Abstract
This article first outlines the main features of social dialogue and collective bargaining in Slovenia during the 1990s. It then identifies the main changes affecting actors and processes that emerged in the 2000s and during the recent economic crisis. The highly coordinated Slovenian system of the 1990s has been exposed to strong socio-economic shocks in the 2000s. Under pressure from these shocks the system’s capacity for coordination has been weakened. Nevertheless, all attempts to replace social dialogue structures by unilaterally imposed government policies have been basically unsuccessful.
After a relatively dramatic separation from the former Yugoslav federation, which culminated in the 10-day war in mid-1991, Slovenia gradually advanced to a market economy without any major social and political disturbances. The process was concluded with its accession to the EU (2004) and to the euro area (2007). During that period Slovenia experienced high growth rates of about 4 per cent (Silva-Jauregui, 2004: 117). The unemployment rate reached a peak of 9 per cent in the early 1990s and has gradually declined since then (Vodopivec, 2004: 298–299). During the decade of economic growth, from (approximately) the mid-1990s to the mid-2000s, the annual inflation rate was relatively high, at 6 to 9 per cent (Silva-Jauregui, 2004: 119). It was a serious problem, which was treated as one of the central policy issues. By means of the centralized collective bargaining system, comparatively developed social dialogue and corresponding political exchanges (Stanojević and Krašovec, 2010), different governments ensured the necessary support of the social partners and kept the inflation rate at a level that enabled Slovenia to enter the euro area in 2007. Therefore, during the adaptation to EU standards and the EMU regime Slovenia developed a type of internal regulation that was close to a coordinated market economy (Hall and Soskice, 2001).
By mid-2000 the system had been exposed to a series of socio-economic shocks. From that point, changes for actors, some modifications of the collective bargaining system and problems and obstruction within social dialogue processes started to occur. In this article we describe and evaluate these changes. We intend to show that the Slovenian system is changing, but that it is prone to political instability when exposed to pressures for radical change. Under pressure from neoliberal ideas, reinforced in the current financial crisis, it has been transformed, but it is (still) resistant to the full neoliberal turn.
Approaching the EU: neocorporatism in the 1990s
The formation of the Slovenian ‘post-communist’ industrial relations system was heavily influenced by the emergence of strong interest organizations, especially the strong trade union movement. In the late 1980s, the movement was to a large extent fuelled by the disintegration of the domestic (Yugoslav) market and by the correspondingly growing workers’ discontent. In the context of the transformational depression and the formation of a new political and economic system, the first democratically elected governments were simply not in a position to ignore this massive and relatively organized social force when trying to resolve pressing contemporary economic and social issues.
The main feature of the Slovenian economy at the beginning of the transition process was the excessive prevalence of large companies from the metal, machine and chemical/pharmaceutical industries. Within the Yugoslav economic system all these companies were strongly embedded in the sheltered Yugoslav market, but in the Slovenian case they were also, compared to companies from other parts of the former Yugoslavia, more systematically involved in Western markets. This intermediary position of Slovenian companies was one of the main factors in rapid Slovenian economic development during the period of Yugoslav ‘communism’ (Jaklič et al., 2009; Prunk, 1997). During the transformation of the political system and the disintegration of the (former) domestic Yugoslav market, however, the entire economy was put under additional pressure and forced to reorient completely towards Western markets. This kind of reorientation was the only survival strategy for companies, but also for the economy and for the new national state in general. At the beginning of the transition these vital companies’ interests were systematically articulated and supported by the single employers’ organization, the Chamber of Commerce and Industry of Slovenia. Membership of the Chamber was obligatory at that time. The largest, already strongly export-oriented companies were traditionally most influential.
Against that background, in circumstances in which formerly dominant political forces were gradually losing influence and new political parties were gaining ground, the proportional electoral system was adopted. The system induced the formation of political coalitions and moderate, reform-oriented policies (Wilensky, 2002: 121).
In 1992, a law on privatization was adopted. According to the law, privatization involved the massive (re)distribution of property inherited from ‘communism’. It was envisaged that the state would become the key owner of the largest and most capital-intensive companies. Managers would accordingly become the second most important co-owners in all sectors, and workers would become owners – even majority owners – of the most problematic, cheapest, most labour-intensive companies. All actors agreed to that solution and most of them perceived it as an interim compromise, which would be followed by a second, ‘real’ privatization. The outlined process, in which property was simply (re)distributed – that is, not bought or sold – can be seen as a major initiatory political compromise that marked the beginning of Slovenia’s transition to a market economy. It strongly influenced Slovenian development in the 1990s.
Following the adoption of the law on privatization, early neocorporatist institutional practices started to emerge. They were based on the strength of large organized economic interests: in 1992 the trade union density rate was 60 per cent (Toš, 1999, 2004, 2009); the coverage rate of the Chamber of Commerce, due to its obligatory membership, approached 100 per cent in the mid-1990s. These actors, due to the proportional electoral system and corresponding instability of the governing coalitions, had to be involved in national economic and social policies formation and their implementation.
During the 1990s, unstable, centre-left coalition governments systematically prevailed. These governments were open to trade union demands. On the other hand, they were also strongly determined by the ongoing process of accommodation to EU rules and demands. High inflation, which first declined below 10 per cent in 1995 – having previously been three and then two digits (Silva-Jauregui, 2004: 119) – was a problem that had to be solved during the accession process. Accordingly, reducing inflation was a permanent priority of Slovenian governments. This focus implied systematic wage moderation, which was not possible without sustained cooperation with the social partners. Accordingly, the resulting policies were strongly focused on job protection, sustaining a low unemployment rate and gradual lowering of the relatively high inflation. It seems that the constellations associating strong unions and employers’ organizations, combined with the unstable centre-left coalition governments, almost spontaneously generated the ‘neocorporatist’ compromise.
Institutionalization of the neocorporative system was concluded in 1994 when the Economic and Social Council (ESC), the most important institution for social dialogue, was formed. The ESC basically resulted from political exchange between the first centre-left government and the trade unions. Faced with the problem of high inflation, the government intended to use wage moderation, but was aware that it would not be able to manage it without the unions’ support. The establishment of the ESC was, in some respects, the ‘price’ that the government had to pay for unions’ support. Since 1994, the social partners have systematically negotiated income and other policies within the ESC. Negotiations led to one or two-year agreements on income policies, occasionally also taking the form of broader social pacts, wherein chapters on wage policies were of central importance.
The key implementation mechanism of the agreed policies was the centralized collective bargaining system. In the 1990s, general collective agreements for the private and public sectors framed sectoral bargaining. At the time, sectoral agreements were implemented in almost all Slovenian organizations. The coverage rate, due to companies’ obligatory membership of the Chamber of Commerce – which was the main negotiator and signatory of the collective agreements – was exceptionally high and covered almost all dependent employees (Visser, 2011; see also Glassner, 2013).
By the mid-1990s, this type of wage regulation was influencing wage trends in Slovenia and proved to be relatively favourable in terms of macroeconomic stability and competitiveness. Congruent with the rigorous implementation of the Maastricht criteria, wage growth systematically lagged behind productivity growth during the entire accession period, with only minor exceptions at the very beginning (Klinar, 2006).
Over a decade of trade union support for systematic wage restraint was part of a wider political exchange. In the late 1990s and early 2000s, the trade unions were able to exchange this constructive stance for a relatively generous pension reform and then, in the first half of the 2000s, for a comparably generous labour law. At the beginning of that period workers were ready to accept internal rationalization (work flexibilization and intensification) in exchange for job security.
Slovenia was not then under the pressure of budget deficit and public debt problems; companies were not overloaded by debts. Stable economic growth provided room for political quid pro quos. In these conditions, political exchanges functioned as a key element of the system’s governing mechanisms. Stabilization and the development of generous social protection were essential components. During the 1990s, the relatively developed welfare state did not constrain the competitiveness of the Slovenian economy.
From the mid-1990s to the mid-2000s, the Slovenian system clearly demonstrated the characteristics of competitive neocorporatism (Rhodes, 1997). It was the main regulatory mechanism of Slovenia’s Keynesian economic policy.
EU Member State: deconstruction of neocorporatism
Since 2004, when Slovenia became a full member of the EU, internal power constellations have changed and the role of the ESC in policy-making has become less important. A few years before adhesion to the euro area, income policies functioned almost automatically and were no longer on the ESC agenda. Furthermore the new right-wing government, elected in 2004, also announced a new agenda, a package of radical neoliberal reforms. At the heart of the package was the intended introduction of a flat rate income tax.
The entire neoliberal agenda was unacceptable to the trade unions. Accordingly, negotiations and consensual development of policies within the ESC became impossible. Social dialogue vanished. Trade unions, being pushed into a corner, started to articulate public resistance against the government’s intended reforms. Resistance culminated in autumn 2005, when a massive trade union rally was organized in the Slovenian capital. After the rally, public support for the government decreased dramatically. At the same time, in the context of a massive inflow of cheap loans and exceptional economic growth, the problem of rising inflation came to the fore again. In response, the centre-right government initiated the renewal of social dialogue and even concluded a social pact for the period 2007–2009. But the system of competitive neocorporatism and the corresponding legitimization of the political elite no longer functioned as it did during the accession process. Renewed social dialogue and the social pact proved to be largely insignificant. The centre-right government lost the elections in 2008.
Exogenous and endogenous shocks: membership of the euro area and the second wave of privatization
The political change of 2004 and the announced reforms overlapped with Slovenia’s inclusion in the euro area. The process reached its critical point with the introduction of a fixed exchange rate prior to formal euro area admission in 2007. This proved to be a strong external shock: due to the fixed exchange rate, competitive pressures on companies increased rapidly.
The second phase of privatization was a key element of the intended neoliberal reforms. The new centre-right government announced privatization of the largest and most advanced Slovenian companies at the outset.
The key instruments of privatization were generous cheap loans offered mostly by state-owned banks. Such loans were secured by company shares, which were bought with these same loans. The borrowers’ repayment capacity was strongly determined by the changing market values of the companies.
The key player in the entire privatization process was the centre-right government. It triggered a reconstruction of the economic elite’s network (Žerdin and Mrvar, 2007) by means of selective privatization, in which a core group of privileged ‘owners’ of appropriate political capital had easiest access to major state banks and massive, generous loans.
In this context, share acquisition became the main strategic goal of all participating managers. All other strategies seemed more or less meaningless. Having recognized the opportunity to concentrate companies’ ownership in their hands, all the managers involved were more preoccupied with developing their political capital than with strategic involvement in foreign markets or improving production and adopting new technologies. During this period, debt started to accumulate at all levels.
De-unionization
Trade union density rates started to decline rapidly in the mid-2000s. The intensity of this transformation, which began when Slovenia entered the EU, may be compared to the massive changes of the early 1990s. From 2005 to 2008, the density rate dropped from 40 to below 30 per cent (Toš, 1999, 2004, 2009). The share of unionized blue-collar workers declined relatively quickly. Unionization within public services has been stable and/or growing, but not intensively enough to make up for losses in manufacturing.
The ‘coincidence’ of the two processes – the completion of the accession process and the trade unions’ decline – suggests that the most influential factor is probably the new, radically different context, established in 2004 when Slovenia entered the EU. Comparative studies reveal that the EU accession process and the corresponding full inclusion of the Slovenian export economy in European markets implied a gradual increase in pressure on the labour force (European Foundation, 2007; Svetlik, 2006). This was systematically combined with neocorporative restrictive income policies. These processes were maintained by the workers’ patience, mostly generated by high expectations with regard to EU accession. These expectations proved to be too high, however, and the unions paid the price of massive disillusion.
The electoral victory of the (centre) right parties in 2004, the year when Slovenia became a full member of the EU, was an important contextual change for the unions. The new government triggered radical neoliberal reforms at the beginning of its 2004–2008 term of office. The unions opposed these reforms and managed to hinder their implementation. In 2006, after the escalation of conflict and its culmination in the massive trade union rally of late 2005, however, the union density rate dropped by about 6 per cent (Toš, 2009). It is thus quite possible that this primarily political conflict also significantly contributed to the decline in union membership.
In spite of this, the distribution of the unionized workforce among the main union organizations has not changed significantly. Despite recent heavy losses, the Association of Free Trade Unions of Slovenia (AFTUS) remains the largest confederation, as it was in the 1990s. Today, this organization, which traditionally focuses primarily on blue-collar industrial workers, still covers more than half of the unionized population (Visser, 2011: 21). Internal interest fragmentation in the confederation, mostly evident from the development of company unionism, is a new trend, however. This tendency shows that the mobilizing capacity of that largest confederation may be significantly lower than what its official membership statistics indicate.
The second main feature of recent processes is the stability and growth of unionization in the public sector (Visser, 2011: 21). In 2006, some major unions formed the Confederation of Public Sector Trade Unions (CPSTU), which covers almost a quarter of the unionized workforce. The affiliates of this new confederation are quite strong and autonomous. Compared to the AFTUS case, where internal fragmentation at the micro level is an outstanding trend, fragmentation within the CPSTU is more sectional in nature.
The rest of the union organizations, covering around 20 per cent of the unionized workforce, consist of smaller confederations, that is, autonomous national, mostly public sector unions and, in addition, some company unions.
Changing status of employers’ organizations
The Chamber of Commerce, the main employers’ organization, was based on mandatory membership in the 1990s. As it was the main employers’ negotiator, collective bargaining was in effect centralized and coverage was almost total. In parallel to the Chamber of Commerce there was also a chamber of small and medium-sized enterprises that was also based on mandatory membership. Under pressure from international organizations, especially the ILO, which criticized the involvement of mandatory interest organizations in autonomous and voluntary bargaining processes, both chambers set up parallel voluntary interest organizations in the mid-1990s. These new employers’ associations were involved in collective bargaining and in negotiation processes within the Economic and Social Council, but were basically dependent on the financially strong and influential chambers.
The situation radically changed under the centre-right coalition government. In 2006 the position of the Chamber of Commerce changed: its former status of a mandatory organization was abolished. By the new law, it was transformed into a voluntary interest organization. The new status implied an immediate decline in membership and forced the Chamber to compete for members, in other words, to adopt new, more radically oriented policies closer to the interests of its potential constituencies. Accordingly, the formerly modest employers’ interest organization, which used to play an important role in the negotiations of social pacts, significantly radicalized its stance.
Today, there are five employers’ confederations in Slovenia: two are general, two recruit members among small and medium-sized enterprises and one represents the trade sector. According to Visser (2011: 31), the two major employers’ confederations are the Employers Association of Slovenia and the Chamber of Craft and Small Businesses of Slovenia. The density rates of the two associations are 35 per cent and 18.1 per cent, respectively.
Changes in the collective bargaining structure
The Slovenian industrial relations system began to change in the mid-2000s. The direction of the transformation, announced by previous governments, corresponded to the prevalent European trends of the time. Coordination at the macro level was maintained, but general collective agreements at the national level were abolished and the entire regulatory system focused more on the sectoral level. Despite that decentralization, the new law on collective bargaining adopted in 2006 still ensured a high coverage rate of about 90 per cent in 2008 (Visser, 2011). In general terms, this ‘new’ system is a ‘softer’ version of the old one. It is not significantly weaker than the old one in terms of regulation. Along with moderate decentralization it preserved a relatively high level of regulatory capacity (Visser, 2011: 41).
Collective bargaining is also conducted fairly systematically at the company level. Trade unions are usually active in negotiating agreements with managers in large and medium-sized companies. At successful companies, such agreements typically improve on the standards laid down in sectoral agreements.
Along with the unions, works councils also exist in the majority of large and medium-sized companies. At the normative level, this system was implemented at the beginning of the 1990s when the law on participation was adopted (1993). In basic terms, the law reorganized former Yugoslav self-management institutions and accommodated them to forms of participation similar to those in the German system.
Economic and political crisis 2008–2011: the failure of unilateral policy-making
Immediately after the elections of 2008, the new centre-left coalition government found itself in the midst of the economic crisis. The crisis escalated dramatically in the first year of the new government’s term of office. In 2009, GDP fell by 8 per cent (OECD, 2011: 18–19). The budget deficit and public debt, which had been unproblematic, started to increase sharply: the deficit, which was 1.8 per cent of GDP in 2008, rose to 5.8 per cent in 2009 ‘and public debt increased significantly’ (OECD, 2011: 31). The export sector was suddenly faced with a decline in demand on foreign markets.
In these circumstances, all major privatization projects encountered huge problems. A chain of bankruptcies suddenly struck the construction sector. At that point, the second wave of privatization began to crumble. A series of unsuccessful local privatizations further deepened the crisis. In autumn 2009, a wave of spontaneous strikes broke out. Worker discontent culminated in a massive rally organized by major union confederations in Ljubljana on 28 November 2009 under the motto: ‘For decent pay and a safe old age’ (Vrhovec, 2010: 161).
The government reacted with a series of fire-extinguishing measures. Faced with workers’ evident discontent, in early 2010 it opted for a 23 per cent increase in the minimum wage (OECD, 2011: 41), along with provisions focused on interim support for companies and redundant workers. Under pressure from the escalating crisis, the threat of an increase in public debt and the corresponding demands of the EU institutions, it also drew up an ambitious programme of structural reforms, aimed at reforming the labour market and the pension system. The government tried to exchange the minimum wage improvement for the unions’ support for the announced structural reforms. The unions, faced with huge pressure from dissatisfied workers, found the government’s offer unacceptable. The government reacted by enforcing structural reforms unilaterally.
The government’s unilateral policy-making had devastating political repercussions. Unions, pushed towards the opposition by the former centre-right government and kept at a distance by the centre-left one, started to articulate social and political dissatisfaction and immediately revealed a fairly impressive mobilizing capacity. Young people were particularly appalled by the proposal to abolish so-called student jobs. Student jobs were introduced in Slovenia over 50 years ago with the intention of allowing students to earn some money during their study years. Following OECD guidelines, the government wanted to limit students’ income, trying to introduce German-tailored ‘mini-jobs’, accessible to students, pensioners and the unemployed. The Student Organization of Slovenia strongly opposed the reform plan. The anger culminated in the protests of May 2010, which were attended by 15 000 students and involved an attack on the parliament building, during which part of its façade was seriously damaged.
Aided by trade unions, the Student Organization gathered over 40 000 signatures, triggering a referendum on ‘mini-jobs’. The latter followed in April 2011, with over 80 per cent of the participants voting against the proposed law. The outcome signalled the first major defeat of the ruling coalition. Its demise followed soon after, at a triple referendum in June, when a no vote of over 70 per cent prevented the government from implementing reforms concerning the pension system and the informal economy. It became perfectly clear that the government had lost the voters’ support and would not be able to implement any reforms.
Persisting in promoting reforms that did not have public support and were not coordinated with the social partners resulted in a slump in support for the centre-left government. The coalition thus lost its majority in the parliament, which voted against the government in the confidence vote in September 2011.
Recent developments: early elections in 2011 and the new wave of socio-economic shocks
The elections of 2011 brought the centre-right back to power. This time, Slovenia was fairly close to falling into the trap of a potentially serious debt crisis. Soon after coming to power, the new government announced that radical austerity measures were to take place as soon as possible. The measures proposed were far more radical than those of the previous government, which the centre-right fervently criticized while in opposition. They touched upon various aspects of social and labour market policies. Trade unions were especially appalled by the announcement of a planned 15 per cent linear wage cut for all employees in the public sector.
Extremely critical of the proposed measures, in April 2012 trade unions organized one of the biggest general strikes in the public sector in the history of Slovenia. After long negotiations and much coordination, on 10 May 2012 most of the trade unions finally signed an agreement with the government. In the course of negotiations they succeeded in persuading the government to decrease its interference with social rights. Linear wage cuts of 8 per cent were agreed and inequalities resulting from the latest public sector wage reform, when the wages of some categories of employees were not increased – for example, university teachers – were to be removed. The agreement then enabled the parliament to adopt the extensive law on adjustment of public finance (which came into force at the end of May, see: Uradni List RS – Official Gazette of the Republic of Slovenia, No. 40/2012).
The new centre-right government therefore succeeded in doing what the former centre-left government had failed to do, namely, conclude an agreement with the trade unions that allows it to limit or decrease wages in the public sector. This means that it avoided a referendum on the proposed reforms. But after only six months in power it faced a slump in public support which was already approaching the level that triggered the downfall of the previous government.
Conclusion
The highly coordinated Slovenian system of the 1990s has been affected by strong socio-economic shocks in the 2000s. The main shock was caused by the global financial crisis that reached Slovenia in 2009, but the impact of the massive inflow of ‘cheap money’ after Slovenia’s accession to the EU and EMU, combined with the second large wave of privatization, has been equally important. Therefore, the financial bubble and privatization of 2005–2008 accelerated the sharp decline in 2009. Under this pressure – thus clearly not entirely from externally caused shocks – the bargaining system’s capacity for coordination weakened.
After the centre-right electoral victory that overlapped with Slovenia’s accession to the EU, and the corresponding proposal of radical neoliberal reforms, the Slovenian trade unions were pushed into opposition and social dialogue was frozen. Subsequent open disputes caused a deterioration in the government’s image and public support, but simultaneously strongly influenced a sharp decline in trade union membership.
Surprisingly, the decline in trade union membership did not enable the government to engage in unilateral decision-making at all. Despite the weakening of the trade unions’ power, all attempts at replacing social dialogue structures with unilateral ‘emergency’ policies were basically unsuccessful. In all cases unilaterally enforced reforms induced political conflicts and culminated in referendums that showed that none of the planned structural reforms had succeeded in getting public support. The current crisis reveals that the government still needs the trade unions’ support. Recently, in spring 2012, the unions, which are weaker than before, accepted concession bargaining, as the recent agreement to implement austerity measures clearly shows. However, the unions are not the only weakening player in the game. Against the background of austerity measures, public support for the current centre-right government has fallen to critically low levels and it could be that support would be even lower without the trade unions’ concessions. Under pressure of neoliberal change the Slovenian system is obviously being transformed, but it seems that it is resisting a radical neoliberal turn.
Footnotes
Funding
This work was supported by the European Trade Union Institute project ‘The impact of socio-economic shocks on collective bargaining and social dialogue in Central and Eastern Europe’ [project code: 1151-086-31].