National Institutions

From the late 1970s to the early 1990s, researchers conducted a number of industry case studies, mainly in the engineering and automotive sectors, which identified distinct national differences in work organization. Germany was consistently highlighted as offering jobs with higher levels of skill and autonomy, particularly when compared with the UK and, less frequently, with France. The path-breaking 'societal effects' approach, associated with the LEST group in France, drew on detailed empirical studies of 'comparable' firms, and argued that there was an 'institutional logic that is particular to a society' which brings about 'nationally different shapes of organization', with firms adopting 'different solutions to similar challenges' (Maurice et al. 1980: 59, 61). The research showed how the same manufacturing goods could be produced with contrasting country-based occupational hierarchies, division of labour, and work organization. Focusing on France and Germany, they concluded that firms 'are organized quite differently and that the worker hierarchy in the two countries is not the same' (Maurice etal. 1986: 161). In Germany, work was organized in ways that encouraged polyvalence, with workers having a greater span of control and less managerial supervision. In France, hierarchical authority was prominent, with work organized on the basis of a more detailed division of labour. There was no one dominant factor to explain these differences; rather they were an outcome of long-standing, interconnected 'social spheres' that had developed in 'manufacturing, industrial relations, education and training' (Maurice etal. 1980: 61), and which were closely linked to class relations and power in the wider society.

While the education and training system was a central 'sphere' for the 'societal effects' group, other approaches implied that it was the core explanation for differences in skills and work organization. Driven by a UK policy concern about low productivity, the National Institute of Economic and Social Research (NIESR) sought to explore the contribution of vocational education and training (VET) to under-performance. A series of 'matched-plant' studies were conducted in the 1980s and 1990s which compared UK workplaces in a number of sectors with those in Germany, France, and the Netherlands. The outcome was a collection of detailed workplace and sector comparisons of technology, work organization, training, and performance. UK workers were typically found to be undertaking less training, performing lower skilled work with greater supervision, and to be less productive than their continental European counterparts (e.g. Daly etal. 1985; Prais etal. 1989; Steedman and Wagner 1989; Mason at al. 1994).

The authors prioritized the role of VET as the main causal factor, pointing for example to the impact of Germany's high quality dual apprenticeship system. However, the evidence to single out this one factor was, for some critics, unconvincing as many other elements were also in play (see Cutler 1992). A different reading of their data indicated that organizations in the UK had lower levels of capital investment, targeted 'mass' as opposed to 'differentiated' high-quality markets, and were faced with more intense short-term financial pressures. While the aim was to focus on comparable plants, in many cases it was the very problems involved in obtaining good matches that was itself illuminating. Nevertheless, the idea that the education and training system was the main driver of differences in skill outcomes in the workplace would have an enduring appeal for many UK academics and policy-makers alike.

While the differences in the way countries were specializing in particular product markets had been downplayed, other studies were focusing on the distinction between mass markets and differentiated products, and their implications for skills and work organization. Streeck (1992: 7) emphasized the 'thick institutional structures' in Germany that included, but went beyond, the apprenticeship system, and which provided a series of 'beneficial constraints' that pushed employers onto 'high road' accumulation strategies centred around 'diversified quality production', high skills, and high wages. German 'institutional rigidities', such as sectoral wage bargaining, employment protection, training requirements, and legally-backed systems of co-determination and works councils, largely 'foreclosed price based competition'. This distinctive set of socio-economic institutions, which also included systems of bank-based finance delivering 'patient capital', encouraged firms to seek competitive advantage in markets focusing on high-quality, differentiated products (Sorge and Streeck 1988: 26-7). This environment was seen to be associated with higher skilled and more autonomous forms of working than in 'institutionally impoverished settings' such as the UK and USA (Streeck 1992: 10).

The German system reflected a 'complex historical compromise' between the state, capital, and labour (Streeck 1997a: 34), which emerged when organized labour was relatively powerful. A similar argument about power, but linked to different institutional features, was also used to explain Swedish distinctiveness as regards work organization. Writing around the same time, Berggren (1992) argued that features such as strongly coordinated bargaining systems and low wage differentials, a generous welfare state, strong workplace trade unions, and a period of full employment (and therefore recruitment difficulties) had led Swedish companies to adopt more autonomous forms of team-based work organization, notably in the automotive industry. In the Nordic context, commentators like Esping-Andersen (1990) emphasized the power of unions and social democracy in the development of an inclusive welfare state model which provided constraints on employer choices and helped push them towards 'high road' strategies (see also Korpi 2006).

Writing in the 1980s, Finegold and Soskice (1988) also focused on the role of institutions to explain why the UK had such a poor training record and relatively low levels of qualification among school leavers. Rather than a cultural or class-structure problem of ingrained 'anti-industry' or 'antieducation' attitudes undermining investment in skills (see Wiener 1981), the problem was one of system failure (Finegold 1999: 60). Britain was seen to be 'trapped in a low-skills equilibrium', defined as 'a self-reinforcing network of societal and state institutions which interact to stifle the demand for improvements in skill levels' (Finegold and Soskice 1988: 22). Many UK firms were said to be competing in 'mass markets' for standardized goods with forms of work organization and job design that required only low levels of skill. Short-term shareholder pressures, the weak coordination capacity of employers and trade unions within an 'adversarial' and decentralized industrial relations system, the lack of sectoral coordination, and the low quality of vocational training were all implicated. While the education and training system had evolved to meet the needs of an economy based primarily upon large, mass production manufacturing, this system was seen as ill-equipped to meet the changing nature of international competition which placed a premium on new industries and flexible, batch production methods, echoing debates around 'flexible specialization' prominent at the time (Piore and Sabel 1984) (see Chapter 2). Finegold (1991) drew an explicit comparison with the German 'high skills equilibrium', where interlocking institutions created a 'virtuous circle' of product and skills upgrading (see also Culpepper 1999).

The varieties of capitalism (VOC) literature (Hall and Soskice 2001), which has come to dominate comparative industrial relations, drew upon these theories of skills equilibria, and emerged as an academic defence of the viability of German capitalism at a time when the US economy was widely viewed to be forging ahead. Responding to arguments that globalization was leading to a process of 'Anglo-Saxonization', the theory distinguished between 'liberal market economies' (LMEs), such as the UK and USA, and 'coordinated market economies' (CMEs), which included Germany, Japan, and the Nordic countries. It located firms as 'the crucial actors in a capitalist economy', focusing attention on how they coordinate their economic activities to develop 'core competencies' that can deliver comparative advantage (Hall and Soskice 2001: 6). In LMEs, firms seek to resolve their coordination problems through markets and hierarchies, while in CMEs they rely more on non-market relations and strategic collaborations between firms and other actors (Hall and

Soskice 2001: 8). These different processes of coordination were seen as being shaped by interlocking and complementary institutional 'spheres' encompassing industrial relations, VET, corporate governance, inter-firm relations, and intra-firm relations, the last of which concerned labour utilization and management of the 'wage-effort bargain'.

These different institutional settings were said to provide firms with advantages which allowed them to compete successfully in particular types of markets. In CMEs, firms tend to adopt production strategies characterized by 'incremental innovation', requiring long-term cooperation with a skilled and functionally flexible workforce. Incentives to compete on the basis of quality and product differentiation were provided by access to patient capital, labour market regulations which restricted the use of redundancies, an education and training system that ensured high levels of firm-specific and industry-specific skill, and industrial relations and corporate structures (e.g. codetermination/ works councils) designed to provide collective voice and elicit cooperation.

For LMEs, a numerically flexible ('hire-and-fire') labour market, a highly developed stock market, hierarchical corporate management, and an education system providing 'general skills', created different incentives. Quick and easy access to start-up capital, rapid decision-making, and the ability to restructure with limited costs were seen to provide advantages for firms competing in sectors where the emphasis was upon 'rapid innovation' in new products (e.g. biotech in the USA). At the same time, a high level of labour market flexibility enabled many firms to compete via low-cost, low value- added strategies, with a less skilled, lower-cost workforce (Hall and Soskice 2001). The UK emerges as an economy with some advanced innovative sectors (e.g. finance, pharmaceuticals, and aerospace) but which is also heavily reliant upon mass-produced services (Crouch etal. 1999). A high level of tertiary education was seen to support innovative sectors, with the broader education system providing entrants to the workforce with 'general skills' needed to adjust and adapt to rapidly changing job demands.

VOC took a particular view on the role of product market strategy and the centrality of the skill formation system. On the former, it suggested that there was a direct link between the product market strategy of the firm and its skills requirements. In CMEs, firms 'employ production strategies that rely on a highly skilled labor force given substantial work autonomy and encouraged to share the information it acquires in order to generate continuous improvements in product lines and production processes' (Hall and Soskice 2001: 24). Beyond this general assumption, however, they left it to later contributors to explore work organization in detail.

Although the theory acknowledges the role of interconnected 'institutional complementarities', the skill formation system, as with the NIESR studies, was afforded particular attention in relation to job design decisions (Estevez-Abe etal. 2001: 146; Busemeyer and Trampusch 2012). Institutional practices make a difference because they encourage and discourage particular types of skill formation approaches from both workers and employers, i.e. firm/ industry 'specific skills' in Germany and 'general skills' in the UK. The skills created are assumed to align closely with their use within the workplace; issues of over- or under-qualification or skills wastage, therefore, do not enter the analysis. In addition, the distinction drawn between specific and general skills is not unproblematic. German apprentice-trained workers have broad-based transferable skills, with Streeck (2011a: 24) giving the example of skilled bakers who are sufficiently knowledgeable about chemistry to be employed by chemicals firms! Furthermore, it cannot be assumed, as is the tendency within the VOC literature, that tertiary-level education necessarily represents higher level general skills, with questions surrounding the quality of many degree programmes in the UK and USA and the level of cognitive skill acquired (Streeck 2011a; Cote 2014).

It is important to reiterate that while VOC was partly a defence of the viability of coordinated capitalisms, Hall and Soskice (2001) nevertheless insisted that both LMEs and CMEs could be economically successful, although their implications for social and distributional issues would be very different. There was also a strong implication that countries were locked into particular trajectories, or path dependencies, by virtue of their interlocking institutional complementarities. Little was said about processes of change and transformation (Streeck and Thelen 2005). It was claimed, for example, that the UK could never hope to emulate Germany's high quality apprenticeship system, required for success in differentiated product markets, because it lacked strong employer organizations. Instead, it should focus on the mass expansion of higher education (Soskice 1993; Finegold 1999) and compete on labour market flexibility. Despite developments in Germany challenging these assumptions about the locked-in nature of country trajectories, there remains an enduring argument that as LMEs struggle to develop strong forms of coordination, they are, therefore, destined to pursue further deregulatory measures.

While both the 'societal approach' and VOC explore the role of interlocking institutions, a key difference is that the first draws on power to explain the development of institutions and accompanying social norms. As Streeck (2010) has argued, the VOC approach reflects a functionalist perspective based on rational decision-making in response to institutional incentives. The approach is technocratic and tends to neglect politics, specifically the power resources at the disposal of employers and trade unions which, together with the role of the state, are central factors in shaping how systems emerge historically as well as change over time. There is, for example, no recognition of the power of organized labour and class conflict in explaining the development of labour market and welfare institutions. Rather, Hall and

Soskice (2001) consider issues like welfare provision or employment protection as rational choices, 'consensually created devices to facilitate cooperation between employers and workers and thereby increase productivity and competitiveness' (Streeck 2011a: 13).

Both these type of approaches have focused predominantly on identifying institutions that lead to specific forms of production strategies and the skills and types of work organization assumed to be associated with them. As seen in the previous chapter, the relationship between product markets, technology, and skills/work organization may be far more complex than these accounts imply, not least when applied to the service sector. Indeed, attempts at theorizing comparative differences in work organization have been based on a very limited number of workplace studies, predominantly in the automotive and engineering sectors. Whether these theories were intended to be applied beyond manufacturing to the private service sector or the public sector is far from clear. Commentators were certainly concerned to identify country-level differences and distinct national models, and these theoretical approaches have since provided conceptual shorthand for those seeking to frame crossnational comparative studies, including those in the public and private service sector. Given some of the difficulties specifically with conceptualizing the nature of the product, quality, and skills within the service sector, the question arises as to the applicability of these theoretical frameworks. How far does the evidence from these studies of often well-organized sectors in manufacturing reflect broader patterns of work organization across an economy?