Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji 2004 17

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W

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ALISONC. PRESTON* ANDGEOFFREYV. CROCKETT*

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ssessing the robustness of empirical estimates, and thus the generality of theoretical models, is an important objective in applied research. Accordingly, this paper offers a further test of the Freeman-Lazear employee involvement model. The theoretical model posits that the form and level of bargaining has an important bearing on levels of employee involvement chosen by management. Sub-optimal levels of employee involvement are predicted for firms engaged in workplace level distributive or competitive bargaining. In contrast to earlier tests of the model based on British and German data, findings in this paper (based on the 1995 Australian Workplace Industrial Relations Survey) provide little support for the theorised relationships.

INTRODUCTION

Assessing the robustness of empirical estimates, and thus the generality of theor-etical models, is an important objective in applied research. Accordingly, in this paper we use Australian data to replicate and examine the robustness of Addison, Siebert, Wagner and Wei’s (2000) British and German findings with respect to employee involvement and firm performance. Using a modified version of Freeman and Lazear’s (1995) theoretical model as an analytical framework, Addison et al.studied the impact of employee involvement on firm surplus and profitability. In their British-based analysis they found that, within the sample of unionised establishments, employee involvement was generally associated with negative firm performance. Policies designed to separate the production/ distribution relationship (e.g. ‘. . . weaken trade unions and/or centralize collective bargaining’, (Addison et al., 2000: 41)) were, therefore, advocated.

These policy prescriptions, if implemented, have far-reaching implications across a number of other areas of the labour market. Establishing the robustness of Addison et al.’s findings and therefore, the generality of the Freeman-Lazear employee involvement model, is an important and valid exercise. The approach requires careful replication, which is possible in the case of Addison et al.’s British-based study. The Australian Workplace Industrial Relations Survey (AWIRS) (to be used in this paper) is analogous to the British Workplace Industrial Relations Survey (WIRS) (as used by Addison et al.) and allows for the construction of highly similar (in some cases exact) dependent and independent variables.

THEJOURNAL OFINDUSTRIALRELATIONS, VOL. 46, NO. 3, SEPTEMBER2004, 345–365 * Curtin Business School, Curtin University of Technology, GPO Box U1987, Perth 6845, Australia. Email: prestona@cbs.curtin.edu.au The authors would like to thank John Burgess and Mathew Gray.

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In addition to replication, we also endeavour to extend Addison et al.’s study by separately studying firms engaged in: non-union bargaining; collective bargaining at the establishment level; and collective bargaining beyond the establishment. An acknowledged weakness in the Addison et al.study was their inability to net out the effects of industry-wide wage agreements (i.e. collective bargaining beyond the establishment level).

Our results differ substantially from those reported by Addison et al. in that little support is found for the Freeman-Lazear theoretical framework. These results are discussed in more detail below. By way of some background we begin with a brief overview of the Freeman-Lazear model.

FREEMAN-LAZEAR MODEL

The Freeman-Lazear (1995) model of employee involvement provides a theorised relationship between works councils (a process for employee involvement within Germany) and firm performance. The model posits an important relationship or link between the bargaining form and level, levels of employee involvement and firm performance (as measured by total surplus and profits). In essence the model predicts that firms engaged in distributive or competitive bargaining are likely to choose a sub-optimal level of employee involvement for fear of the effects of increased worker knowledge (and therefore power) on wage negotiations.1_In

an important modification to the Freeman-Lazear model, Addison et al. allow for the ‘decoupling of production and distribution’. In other words, they suggest that where bargaining over the wage share occurs beyond the firm (e.g. industry or national level negotiations) the level of employee involvement selected by management may be closer to the optimum.

The model, which is explained more fully in Addison et al. (2000: 8–14), may be briefly summarised as follows. The starting point is the critical assumption that the level of employee involvement is determined differently in union and non-union firms (2000: 9). Implicit in this assumption is a distinction between non-union and union firms with respect to form of pay bargaining. Unionised firms are assumed to engage in distributive bargaining where management may be fearful of too much employee involvement. Although not explicitly stated, the paper makes the implied assumption that non-union bargaining is not distributive.2

Figure 1 summarises the Freeman-Lazear model, incorporating the ‘decoup-ling’ modification as advanced by Addison et al. It shows the relationship between employee involvement (x) and firm surplus (which might alternatively be defined as valued-added). In other words, firm surplus is the sum of worker surplus (wages minus opportunity cost of working) plus the surplus of other factors of production such as capital (e.g. profits minus interest payments) (Addison et al., 2000: 20). The firm surplus function with respect to employee involvement is given by R(x). R(x) is maximised when employee involvement is equal to x*. This is defined as the ‘socially’ optimum level of employee involvement. When R(x) is maximised, so too is GDP.

The level of employee involvement selected is, as noted above, affected by distributional considerations and thus, level (e.g. workplace, industry, national)

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and form (e.g. distributive, integrative or other) of wage negotiation. If wage negotiation takes the form of local level distributive bargaining, the relevant function in terms of employee involvement translates to F(x). The F(x) function shows the link between firm profits and employee involvement. Because workers will bargain over their share of profits, the level of employee involvement chosen by management will be set to maximise profits and not firm surplus. Therefore, firms engaged in local level distributive bargaining are likely to select a sub-optimal level of employee involvement.

Addison et al. allow for a ‘decoupling of production and distribution’ in the form of wage bargaining beyond the workplace (e.g. at the industry or national level). This is given by the function G(x). In this situation the level of employee involvement selected may be closer to the socially optimum level, x*.

A final consideration within the model is that of trade union power. Assuming trade unions use their power to maximise the worker’s share of the total surplus, the trade union preferred level of worker involvement will be at xw, where the

difference between the R(x) and F(x) function is greatest.3

In operationalising the model, Addison et al. draw a distinction between union and non-union bargaining in the absence of information on bargaining form (i.e. distributive/non-distributive). As a result their model shifts from a theory about the effects of local distributive bargaining on employee involvement and firm performance toward a theory of workplace level union/non-union bargaining.

WO R K E R PA RT I C I PAT I O N A N D F I R M P E R F O R M A N C E 347

Figure 1 Employee involvement, total surplus and profits.

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A few other points about the Addison et alspecification process, specifically the dependent variables, are also worth noting before restating the model’s key a priori predictions. As noted above, the dependent variable is constructed as firm surplus and profits. In Addison et al firm surplus is measured by two variables: (i) changes in labour productivity; and (ii) employment change (on the assumption that positive employment change is an indicator of improved firm surplus).4_{Firm profitability is also measured or captured by two variables:}

(i) management assessment of firm profitability relative to other firms in the same industry; and (ii) a variable capturing average wages (the rationale being that higher wages may be a source of lower profitability).5

The covariates or independent variables obviously comprise measures of employee involvement plus a host of other controls to capture firm heterogeneity (e.g. share of women workers, share of shift work, size of establishment, age of establishment, market power etc.). The two employee involvement measures are entered as dummy variables: (i) equal to one if the workplace has a joint consultative committee (JCC) (an indirect form of employee involvement); and (ii) equal to one if the workplace employs ‘direct’ participation methods such as meetings, work groups, teams etc. The set of change measures capture whether or not the last two years has seen the introduction of any ‘new’ form of direct or indirect methods of employee involvement.

The a prioripredictions arising from the modified Freeman-Lazear model are summarised in Table 1.

EMPLOYEE INVOLVEMENT AND FIRM PERFORMANCE INAUSTRALIA

Using data drawn from the 1995 AWIRS this section examines the link between employee involvement and firm performance in Australia and, in so doing offers a direct comparison and test of the empirical model as reported in Addison et al. (2000). The advantage of the AWIRS data over other data sets is that the survey methodology and instruments correspond closely to those used in WIRS, thus allowing for a very high level of compatibility between the original and the replicate study. Like WIRS, AWIRS also over sampled large establishments. In the main survey the lower cut-off point for inclusion in the sample was 20 employees; in WIRS the corresponding level was 25 employees.

The main 1995 AWIRS contains records on 2001 non-agricultural and non-defence industry establishments. Following Addison et al., public-sector establishments are excluded from the analysis due to the difficulties associated with evaluation profits and performance in this sector. We do however, retain government sector business enterprises that are commercialised. After purging the remaining sample of observations with missing values on key variables the resultant sample size was reduced to 1109. Missing information on nature and form of pay bargaining arrangements led to the loss of a further 295 observations, leaving 814 establishments for analysis purposes: 77 (10%) covered by a non-union wage agreement; 115 (14%) by a non-union (workplace level) wage agreement; 82 (10%) by a union (beyond the workplace) wage agreement; and 540 (66%) by the award system. In the Addison et. al.paper the initial WIRS sample of 2061 falls to 863 establishments (424 engaging in non-union bargaining and 449

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Table 1 Predictions from the Freeman–Lazer Employee Involvement Model

Bargaining form Description of a priori prediction with Relevant

respect to employee involvement (EI) profit function

Non-union (assumed to be non-distributive) The level of EI will be endogenously chosen by management G(x)

and union bargaining beyond the workplace (close to x*).

(i.e. where production and distribution Total surplus and profits will be close to their maximum.

are decoupled) A positive change in EI will be positively associated with

a change in firm surplus/profit.

Local level union bargaining The level of EI will be influenced by trade union power (xw). F(x)

(assumed to be distributive) Total surplus and profits will not be maximised and the

predicted effect of EI on firm surplus and profits is negative. The link between change in EI and change in firm surplus is ambiguous. An increase in EI may be a competitive response or may reflect improvement in trade union power.

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in union bargaining) after restricting the group to private (non-agricultural) establishments.6

The dependent and independent variables are designed to replicate, as close as possible, variables employed in the Addison et al.study. As noted above the dependent variables or measures of firm performance are as follows: productivity, profitability, employment and wages. Detailed descriptions of variable construc-tion and definiconstruc-tions are provided in Appendix A: Table A1 (firm performance) and Table A2 (employee involvement measures) along with associated descriptive statistics (means and standard deviations). Table A3 (Appendix A) provides information on the other independent variables used in the empirical analysis reported on below. In all tables the first two columns, titled ‘variable descrip-tion’ detail, respectively, the WIRS construction and the AWIRS construction of the particular variable in question. Where variables are identical (in other words, exact replication was possible) the term ‘same’ is used to denote this. Overall it is apparent that there are only minor differences between the two studies in the set of independent variables employed. Moreover, the key inde-pendent variables measuring employee involvement are virtually identical across the two studies

APPROACH

In modelling the link between employee involvement and firm performance we split establishments into three groups according to information on the form and level of wage negotiations: (a) non-union bargaining; (b) collective bargaining at the workplace level; and (c) collective bargaining beyond the workplace. Group (a) consists of establishments with a wage agreement that was negotiated without the involvement of a union.7_{Group (b) consists of establishment with}

a workplace level union negotiated wage agreement.8 _{Group (c) consists of}

establishments that are covered either by the Award (a highly centralised arrange-ment), an industry (union) wage agreement or a wage agreement that involved unions and was negotiated beyond the establishment.

Group (a) is analogous to the ‘non-union’ group in the Addison et al. study, while group (b) is analogous to the union group. Group (c) offers an extension of the Addison et. al. model by allowing some insight into the effects of employee involvement and performance in establishments where there is a ‘decoupling of production and distribution’. The model predicts that for union firms, where there is a decoupling of production and distribution, the level of employee involvement chosen by management will be closer to the optimum.

The models are estimated using ordered probits (for dependent variables in index form, that is ‘labour productivity’ and ‘profitability’) and ordinary least squares (OLS) for the other two dependent variables (employment change and average weekly wages). Unweighted estimates are reported.

RESULTS

Since the analysis is principally concerned with the employee involvement/firm performance relationship, we follow Addison et al.’s approach and summarise the

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Table 2 Summary of employee involvement effects, UK and Australia

UK establishments with . . . Australian establishments with . . .

Non-union Collective Non-union Collective Collective bargaining bargaining at bargaining bargaining at bargaining beyond

the workplace the workplace the workplace

Labour productivity change

New joint consultative committee +(5%) NS NS NS NS

New info/consultative scheme +(5%) NS NS NS NS

Employment change

New joint consultative committee NS -(1%) NS NS NS

New info/consultative scheme +(1%) +(10%) NS NS NS

Profitability

Joint consultative committee NS NS NS NS NS

Information/consultation scheme NS -(5%) NS NS NS

Wages

Joint consultative committee NS NS +(1%) -(10%) NS

Information/consultation scheme +(1%) NS NS NS -(10%)

Note:The summary information above presents the sign and significance level associated with each measure of employee involvement.

Source:(a) The UK results are from Addison et al. Table 1 (a similar summary table). They are also reported in detail in the Appendix to Addision et al.(Tables 2–5). (b) The full-set of Australian results may be found in Appendix B of this paper (Tables B1–B4).

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findings associated with this relationship (see Table 2). The models are, of course, estimated along with a detailed set of other controls related to the type of establishment (e.g. age, market power, technology, trade union density and industry dummies). The full set of coefficients are reported in Tables B1, B2, B3 and B4 Appendix B where the dependent variables are, respectively: changes in labour productivity; employment change; profitability; and average weekly wages.

In interpreting the UK results Addison et al. suggest the following. Focussing first on firm surplus, as captured by employment change, their main conclusion is that ‘. . . measures to improve employee involvement are good for employment growth only among the non-union sample’ (Addison et al. 2000: 28). They explain their profitability findings as follows:

These results . . . accord with our expectations: competitive pressures are strong in the non-union sector, and cause management to choose levels of employee involvement – high or low – so as to achieve near-maximum-profit performance. In the sample of union establishments, by contrast, union power might be able to override competitive pressures, and there are indeed signs of a negative effect for the various measures of employee involvement on profits for this sector . . . (Addison

et al. 2000: 28–29)

The UK wage equation, as indicated in Table 2, finds a positive relationship between average wages and measures of employee involvement in non-union establishments and an insignificant relationship in unionised establishments, leading Addison et al. to conclude that ‘. . . wages and profits react differently to employee involvement in the union and non-union sectors’ (ibid.: 29).

The Australian results contrast markedly in that there seems to be very little evidence of an association between employee involvement and establishment performance irrespective of the form or level of wage negotiation adopted. The wage equation is the only model where employee involvement variables attain significance and even there the association is generally weak. The strongest result occurs within the non-union bargaining regression, showing that firms with a JCC pay their non-managerial full-time workers significantly higher wages than establishments without a JCC. One might have expected that if employee involvement (in the form of a JCC) was associated with significantly higher wages they might, similarly, be associated with higher labour productivity. The regression results do not however, support this proposition. Indeed, the regression results provide little support for the earlier associations uncovered by Addison et al. in the UK.

The absence of support for Addison et al.’s earlier study raises some important questions about the validity of their empirical model, the data, methodology, modelling approach and theoretical framework. It should be noted however, that the lack of consistency in studies of the firm is not unusual. Recent examples may be found in Treble et al.(2001) and Addison and Belfield (2001). The latter is designed to up-date the determinants of firm performance using the 1998 WIRS. Comparisons are offered with re-estimated models based on the 1990 WIRS. A telling conclusion is reached: ‘The bottom line from this

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further replication is that the principal regularity in estimates based on the WERS98 and WERS90 surveys is their lack of consistency’ (Addison and Belfield, 2001: 356).

In attempting to understand the observed inconsistency in the results over time Addison and Belfield advance a number of suggestions. Differences may for example, be reflective of the economic cycle or changed cultural factors within the workplace. At a methodological level it may be that the estimation approach are unable to capture the ‘complex interactive behaviours’ observed in the workplace (ibid.: 358), or that the constructs and controls (such as dummy variables) employed are too simple and unable to control for firm or establishment-level heterogeneity. Cappelli and Neumark (1999: 14–15) also comment on the estimation difficulties posed by firm heterogeneity and the fact that results from industry studies cannot be easily generalised.

The observed lack of consistency between the 1990 WIRS study and the 1995 AWIRS study may therefore, reflect differences in economic climate, cultural factors, time period, as well as subtleties associated with the survey instruments and firm heterogeneity. The descriptive statistics (means and standard errors) for example, suggest different economic contexts. In the 1990 WIRS sample for example, employment growth in the three years to 1990 averaged 17.3 and 11.7 per cent in the non-union and unionised firms, respectively (see Table A1); comparative estimates for Australia from the 1995 AWRIS for the two years to 1995 are 5.7 and 3.1 per cent, respectively.

Institutional differences may also be invoked to explain some of the observed differences in the WIRS and AWIRS results. Around the time of the AWIRS-95 survey, levels of employee involvement were also being influenced by legislative and tribunal (e.g. Australian Industrial Relations Commission) decisions, thus placing constraints on the ability of management to ‘freely’ choose their optimum levels of employee involvement.9

Poor model specification may also underpin the lack of any apparent robustness in the observed results. Generally speaking the Addison et al.estimating models are poorly specified and in some cases only able to explain less than five per cent of the observed variation in the dependent variable. These same specifications also perform poorly in the Australian context, as evidenced by the explanatory power when estimated using the AWIRS data.

Notwithstanding the above, the fact that the AWIRS results fail to support the earlier WIRS findings still leaves us sceptical about the conclusions arrived at in the Addison et al.paper. More needs to be understood about the relationship between employee involvement and firm performance with respect to bargaining level and form before acting on any policy prescriptions as suggested by Addison et al.

CONCLUSION

The principal objective of this paper was the replication of the analysis by Addison et al. (2000) as a way of validating their empirical estimates and assessing the generality of the Freeman-Lazear theoretical framework. Utilising

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the Australian 1995 WIRS and employing an exact same model specification, we studied the relationship between employee involvement and firm performance within three workplace types: those engaged in union bargaining at the workplace level (assumed to be distributive); those engaged in non-union workplace level bargaining (assumed to be non-distributive); and those workplaces covered by a workplace agreement or award which was negotiated beyond the workplace. A key prediction arising from Addison et al.’s modification to Freeman-Lazear’s model is that a partial decoupling of production and distribution would lead to the selection of employee involvement levels closer to the social optimum level (x*), thus maximising firm performance. The findings in this paper contrast markedly with those uncovered by Addison et al. using data from the 1990 British WIRS. While some support is found for the Freeman-Lazear model when estimated using British data, the Australian empirical exercise suggests little evidence of an association or link between employee involvement and firm performance irrespective of the form and level of wage negotiations. While the disparities between the studies may reflect data limitations and problems associated with measuring and capturing firm heterogeneity, the lack of consistency casts doubt on the robustness of the empirical model used to operationalise the Freeman-Lazear theoretical model.

ENDNOTES

1. There are a number of different ways to classify the form of wage negotiations. Two of the more common constructs employed in the negotiation literature are distributive bargaining (also known as share bargaining) and integrative bargaining. Distributive bargaining is a pluralist construct; it is characterised as being conflict driven, resulting in ‘I win/you lose’ type outcomes. Integrative bargaining, in contrast, is a unitarist construct and assumes no conflict; bargaining is regarded as problem-solving (i.e. win-win). For further discussion of these bargaining constructs see Walton and McKersie (1965).

2. Readers may question this rather simplistic account of unions and bargaining form. Addison et al.however, give no clear justification for their assumed position that union bargaining is distributive and non-union bargaining is something else (e.g. integrative or determined unilaterally by management).

3. Addison et al.(2000:13) do acknowledge that trade union preferences with respect to employee

involvement may run in the opposite direction. This would be the case where trade unions

saw employee involvement as supplanting trade unions. Addison et al. however suggest

that the weight of evidence in the literature points to union pressure in favour of employee involvement (2000: 17).

4. Addison et al.also suggest that an additional advantage of the employment of these dependent

variables in change form (rather than levels) is that it allows the researchers to differentiate out the effects of factors such as unmeasured differences in managerial ability to work or manage high levels of employee involvement.

5. For further discussion and justification of the choice of these measures as dependent variables

see Addison et al.(2000: 20–21).

6. The maximum size of the non-union and union samples in Addison et al.is 424 and 449,

respectively. The only regressions featuring the total 863 are those where the dependent variable is employment change. When the dependent variable is profitability or labour pro-ductivity the non-union and union sample sizes fall considerably (equal to 271 (non-union) and 201 (union) in the ‘profitability’ model).

7. The variable was constructed from information contained in AWIRS questions number: CF19, CF32a and CF38c,g,i.

8. The variable is derived from information contained in CF19, CF32a, CF38c,g,i and CF39 in AWIRS.

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REFERENCES

Addison JT, Belfield CR (2001) Updating the Determinants of Firm Performance: Estimation using

the 1998 UK Workplace Employee Relations Survey. British Journal of Industrial Relations

39(3), 341–66.

Addison JT, Siebert WS, Wagner J, Wei X (2000) Worker Participation and Firm Performance:

Evidence from Germany and Britain. British Journal of Industrial Relations38(1), 7–48.

Cappelli P, Neumark D (1999) Do ‘High Performance’ Work Practices Improve Establishment-Level Outcomes? National Bureau of Economic Research, Working Paper 7374. Available from http://www.nber.org/papers/w7374

Freeman RB, Lazear EP (1995) An Economic Analysis of Works Councils. In: Rogers J and Streeck

W eds Works Councils: Consultation, Representation and Cooperation in Industrial Relations. Chicago:

University of Chicago Press.

Treble J, van Gameren E, Bridges S, Barmby T (2001) The Internal Economics of the Firm: Further

Evidence from Personnel Data. Labour Economics8(5), 531–52.

Walton R, McKersie RB (1965) A Behavioral Theory of Negotiations. New York: McGraw-Hill.

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Table A1 Firm performance measures, definition, mean and standard deviation: WIRS and AWIRS

UK establishments with . . . Australian establishments with . . . Variable description Variable description for AWIRS Union wage Non-union Non-union Union wage Union wage (as per Addison et al.) AWIRS where slight Q. # bargaining wage wage bargaining bargaining

differences exist (n= 424) bargaining bargaining at the firm at the (n= 449) (n= 77) level industry/

(n= 115) national level (n= 632) Labour productivity change Based on management BD11 1.800 (0.5) 1.600 (0.5) 1.800 (0.5) 1.800 (0.5) 1.700 (0.6) (3-element index of labour assessment of current 0.030 0.021 0.051 0.043 0.071 productivity change based productivity level compared 0.110 0.282 0.129 0.121 0.188 on management assessment with 2 years earlier (1993). 0.860 0.698 0.818 0.834 0.740 of current productivity level Assigned values are equivalent.

compared with 3 years earlier. Assigned values: 0 = little/lot lower’; 1= ‘about the same’; 2 = ’a little/lot higher’)

Employment change % difference in employment A1 & 11.7 (101.7) 17.3 (85.2) 5.7 (46.9) 3.1 (24.5) -0.7 (27.1) (employment in 1990 less levels between 1994 and 1995. A9

employment in 1987: %)

Profitability (3-element profit 3-element index constructed BD3 1.500 (0.6) 1.600 (0.6) 1.700 (0.6) 1.800 (0.6) 1.500 (0.8) indexconstructed from from management assessment 0.090 0.074 0.103 0.086 0.188 management assessment of of pre-tax profit of the 0.343 0.282 0.064 0.078 0.109 financial performance of the establishment over the last year. 0.567 0.550 0.831 0.834 0.702 establishment compared with Assigned values: 0 = loss;

other establishments in the 1 = break even; 2 = profit. same industry. Assigned values:

0 = ’below average’; 1 = ‘above average’; 2 = ‘better than average’.

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Table A1 Continued

UK establishments with . . . Australian establishments with . . . Variable description Variable description for AWIRS Union wage Non-union Non-union Union wage Union wage (as per Addison et al.) AWIRS where slight Q. # bargaining wage wage bargaining bargaining

differences exist (n= 424) bargaining bargaining at the firm at the (n= 449) (n= 77) level industry/

(n= 115) national level (n= 632) Wages (average weekly Average gross weekly wage A3b,c, 175.7 (63.3) 147.9 (60.9) 575.6 (189.9) 683.9 (265.3) 592.1 (202.5) wage of manual workers) of full-time non-managerial d,e,f,g,

employees at the workplace. h & A13b, c,d,e,f,g,h

Notes:(a) Variable definitions, means and standard deviations (in parentheses) for the UK are from Addison et al.Table A1.

(b) In the labour productivity and profitability rows there are four sets of numbers. The first number reports the mean and standard deviation. The other three report the distribution of responses. For example, in the UK, 86% of respondents indicated that labour productivity was ‘a little/lot higher’; in AWIRS a similar share (81.8%) also reported that labour productivity was ‘a little/lot higher’.

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UK establishments with . . . Australian establishments with . . . Variable description Variable description for AWIRS Union wage Non-union Non-union Union wage Union wage (as per Addison et al.) AWIRS where slight Q. # bargaining wage wage bargaining bargaining

differences exist (n= 424) bargaining bargaining at the firm at the (n= 449) (n= 77) level industry/

(n= 115) national level (n= 632) Joint consultative committee ‘Same’ CD7c 0.3 (0.4) 0.2 (0.4) 0.3 (0.5) 0.8 (0.4) 0.2 (0.4) (dummy = 1 if JCC present)

Information/consultation Dummy = 1 if establishment CA171f, 0.7 (0.4) 0.6 (0.5) 0.3 (0.4) 0.3 (0.4) 0.2 (0.4) schemes (dummy = 1 if used either quality circles, CD7d

firm has regular meetings task force and/or other ad to communicate or consult hoc joint committees to among workgroups/teams communicate or consult or between workers and with employees. management, including

quality circles and team briefings).

New joint consultative Dummy = 1 if JCC had been CD8c 0.1 (0.2) 0.0 (0.2) 0.2 (0.4) 0.2 (0.4) 0.1 (0.3) committee (dummy = 1 if introduced within the last

JCC established or reorganised 2 years (1993–1995). between 1987 and 1990).

New information/consultation Dummy = 1 if workplace had CD8b 0.2 (0.4) 0.1 (0.3) 0.1 (0.3) 0.2 (0.4) 0.1 (0.3) schemes (dummy = 1 if seen the introduction of

changes in employee quality circles and/or task force involvement occurred between in the 2 two years (1993–1995). 1987 and 1990, including

general consultative meetings, production meetings or other discussions/communications between management and workers).

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Table A3 Other independent variables: Definition, mean and standard deviation

UK establishments with . . . Australian establishments with . . . Variable description Variable description for AWIRS Union wage Non-union Non-union Union wage Union wage (as per Addison et al.) AWIRS where slight Q. # bargaining wage wage bargaining bargaining

differences exist (n= 424) bargaining bargaining at the firm at the (n= 449) (n= 77) level industry/

(n= 115) national level (n= 632) Establishment age ‘Same’ BB7 18.5 (4.7) 14.6 (6.5) 35.9 (24.0) 38.3 (23.6) 34.0 (22.3) (age of establishment

in years)

Female (%) ‘Same’ A2 27.1 (23.8) 24.3 (21.7) 41.5 (28.8) 19.7 (18.3) 41.2 (26.9) Skilled (%) ‘Same’ A3dt, 53.7 (39.6) 50.7 (36.3) 24.1 (27.9) 48.1 (28.5) 24.0 (29.4)

A3gt,A3t

Part-time (%) ‘Same’ A2 13.5 (20.7) 17.1 (23.9) 26.1 (30.8) 6.3 (11.2) 24.3 (30.3) Shiftwork (dummy = 1 if ‘Same’ CB4 0.4 (0.5) 0.3 (0.5) 0.6 (0.5) 0.9 (0.3) 0.7 (0.5) shiftwork used)

Piece rates Dummy = 1 if any non- CM1 0.1 (0.4) 0.1 (0.4) 0.7 (0.5) 0.4 (0.5) 0.4 (0.5) (dummy = 1 if individual managerial employees received

payment by results for any payments based on some group of workers in the firm) measure of performance such

as incentive bonus, merit pay, piece work or commission.

Advanced technology Dummy = 1 if, in the last BF1a, 0.4 (0.5) 0.2 (0.4) 0.5 (0.5) 0.7 (0.5) 0.6 (0.5) (Dummy = 1 if automated 2 years, the firm introduced BF1b

handling, storage or major new office technology, centralised machine control) new plant, machinery or

equipment.

Profit sharing for employees ‘Same’ CM2d 0.7 (0.5) 0.5 (0.5) 0.1 (0.4) 0.0 (0.2) 0.1 (0.3) (dummy = 1 if used)

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UK establishments with . . . Australian establishments with . . . Variable description Variable description for AWIRS Union wage Non-union Non-union Union wage Union wage (as per Addison et al.) AWIRS where slight Q. # bargaining wage wage bargaining bargaining

differences exist (n= 424) bargaining bargaining at the firm at the (n= 449) (n= 77) level industry/

(n= 115) national level (n= 632) Market power ‘Same’ BC5 0.2 (0.4) 0.3 (0.4) 0.3 (0.4) 0.4 (0.5) 0.3 (0.4) (dummy = 1 if dominant/few

competitors in the market)

Export sector ‘Same’ BC3 0.1 (0.3) 0.1 (0.3) 0.1 (0.3) 0.1 (0.3) 0.0 (0.2) (dummy = 1 if establishment

produces a good or service primarily for export)

Trade union density ‘Same’ CN5, 64.1 (27.4) 8.6 (19.4) 29.3 (34.1) 60.8 (30.3) 33.1 (37.3)

(% of total workforce in A2t

trade union)

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APPENDIXB: RESULTS

Table B1 Ordered probit estimates of the effects of changes in employee involvement on changes in labour productivity(dependent variable) in Australian establishments

Non-union bargaining Collective bargaining

Workplace level Beyond the workplace coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Constant 6.018 1.229 0.196 0.1420 0.586 1.633000

Establishment age -0.039 1.206 +(5%) 0.007 0.6270 +(10%) -0.002 0.818000

1n (establishment size) -0.108 0.147 -0.010 0.0380 0.11 1.533000

New joint consultative committee 4.632 0.014 +(5%) -0.142 0.2220 -0.124 0.627000

New information/consultation scheme 5.723 0.000 +(5%) -0.075 0.0690 -0.074 0.447000

Single establishment -0.063 0.038 NA 0.363 2.736***

Female (%) -0.004 0.113 +(5%) -0.005 0.3850 -(1%) 00.0 0.108000

Skilled (%) -0.009 0.333 +(1%) 0.012 1.2390 -0.006 2.057**0

Part time (%) -0.029 1.359 0.015 0.5770 -0.001 0.381000

Shiftworking 0.654 0.600 0.284 0.4000 0.086 0.663000

Performance pay (piece rates) -1.131 0.541 +(5%) 0.449 0.7700 +(10%) 0.143 1.150000

Market power (low competition) 0.446 0.243 -0.878 1.782* 0.004 0.036000

Export sector 0.614 0.003 -0.04 0.0400 -0.257 0.739000

Technological change -0.574 0.484 0.665 1.3170 0.457 4.016***

Profit sharing for employees -2.496 1.473 +(5%) -0.914 0.8870 -0.045 0.192000

(18)

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Non-union bargaining Collective bargaining

Workplace level Beyond the workplace coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Industry dummies Included Included Included

McFadden R2 _0.47 _(0.196) _0.201 _(0.411) _0.077

N 77 115 632

Notes:Absolute t-statistics are reported here; ***, ***, * denote significance at 0.01, 0.05 and 0.10 levels, respectively; the third column within the ‘non-union bargaining’ and ‘collective bargaining – workplace level’ sections reports on the sign and significance of the corresponding variable in the Addison et al. study of UK firms – a blank indicates that the variable was not statistically significant.

(19)

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Table B2 OLS estimates of the effects of changes in employee involvement on employment change (dependent variable) in Australian establishments

Non-union bargaining Collective bargaining

Workplace level Beyond the workplace coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Constant 68.692 2.00800 5.447 0.462 -(1%) -6.773 1.066

Establishment age -0.057 2.167** -(10%) -0.134 1.571 -0.095 1.482

ln (establishment size) -11.015 1.30000 +(10%) 2.932 1.063 +(1%) 1.247 1.169

New joint consultative committee -1.143 0.11200 3.065 0.768 -(1%) -4.149 1.265

New information/consultation scheme 2.253 0.17000 +(1%) 2.531 0.440 +(10%) 1.996 0.951

Single establishment -22.247 0.91600 NA -5.739 1.632

Female (%) 0.146 0.72100 0.091 1.013 0.056 0.960

Skilled (%) 0.033 0.13400 0.106 0.821 +(1%) 0.083 1.783

Part time (%) -0.117 0.42200 0.115 0.805 -0.062 0.984

Shiftworking -1.898 0.22600 -18.381 1.231 4.184 1.459

Performance pay (piece rates) -1.808 0.13700 -4.415 1.185 +(5%) 2.619 1.084

Market power (low competition) 11.675 0.91300 1.276 0.356 +(5%) 3.788 1.181

Export sector 30.744 1.59500 -7.935 1.064 4.432 0.783

Technological change -1.485 0.19000 -(1%) -2.633 0.729 -(5%) 1.889 0.921

Profit sharing for employees 2.550 0.16900 8.441 0.632 0.363 0.080

Trade union density -0.071 0.60100 -0.062 1.121 -(1%) -0.026 0.883

Industry dummies Included Included Included

McFadden R2 _0.046 _(0.026) _0.079 _(0.228) _0.024

N 77.00 115.000 632.0000

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Non-union bargaining Collective bargaining

Workplace level Beyond the workplace coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Constant -2.207 0.680 1.190 0.658 +(5%) 0.304 0.9250

Establishment age 0.010 0.514 0.013 0.866 -(1%) 0.001 0.2230

ln (establishment size) 0.494 0.924 0.07 0.242 0.112 1.700*

Joint consultative committee 0.319 0.330 -1.099 1.364 0.139 0.9910

Information/consultation scheme 0.445 0.529 -0.014 0.025 -(5%) 0.020 0.1540

Single establishment 0.955 0.762 na -0.176 1.3160

Female (%) 0.019 0.857 0.007 0.498 -0.001 0.1920

Skilled (%) 0.008 0.361 -0.014 1.131 +(1%) -0.002 0.6810

Part time (%) 0.004 0.185 0.053 0.702 -(10%) 0.000 0.1680

Shiftworking -0.285 0.283 0.435 0.530 -(1%) 0.058 0.4680

Performance pay (piece rates) 0.142 0.113 -(1%) -0.164 0.327 0.196 1.685*

Market power (low competition) -0.455 0.455 0.068 0.943 +(1%) -0.155 1.2830

Export sector 0.105 0.064 -0.057 0.073 -0.111 0.3980

Technological change -1.253 1.160 +(10%) 0.767 1.255 +(1%) 0.051 0.4720

Profit sharing for employees 5.475 0.001 0.458 0.366 +(1%) 0.183 0.7620

Trade union density 0.002 0.091 -0.006 0.580 0.000 0.1120

Industry dummies Included Included Included

McFadden R2 _0.364 _(0.095) _0.199 _(0.377) _0.021

N 77.000 115.0000 632.0000

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Table B4 OLS estimates of the effects of employee involvement on average weekly wages (dependent variable) in Australian establishments Non-union bargaining Collective bargaining

Workplace level Beyond the workplace coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Constant 343.180 3.099*** +(1%) 398.427 4.191*** +(1%) 531.883 12.273***

Establishment age 0.748 0.926000 0.050 0.064000 -0.202 0.651000

ln (establishment size) 57.800 2.969*** +(1%) 34.530 1.865*00 31.418 3.552***

Joint consultative committee -90.813 2.783000 -63.372 1.634*00 -14.434 0.821000

Information/consultation scheme 2.574 0.074000 +(1%) -20.068 0.500000 -24.690 1.675*00

Single establishment 83.445 1.724*00 +(10%) na 6.915 0.404000

Female (%) -1.898 2.245**0 -(1%) -3.095 4.273*** -(1%) -1.298 4.612***

Skilled (%) -0.690 1.194000 +(1%) -0.644 0.822000 +(1%) -1.032 3.361***

Part time (%) -0.328 0.418000 -(1%) -1.312 1.104000 -(1%) -1.401 4.290***

Shiftworking 2.164 0.066000 23.576 0.572000 +(1%) 17.380 1.106000

Performance pay (piece rates) -27.673 0.692000 122.750 3.390*** 18.465 1.265000

Market power (low competition) 129.853 2.617**0 20.952 0.622000 3.921 0.225000

Export sector -37.668 0.621000 +(1%) 268.845 3.082*** 74.685 1.348000

Technological change -9.241 0.250000 -21.859 0.623000 -23.012 1.656*00

Profit sharing for employees 5.188 0.149000 -132.7020 1.483000 +(1%) -14.095 0.489000

Trade union density -0.613 1.168000 +1%) 1.376 2.142**0 -0.559 3.165***

Industry dummies included included included

McFadden R2 _0.313 _(0.609) _0.518 _(0.612) _0.300

N 770.0 1150.00 6320.00

(1)

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Table A3

Continued

UK establishments with . . . Australian establishments with . . . Variable description Variable description for AWIRS Union wage Non-union Non-union Union wage Union wage (as per Addison et al.) AWIRS where slight Q. # bargaining wage wage bargaining bargaining

differences exist (n= 424) bargaining bargaining at the firm at the (n= 449) (n= 77) level industry/

(n= 115) national level (n= 632)

Market power ‘Same’ BC5 0.2 (0.4) 0.3 (0.4) 0.3 (0.4) 0.4 (0.5) 0.3 (0.4)

(dummy = 1 if dominant/few competitors in the market)

Export sector ‘Same’ BC3 0.1 (0.3) 0.1 (0.3) 0.1 (0.3) 0.1 (0.3) 0.0 (0.2)

(dummy = 1 if establishment produces a good or service primarily for export)

Trade union density ‘Same’ CN5, 64.1 (27.4) 8.6 (19.4) 29.3 (34.1) 60.8 (30.3) 33.1 (37.3)

(% of total workforce in A2t

trade union)

(2)

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AND

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361 A

PPENDIX

B: R

ESULTS

Table B1

Ordered probit estimates of the effects of changes in employee involvement on

changes in labour productivity

(dependent variable)

in Australian establishments

Non-union bargaining Collective bargaining

Workplace level Beyond the workplace

coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Constant 6.018 1.229 0.196 0.1420 0.586 1.633000

Establishment age -0.039 1.206 +(5%) 0.007 0.6270 +(10%) -0.002 0.818000

1n (establishment size) -0.108 0.147 -0.010 0.0380 0.11 1.533000

New joint consultative committee 4.632 0.014 +(5%) -0.142 0.2220 -0.124 0.627000

New information/consultation scheme 5.723 0.000 +(5%) -0.075 0.0690 -0.074 0.447000

Single establishment -0.063 0.038 NA 0.363 2.736***

Female (%) -0.004 0.113 +(5%) -0.005 0.3850 -(1%) 00.0 0.108000

Skilled (%) -0.009 0.333 +(1%) 0.012 1.2390 -0.006 2.057**0

Part time (%) -0.029 1.359 0.015 0.5770 -0.001 0.381000

Shiftworking 0.654 0.600 0.284 0.4000 0.086 0.663000

Performance pay (piece rates) -1.131 0.541 +(5%) 0.449 0.7700 +(10%) 0.143 1.150000

Market power (low competition) 0.446 0.243 -0.878 1.782* 0.004 0.036000

Export sector 0.614 0.003 -0.04 0.0400 -0.257 0.739000

Technological change -0.574 0.484 0.665 1.3170 0.457 4.016***

Profit sharing for employees -2.496 1.473 +(5%) -0.914 0.8870 -0.045 0.192000

(3)

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2004

Table B1

Continued

Non-union bargaining Collective bargaining

Workplace level Beyond the workplace

coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Industry dummies Included Included Included

McFadden R2 _0.47 _(0.196) _0.201 _(0.411) _0.077

N 77 115 632

Notes:Absolute t-statistics are reported here; ***, ***, * denote significance at 0.01, 0.05 and 0.10 levels, respectively; the third column within the ‘non-union bargaining’ and

‘collective bargaining – workplace level’ sections reports on the sign and significance of the corresponding variable in the Addison et al. study of UK firms – a blank indicates

(4)

ORKER

TICIP

TION

AND

FIRM

PERFORMANCE

363 Table B2

OLS estimates of the effects of changes in employee involvement on

employment change

(dependent variable) in Australian

establishments

Non-union bargaining Collective bargaining

Workplace level Beyond the workplace

coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Constant 68.692 2.00800 5.447 0.462 -(1%) -6.773 1.066

Establishment age -0.057 2.167** -(10%) -0.134 1.571 -0.095 1.482

ln (establishment size) -11.015 1.30000 +(10%) 2.932 1.063 +(1%) 1.247 1.169

New joint consultative committee -1.143 0.11200 3.065 0.768 -(1%) -4.149 1.265

New information/consultation scheme 2.253 0.17000 +(1%) 2.531 0.440 +(10%) 1.996 0.951

Single establishment -22.247 0.91600 NA -5.739 1.632

Female (%) 0.146 0.72100 0.091 1.013 0.056 0.960

Skilled (%) 0.033 0.13400 0.106 0.821 +(1%) 0.083 1.783

Part time (%) -0.117 0.42200 0.115 0.805 -0.062 0.984

Shiftworking -1.898 0.22600 -18.381 1.231 4.184 1.459

Performance pay (piece rates) -1.808 0.13700 -4.415 1.185 +(5%) 2.619 1.084

Market power (low competition) 11.675 0.91300 1.276 0.356 +(5%) 3.788 1.181

Export sector 30.744 1.59500 -7.935 1.064 4.432 0.783

Technological change -1.485 0.19000 -(1%) -2.633 0.729 -(5%) 1.889 0.921

Profit sharing for employees 2.550 0.16900 8.441 0.632 0.363 0.080

Trade union density -0.071 0.60100 -0.062 1.121 -(1%) -0.026 0.883

Industry dummies Included Included Included

McFadden R2 _0.046 _(0.026) _0.079 _(0.228) _0.024

N 77.00 115.000 632.0000

(5)

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Table B3

Ordered probit estimates of the effects of employee involvement on

profitability

(dependent variable) in Australian establishments

Non-union bargaining Collective bargaining

Workplace level Beyond the workplace

coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat. _{Sign & Sig.} _coeff. t_-stat

UK UK

Constant -2.207 0.680 1.190 0.658 +(5%) 0.304 0.9250

Establishment age 0.010 0.514 0.013 0.866 -(1%) 0.001 0.2230

ln (establishment size) 0.494 0.924 0.07 0.242 0.112 1.700*

Joint consultative committee 0.319 0.330 -1.099 1.364 0.139 0.9910

Information/consultation scheme 0.445 0.529 -0.014 0.025 -(5%) 0.020 0.1540

Single establishment 0.955 0.762 na -0.176 1.3160

Female (%) 0.019 0.857 0.007 0.498 -0.001 0.1920

Skilled (%) 0.008 0.361 -0.014 1.131 +(1%) -0.002 0.6810

Part time (%) 0.004 0.185 0.053 0.702 -(10%) 0.000 0.1680

Shiftworking -0.285 0.283 0.435 0.530 -(1%) 0.058 0.4680

Performance pay (piece rates) 0.142 0.113 -(1%) -0.164 0.327 0.196 1.685*

Market power (low competition) -0.455 0.455 0.068 0.943 +(1%) -0.155 1.2830

Export sector 0.105 0.064 -0.057 0.073 -0.111 0.3980

Technological change -1.253 1.160 +(10%) 0.767 1.255 +(1%) 0.051 0.4720

Profit sharing for employees 5.475 0.001 0.458 0.366 +(1%) 0.183 0.7620

Trade union density 0.002 0.091 -0.006 0.580 0.000 0.1120

Industry dummies Included Included Included

McFadden R2 _0.364 _(0.095) _0.199 _(0.377) _0.021

N 77.000 115.0000 632.0000

(6)

ORKER

TICIP

TION

AND

FIRM

PERFORMANCE

365 Table B4

OLS estimates of the effects of employee involvement on

average weekly wages (

dependent variable) in Australian establishments