Industrial Relocation and Labour Relations: The Case of Central and Eastern Europe

Industrial relocation is one of the main concerns of industrial relations practitioners, policy-makers, union leaders and researchers in general. For many companies the critical choice is no longer between producing at home or abroad, but rather between cutting costs or losing market share. One of the ways to increase competitiveness is to move east. By facilitating company relocation, the Central and Eastern European countries are guaranteeing the future of companies facing competition in Germany, France, Italy, and other European countries. But relocation often involves the loss of jobs in the country of origin and job creation in the countries of destination as well as many changes in industrial relations practices of both sides. This paper focuses on the impact of the integration of eight former communist countries in the European Union in 2004. Data for 2004-2006 show that differences in terms of salaries and working conditions are related to changes in the industrial relations systems of Western Europe on the one hand, and Central and Eastern Europe on the other. The eastern countries are growing fast, but a high rate of unemployment has led to frustration and dissatisfaction in most of the new Member States. In the Western countries, to avoid further company relocation to the eastern countries, pressure has been exerted on employees to make deep concessions in terms of salaries, bonuses, working time and other labour conditions. The paper explores the future prospects for these developments, as well as their repercussions for other emerging nations.