for attempts to redefine the terms of a social or economic relationship. In his
model, an aggrieved customer, employee or member of an organisation has
two main options: either to go elsewhere (exit) or to demand improvements
(voice). The more committed an individual to a particular supplier, employer,
political party or other organisation – in Hirschman’s terms, the stronger their
loyalty – the greater the incentive to choose voice rather than exit. In addition –
though Hirschman did not fully pursue this issue – an exit decision is typically
individual, whereas voice is normally collective: it requires the existence of
(usually institutionalised) channels. Hence it is in institutionally embedded
societies – where rights of collective association and expression are protected –
that voice is a widespread option.
This argument has been developed in the specific context of industrial
relations by Freeman and Medoff (1984). They stress that effective voice
reduces exit; and because labour turnover imposes costs on the employer (in
seeking replacements, providing training, absorbing the lower productivity
normal with new employees because of learning-curve effects) there are bene-
fits for managements as well as for workers in institutionalising voice; griev-
ance procedures and seniority systems, in particular, have a stabilising effect on
employment. They argue however that the economic benefits are most evident
at the aggregate, macroeconomic level; whereas the size of the union wage
mark-up entails that for the individual employer, the costs may outweigh the
benefits. Hence a favourable legal regime is necessary to underpin institutions
of employee voice, obliging employers to adopt industrial relations procedures
which may not be in their individual short-term interests though they will
benefit employers collectively in the long run.
To an important extent, this analysis reflects a North American perspec-
tive: in the USA, company-based certification of trade unions for collective
bargaining purposes results in a clear division between union and non-union
firms and sectors, with substantial differences in terms and conditions of
employment between the two. Twenty years ago, for example, it was common
to speak of a ‘union wage mark-up’: pay rates might be 20% higher in a
unionised firm than in an analogous company without union recognition. In
many other national contexts the situation is very different. First, the distribu-
tion of union membership is typically more extensive: union density in the
USA when Freeman and Medoff wrote was only about 20%, and has fallen
significantly since then; in almost all of western Europe the figure is much
higher (over 80% in many Scandinavian countries), and the American level of
unionisation is exceeded in many other parts of the world. Second, bargaining
rights in many countries do not necessarily depend on majority membership;
in some cases any union officially considered ‘representative’ has the right to
negotiate. Third, the meaning of union recognition (and hence the character
of institutionalised voice), a matter of tight legal definition in North America,
is elsewhere often diffuse and elastic. Fourth, in the USA (and also Britain) col-
lective bargaining takes place overwhelmingly at company level, giving the
National industrial relations and transnational challenges 419