Lessons from Nordic Sector Bargaining for California – Top 5 Insights



California is progressively adopting a centralized, coordinated bargaining system for labor, and can potentially learn from the Nordic Model of labor institutions, renowned for high wages, employment rates, and productive economies. Since 2019, California has begun implementing sectoral bargaining through several legislative measures, like AB-257 for the fast-food industry and AB-378, the Childcare Providers Act. However, the scope and permanence of these changes fall short of the Nordic Model, which encompasses coverage for all industries, negotiations represented by workers and management, and comprehensive coverage of issues.

California’s Embryonic Centralized Bargaining System Inspired by the Nordic Model

California is progressively moving towards a centralized, coordinated bargaining system, widely considered the gold standard for workers’ rights. Through a series of legislative measures, the state is drawing closer to the structures observed in the Nordic Model, one of the world’s most effective labor institutions.

Renowned for superior employment rates, restricted wage differentials, high productivity, and innovative economies, the Nordic countries owe these achievements chiefly to their highly-organized workforce and sectoral bargaining frameworks.

In all Nordic countries, approximately 84 percent of the workforce is covered by a Collective Bargaining Agreement (CBA), a figure seven times higher than that of the US. Among the 11 nations with a supermajority of workers under a CBA, the five Nordic countries figure prominently, with Finland and Iceland leading with 90 percent coverage.

Centralized Bargaining in Action

In the Nordic system, labor and employer groups play defined roles in the bargaining process. Employer associations, which account for 65%-80% of all employers in the Nordic region, engage in discussions with unions to establish industry-wide standards. Labor-side coordination is equally strong, with 50-90% of workers belonging to a union. This coordination ensures that Collective Bargaining Agreements (CBAs) cover the entire industry, even in countries lacking formal extensions of CBAs.

The scope of sectoral bargaining in the Nordic Model is expansive, covering wages, work-life balance, benefits, vocational training, gender equality, and more. The contracts are comprehensive, adapting to each sector’s specific needs and country of operation.

Since the 1980s, Nordic countries have experienced organized decentralization within their bargaining regimes, shifting from economy-wide coordinated bargaining to sector or firm level. This allowed sectoral agreements to serve as base frameworks for firm-level bargaining structures.

Emergence of Centralized Bargaining in California

In California, sectoral bargaining has been progressively established through legislative measures since 2019. The most notable instance pertains to the fast-food industry. The state has passed laws allowing the creation of a ‘Fast Food Council’ with the mandate to negotiate statewide standards for fast-food workers’ wages and working conditions.

Other industries, such as childcare and in-home support services, are also transitioning towards more centralized, coordinated bargaining. For instance, California has passed a law enabling family childcare providers to unionize and collectively bargain with the state. Meanwhile, initiatives are underway to establish a statewide bargaining process for In-Home Support Service (IHSS) workers, who currently suffer from low pay and inconsistent standards across different agencies.

The healthcare sector is another focal point, with the state implementing legislation to elevate minimum wage schedules for healthcare workers significantly above the state minimum. Moreover, the recently signed Budget Act has revived the Industrial Welfare Commission (IWC), which sets wages and working conditions for specific industries.

Moving Forward

California’s movement towards centralized bargaining presents a promising trend but falls short of the Nordic Model’s standards. To more closely align with this model, the state would need to establish permanent bargaining structures in all industries, with both workers and management represented in coordinated negotiations. Additionally, considering the lower levels of union density and employer associations, the state should contemplate automatic extensions of sectoral agreements to non-participants.

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