloristic’ organization. The recently emerging work organization, characterized by multitasking and decentralization of work responsibilities, will be called ‘holistic’. In this context, we will interpret job rotation and...

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