Some Lessons Learned for Creating and Promoting Healthy Labor Relations in Small and Medium Enterprises in Vietnam

1.6.1.3. Andre Petit's (1985) model of mutual effects

Petit also believes that labor relations are a system, but he emphasizes the mutual impacts between environmental factors inside and outside the enterprise on that system. He also emphasizes the mutual impacts between workers (unions) and employers. But the impacts between these two subjects need to be considered in the mutual impacts on the environment of labor relations.

He described his model of labor relations as a dynamic system in which employees (unions) and employers are two entities with conflicting interests and must constantly fight each other to gain greater benefits. The conflict of interests between the two entities is inevitable. Therefore, to maintain the stability of labor relations in enterprises, it is necessary to make these two forces balanced, with almost equal power. To do this, the enterprise union needs to be strengthened to become a pillar of solidarity of employees, strong enough to confront the employers[79].

1.6.1.4. Some observations drawn from the three models above

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- All three models approach labor relations as a complex system closely linked to the enterprise's production and business system.

- The three models above do not contradict or negate each other, but only emphasize different mechanisms. Therefore, it is possible to combine all three models into the same labor relations system.

- All three models above have high scientific and practical value. However, the application of which model depends on the economic, social and political characteristics of each country.

1.6.2. Experience in creating and promoting healthy labor relations at the enterprise level in some countries

1.6.2.1. China's experience

China is a country with a political, economic and social system quite similar to Vietnam. Like Vietnam, the economic reform and opening-up policy has resulted in rapid economic growth. In the 1990s, China implemented a policy of restructuring state-owned enterprises on a large scale. The economic structure shifted from agriculture to industry, trade and services with large FDI projects. Along with that, income inequality in society increased to a dangerous level (GINI index is 0.46). The outbreak of conflicts in labor relations therefore also increased rapidly from 40,000 strikes in 1995 to 310,000 in 2005. This situation forced Chinese leaders to propose a policy of building a harmonious society.

In 1998, the All China Federation of Trade Unions (ACFTU) passed a new resolution to mobilize the entire organization to participate in the campaign under the slogan "Wherever there are workers, there must be unions". With strong government support, the campaign reversed the trend of declining unions. In 2003, the ACFTU began a campaign to establish unions for migrant rural workers, and union membership increased dramatically.

The Trade Union Law amended in 2001 has made a breakthrough in diversifying the forms of trade unions. In addition to enterprise trade unions, other forms are street trade unions (Jiedao gonghui) , general trade unions, and enterprise group-based trade unions (lianhe gonhui) . This diversification of trade union forms has opened up many opportunities for workers in SMEs and even the informal economic sector to join trade unions.

To develop a broad network of unions, ACFTU has implemented a policy of aggressive bottom-up advocacy instead of a top-down approach. That is, instead of asking employers to allow the establishment of unions within the enterprise, ACFTU mobilized all resources to directly approach key workers and persuade them to form unions. That tactic even helped ACFTU establish a union organization at the multinational corporation Wal-Mart, which is very famous for its non-union policy.

Although the ACFTU started the movement for collective bargaining right after the Labor Law came into effect in 1995 (at the same time as Vietnam), collective bargaining only really spread widely from 2001. Similar to Vietnam, at first, collective bargaining agreements mainly copied the minimum provisions of the law. However, when the ACFTU shifted its focus from promoting the signing of collective bargaining agreements in general to agreements on wages, the negotiation processes became more substantial. Since then, the ACFTU has implemented a policy of diversifying collective bargaining agreements at different levels. That is, not regulating a common form of collective bargaining agreements but allowing labor groups and employers to freely choose the content and scope of negotiations. The result was: in 2006, 1.5 million enterprises and 112 million employees participated in collective bargaining agreements; 37 million employees participated in separate agreements on wages; 42 million workers participate in sectoral and regional agreements.

The establishment of the tripartite consultation mechanism in August 2001 is a major experience of China. After its establishment at the national level, the tripartite consultation mechanism was established down to the provinces, cities and even down to the county/county level. This system has become a means for trade unions to rely on

to expand the practice of collective bargaining as well as to monitor the enforcement of the law. In many cities, the vice mayor of the city is appointed as the head of a tripartite working group to facilitate wage negotiations, ensure the signing of labor contracts, and support union movements.

Regarding minimum wages, China has decentralized the determination of minimum wages and the implementation of wage guidance policies to local authorities. Local governments have published a “Wage Guidance Manual” to guide enterprises and employees in determining the level, timing, and method of wage increases through negotiation [75].

1.6.2.2. Japan's experience

Japan is an Asian country that has achieved great success in economic development. One of the important factors that helped Japan overcome the crisis and achieve great achievements is the stability of labor relations.

After World War II, Japan's economy was devastated and completely collapsed. In 1946, under the guidance of the United States, a new constitution was promulgated, in which "Freedom of Association" was recognized. In 1949, the Trade Union Law was promulgated with 3 labor rights: The right to establish a trade union; The right to collective bargaining; The right to dispute. In the next 10 years, "American-style" trade union liberalization was promoted to the maximum. The law stipulated that 2 people (or even 1 person) could establish a trade union without registration. A newly established trade union only had to register if it carried out certain procedures under the Trade Union Law or wanted to receive "rescue" from the Labor Relations Commission. As a result, chaos in labor relations occurred. Workers made unreasonable demands for wage increases (in some cases, a 100% wage increase). If employers did not accept, strikes immediately took place. During this period, the rate of union establishment was very high, accounting for nearly 60% of enterprises, accompanied by a rapidly spreading strike movement.

Entering the 1960s, the Japanese economy began to grow rapidly and labor shortages occurred in most industries. Enterprises were forced to recruit a large number of newly trained young workers and untrained workers from the countryside. To meet the requirements of new technology, enterprises had to build an on-the-job training (OJT) system to gradually improve their skills. This training system was maintained and increasingly improved and operated regularly. From there, "internal labor markets" were formed. That is, enterprises could not recruit skilled workers from outside. When there was a need for labor, they trained, supplied and arranged their own use.

During this period, labor relations became extremely stable and formed the "Japanese Labor Relations Model" with three basic pillars:

- Lifetime employment: This is a long-term employment policy, in which few people change jobs, and the rate of employees with continuous, long-term employment is very high. Every year, businesses will recruit a number of newly graduated young workers under indefinite labor contracts and those workers will work continuously at that company until retirement. This policy is implemented in both small and medium-sized businesses.

- Paying salaries based on seniority: Every year, each employee is trained in the necessary skills and knowledge to serve the current and future needs of the business. Thanks to this, employees are able to develop their abilities and become familiar with many jobs through the arrangement and rotation of staff. Employees are cared for and looked after until retirement thanks to the personnel system of promotion and salary increase based on the number of years of continuous work. Under this regime, employees are continuously trained for a long time at a business. Thanks to this, they accumulate basic knowledge and skills for many types of jobs in the company. This helps businesses to be very flexible in converting technology models, changing production structures, promoting creativity and especially being able to arrange labor reasonably when facing a crisis. When facing an economic crisis, instead of laying off workers en masse like American businesses, Japanese businesses can implement a series of other solutions such as: overtime, job arrangement and conversion, limiting new recruitment, etc. For example, during the 1973 oil crisis, in 1975 the Japanese economy grew while the US and European economies were still deeply in crisis.

- One enterprise, one union regime: Although the law allows freedom of union, each enterprise can only have one union. Unions are organized according to the enterprise and are called grassroots unions. Grassroots unions are defined as follows: First, the scope of union members is limited to the official employees of the company; Second, the grassroots union is an independent union that is recognized for its complete autonomy of operation. Therefore, the grassroots union has the following characteristics: First, it is a closed organization because only official employees of the company can participate. It is also an open organization because all members of the company participate regardless of their profession. Therefore, both intellectual and manual workers can participate in activities equally. The gap between them is very small. Second, the executive committee of the grassroots union receives a salary from the union. They can be part-time employees.

They may be full-time or full-time, but when their term ends, they return to their original job. A member of the executive board of the trade union may be just an employee or worker. They are elected in a truly democratic manner (direct election by secret ballot). Therefore, the distance between the executive board members of the trade union and the workers is very small. They have many opportunities to exchange information. Third, there is no union competition in the enterprise. The employer in each enterprise has one and is a real partner to negotiate with the collective of workers.

With the above three pillars, each enterprise becomes a relatively closed, flexible and sustainable organization. Since the 1960s, there have been very few labor disputes in Japan. Japanese labor relations have always been stable and are considered a factor that helps the Japanese economy take the lead and overcome crises excellently. Some American and European enterprises and governments of some Asian countries such as Singapore, Malaysia, Taiwan, etc. have paid special attention to and tested the Japanese labor relations model. [34]

1.6.2.3. Experience of some Southeast Asian countries

Most Southeast Asian countries are developing countries, with socio-economic development models relatively similar to Vietnam. The regional integration movement is creating opportunities and pressure for countries to share information and experience in the field of labor relations. Learning from the experiences of these countries can help us integrate better, grow economically and stabilize society.

The Philippines is a country that is applying almost the original model of the US labor relations. That is the labor relations model based on the core of industry-level labor relations such as: Industry unions, professional unions, industry-level negotiations and industry-level collective labor agreements. Employees in an enterprise can participate in different industry (professional) unions. Currently, labor relations in the Philippines are very unstable. The main reason is that this model is not suitable for the culture, history and current economic conditions of the Philippines. Filipinos, like people in other Asian countries, have a high sense of community solidarity. Employees in an enterprise can easily share information, aspirations and support each other. Meanwhile, employers do not have a truly strong enough entity to negotiate.

In Malaysia and Singapore, the labor laws were established during the British colonial period. The current labor relations are a continuation of that period. That is, the labor relations in these countries are quite similar to those in Britain. In these countries

In this context, there is also a rather heavy distinction in social status and class between manual workers and indirect workers. The labor relations legal system of these countries overemphasizes minimum labor standards with the assumption that the subjects of application are manual workers. Trade unions are therefore also considered as organizations that are premised on manual workers. After 1974, the Malaysian government learned from Japan's experience and tried to impose it on their society. However, the results were not as expected. The establishment of grassroots unions encountered obstacles from previously formed trade union organizations. The legalization of another country's labor relations model into the labor society of this country was not successful.

Meanwhile, Singapore, with the advantage of being a small country with a high level of development, continues to maintain a close relationship between trade unions and the ruling political parties and even the employers. The law on labor relations in this country is very strict and somewhat promotes labor discipline, preventing strikes with strict legal regulations. Singaporean law allows a business to have many trade unions (for example, Singapore Airlines has up to 5 trade unions representing workers), but the country's legal system is very strict so conflicts between trade unions rarely occur. Another reason is that all trade unions in this country must operate as members of the Singapore National Trade Union Congress (SNTUC). In 1961, this Council had 64 member trade unions. Since 1981, SNTUC has been at the forefront of promoting skill upgrading and productivity improvements to achieve higher wages for workers. During economic downturns, trade unions have actively advocated wage cuts and wage deferrals to enable the economy to quickly recover from the crisis and return to growth. The organization now engages in an effective tripartite mechanism with the government and employers based on mutual trust. This has resulted in stable industrial relations in Singapore with virtually no strikes.

In Indonesia, after the fall of Mohammed Suharto's government in May 1998, the right to "freedom of association" was recognized in June. Hundreds of unions were formed shortly thereafter. Along with it, the "right to collective bargaining" and the "right to dispute" were also freely exercised. Demands for higher wages grew so much that employers could not pay them and many strikes occurred. The movement for rights and

Workers' interests are high and somewhat chaotic, beyond the control of the government. Currently, Indonesia's labor law system is being revised but the riots have not ended.

Thailand has established the Labor Code since 1946. Since then, it has been amended many times. Currently, Thailand's labor laws include: Labor Protection Law, Social Insurance Law, Labor Relations Law. Thai law recognizes multiple unions in the following forms: House Union , Company Union , Enterprise Union and Industrial Union . These unions can form Labor Federations and operate under the coordination of national Labor Councils . However, the unions are not effective. The increase in wages for most employees in SMEs is not the result of negotiations and is mainly achieved through increases in the minimum wage. The minimum wage is regulated by a tripartite committee consisting of the government, employees and employers. However, due to the weak operation of the trade union organization, the representatives of the workers are often the managers in the enterprise.[72],[73]

1.6.2.4. Experience of the US and European countries

Labor relations in the United States and European countries developed strongly with the emergence of trade unions from the early 20th century. The labor relations systems in these countries are built on the premise of a flexible labor market. That is, it is easy for employees to find jobs and vice versa, it is easy for employers to recruit suitable employees. Therefore, the labor relations systems in these countries have some of the following characteristics:

- Industry-level labor relations are very developed and become the core of the national labor relations system. Each country has many industry unions or industry-level collective labor agreements. For example, the Netherlands has more than 800 industry-level collective labor agreements.

- The right to freedom of association is recognized. Therefore, in Europe, unions often seek to exert political influence on their members. Unions operating in the same enterprise can cause conflicts with each other. Employees in SMEs can choose to join the appropriate industry (occupational) union.

- Unions operate independently of employers. Therefore, collective bargaining plays an important role. Employees are often more interested in the results of negotiations than in the labor standards set by the government.

- Many unions can operate in the same enterprise, but each enterprise has only one board representing the employees in that enterprise.

In the United States, collective bargaining usually takes place at the enterprise level. Both employees and employers have the right to object to the establishment of a union at the enterprise. Enterprises without unions (mainly small and medium enterprises) will be regulated by separate laws on labor relations.[71]

1.6.2.5. Some lessons learned for creating and promoting healthy labor relations in small and medium enterprises in Vietnam

Studying the experience of developing labor relations in different countries, we draw some lessons for the process of establishing and promoting healthy labor relations in Vietnamese SMEs as follows:

1- Strong government support for the trade union movement is a powerful source of motivation for trade unions to overcome the immature stages in newly developed economies. The trade union system in Vietnam was established a long time ago, but when it transitioned to a market economy, it showed a lack of experience. Therefore, trade unions will not be able to create a balance of power with employers without strong support from the State.

2- The relationship between trade unions and political organizations of workers is objective. Because, parties and trade unions both operate and serve a certain group of interests. In Vietnam, trade unions in non-state enterprises need to receive public and strong support from the Communist Party. That does not reduce the confidence of investors because both trade unions and employers must operate based on the law.

3- Diversifying the organizational forms of grassroots trade unions is one of the good ways for employees in SMEs to have more opportunities to access and receive support from trade unions. This does not mean "union freedom". Different organizational forms of grassroots trade unions operate uniformly within the same system and comply with the Trade Union Charter of the Vietnam General Confederation of Labor.

4- Trade unions need to be proactive and active in approaching workers. They must identify themselves as representatives of workers, so they should proactively approach, advocate for and protect workers' rights instead of acting as an organization supporting the government. That is, trade unions need to approach from the bottom up instead of from the top down.

5- Diversify the forms and levels of collective bargaining. Collective bargaining agreements and collective bargaining agreements must be appropriate to the circumstances of each group of workers in terms of both process and content. Therefore, Vietnam needs to create maximum conditions for collective bargaining to take place in these areas.

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