Industrial Relations and Firms’ Reactions to the Recession: A Comparative Micro-Econometric Analysis of France and Great Britain[Relations sociales et ajustements à la crise : une analyse micro-statistique comparative franco-britannique]

This article analyses employment and wage adjustments within French and British establishments in reaction to the 2007-2008 downturn. We study how internal and external flexibility associate to industrial relations at the establishment level. Our analysis is based on the comparison of two separate but highly comparable surveys: the British WERS and the French REPONSE, both conducted in 2011-2012. The two economies are often described as opposites, in terms of labor market institutions or firm demography for instance. At the macro level, the form taken by the crisis and its consequences indeed appeared as quite different: Britain favored internal adjustment (with wage change) while France focused on external adjustment (through employment level). Yet, we show establishments that reacted to the crisis by adjusting employment or wages have similar industrial relations in both countries: other things being equal, union presence, negotiation, conflict and consultation are associated with more flexibility arrangements. It shows that in both countries unions were not an obstacle to establishment adjustments after the downturn, even if they may have contributed to mitigate them (which our data does not allow us to assess). Our results suggest that these differences between the two countries might have more to do with difference in macroeconomic policy, and especially monetary policy, rather than labormarket institutions: high inflation opened the way for veiled wage adjustment in Britain when very low inflation restricted such opportunity in France.