A social pact is a form of social protection, whereby governments, worker associations (such as trade unions), and/or management groups engage in policy-making initiatives for the purpose of maintaining appropriate living and working standards. This intersection of industrial relations and social policy has evolved to various levels in a variety of countries. In fact, the establishment of social pacts has been identified as one of the most noted events in western Europe’s political economy during the 1980s. This bior tripartite relationship also is often referred to as social partnerships in many countries.
The purpose of such agreements is intended to reduce management and market attempts to commoditize labor—creating fair wage and living standard agreements that satisfy all parties. This responsibility is ideally shared among a tripartite: proponents and members of the industrial relations movements, government and government agencies, and the firms that employ such workers. Hence, it is also often associated with the welfare state, which is consistent with the fact that European countries tend to have social pacts, as opposed to the United States or other industrialized economies. These partnerships can generally provide multiple benefits to all parties involved in their development and advocacy. Shared benefits of social pacts include higher rates of employment for workers, the provision of benefits to the unemployed resulting in less likelihood of wages being forced downward, reduced worker-management conflict, and other measures. Social pacts are also seen as more fluid attempts to bridge gaps and address shortcomings of national policies, which are often less responsive in adapting to current economic and social conditions. In some cases, such as in Ireland, Italy, and South Korea, social pacts were initiated in response to an economic or political crisis.
Social pacts have been a prominent feature of industrial relations in Europe, particularly during the 1980s when these partnerships emerged. According to some, there has been considerable push by liberal movements, which have influenced many societies to engage in these partnerships with companies and unions. However, as globalization and technology have affected wages and the distribution of labor, capitalist influences have become more dominant, and firms are less willing to participate in these agreements. It is argued that the social pact at the governmental level may be less relevant because of the changes arising from globalization and technology—whereby workers’ interests should be simultaneously represented and defended at the global level (e.g., the International Labour Organization) and at the firm level through corporate policies and procedures. However, trade unions still seek to maintain and strengthen the social pact, particularly in the European Union (EU).
While many social pacts in the EU member states (particularly those evolving in the mid-2000s) were developed at the national level, in some countries such as Austria and the Netherlands, social pacts were developed at the sectoral level (in some cases, these too involved the government as a participant, such as in Denmark). Other non-EU countries that have adopted social pacts include South Korea, Brazil, and Mexico. Overall, these social pacts can be very complex and are often developed with different configurations and levels of governance/participation among the parties involved. They have also been affected by collective bargaining practices. Many social pacts were developed when labor could bargain at a centralized level; now, in some instances, social pacts are used to assist bargaining at more decentralized levels.
One of the major issues that has affected social pacts is the demand for increased flexibility in labor utilization over the past 25 years. In response to the threats and opportunities associated with globalization and technology development, companies have sought a more flexible labor force; this was particularly accelerated during the 1980s. This allocation of work increased corporate reliance on the use of contingent work, part-time work, and other work that more conveniently suited rapid changes of supply and demand for goods and services. These economic shifts also cultivated a demand for wage reductions for workers—social pacts, in fact, typically center around a wage arrangement for workers.
- Bernd Brandl and Franz Traxler, “Industrial Relations, Social Pacts and Welfare Expenditures: A Cross-National Comparison,” British Journal of Industrial Relations (v.43/4, 2005);
- Lucio Buccaro and Sang-Hoon Lim, “Social Pacts as Coalitions of the Weak and Moderate: Ireland, Italy and South Korea in Comparative Perspective,” European Journal of Industrial Relations (v.13, 2007);
- Jimmy Donaghey and Paul Teague, “The Persistence of Social Pacts in Europe,” Industrial Relations Journal (v.36/6, 2005);
- Kerstin Hamann and John Kelly, “Party Politics and the Reemergence of Social Pacts in Western Europe,” Comparative Political Studies (v.40/8, 2007);
- Bob Hancké and Martin Rhodes, “EMU and Labor Market Institutions in Europe: The Rise and Fall of National Social Pacts,” Work and Occupations (v.32, 2005);
- Anke Hassel, “The Politics of Social Pacts,” British Journal of Industrial Relations (v.41/4, 2003);
- Roxborough, “Inflation and Social Pacts in Brazil and Mexico,” Journal of Latin American Studies (v.24, 1992);
- Asbjørn Wahl, “European Labor: The Ideological Legacy of the Social Pact,” Monthly Review (v.55/8, 2004).
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