Originally Posted September 10, 2013
Today, the United Nation’s released its second annual “World Happiness Index”. One thing that is striking about these studies is that the ‘most happy countries’ are always countries with the a long tradition of strong government social welfare programs, high overall tax levels, and of interest to a blog on work law, high levels of collective bargaining coverage. That is, in happy countries, unions and collective bargaining play a substantial role in the setting of conditions of work, which creates a strong middle class. Not surprisingly, therefore, the ‘happiest’ countries also tend to be the least unequal societies: they score well on measures of income inequality. For example, the top 2 most happiest countries (Denmark, Norway) just happen to have the least income inequality in the Western World.
That’s interesting, from a labour policy perspective.
The new UN survey measures happiness by looking at the perceptions of citizens over six factors: real GDP per capita, healthy life expectancy, having someone to count on, perceived freedom to make life choices, freedom from corruption, and generosity. This years’ top 5 are Denmark, Norway, Switzerland, Netherlands, and Sweden. Here is a break down of those countries by the percentage of workers there whose terms of employment are determined by collective agreements (collective bargaining coverage):
Denmark: Happy, and Unionized. Coincidence?
Denmark (percentage of workers covered by collective agreements bargained by unions, 80%)
Norway (70%)
Rounding out the Top 10:
Canada (33%)
Finland (91%)
Austria (95%)
Iceland (88%)
Australia (43%)
Pretty striking, isn’t it? Of the countries in the Top 10 Happiest, only Canada and Australia have collective agreement coverage rates of less than 50 percent. The United States, by comparison, ranked 17th on the Happiness Index, where only about 8 percent of workers are covered by a collective agreement.
These findings are consistent with academic studies that have established a positive coorelation between unionization and personal satisfaction, as I noted in a 2010 post. Given what we know about the effects of collective bargaining, the relationship should not be surprising. Empirically, we know that collective bargaining raises incomes, contributes to a stronger middle class, results in better health benefits and pensions, and produces safer jobs and better job security than the alternative system, in which employers usually fix working conditions unilaterally, subject to certain regulatory minimum standards. We know that countries with high collective bargaining coverage have a broader distribution of wealth throughout society than countries with low collective bargaining coverage. My colleague Professor Michael Lynk has nicely summarized these outcomes in this paper.
We might also expect that countries that respect collective bargaining rights are also more likely to provide a strong bundle of social benefits that tend to make like more enjoyable, and easier, for its citizens. These countries operate under a different type of capitalism than prevails in countries, like the USA, where a belief in ‘market forces’ and ‘individual responsibility” borders on religious doctrine. In these ‘happy’ countries, the role of ‘social partners’, like unions, has long been accepted as a necessary counterbalance to capitalist forces. Critics of strong government and unions like to deride these systems as ‘socialist’. But whatever you want to call it, these systems consistently produce the happiest citizens in the world.
Unhappiness is Caused by Wage Envy
The Happiness Index provides another insight into why collective bargaining coverage might be associated with happiness. In a very interesting segment of the report (pages 62-64), the authors explain that a significant factor affecting happiness is individual perceptions of ‘relative income’. People become less happy when they believe their income is lower relative to a comparator, such as coworkers or friends. This is something I’ve discussed before on this blog (see Why Do Workers Support Policies to Weaken Labour Rights?) A theory might be that where large segments of the population have their wage and benefits fixed by collective agreements, rather than at the whim of human resources policies, there will be fewer gaps in compensation that seem arbitrary or unfair to people. They can more easily understand differences in pay, because those differences are more likely to be transparent and explained in the collective agreements.
In contrast, in countries where union representation is lower, like the USA, unionized workers earn considerably more money and have better benefits and pensions. Nonunion workers become resentful (unhappy) of this privilege, because they are relatively worse off than their perceived comparators in the unionized workplaces. High collective agreement coverage reduces the potential for wage and benefit envy, which breeds unhappiness. What do you think of that theory? How would you refute it?
Question for Discussion
What do you think explains the correlation between high levels of collective bargaining coverage and the high levels of social happiness, as suggested in the Happiness Index’s top 1o?
Is it just a coincidence that happy countries have high levels of collective bargaining coverage?
Do you think that this ‘happiness’ index produces any insight into how Canadian governments should shape labour policy?
Do you think experiences from other countries can be useful, or are foreign systems and cultures too different to import?
Tim Hudak of the Ontario Conservative Party has said that Ontario needs to reform our labour laws to discourage collective bargaining and weaken unions. If you were him, how would you respond to the fact that the happiest countries are those with the highest levels of collective bargaining?