Trade unions’ impact on pay and jobs ‘in long-term decline’

New research for the Joseph Rowntree Foundation contrasts the recent record on pay with the early 1980s when unions were more widespread and powerful. But it also finds that the tendency of 20 years ago for union representation to inhibit job growth still remains.

Employment in unionised workplaces in the private sector declined at an average rate of 1.8 per cent a year in the 1990s, compared with employment growth of 1.4 per cent in the non-union workplaces. An important exception was plants where unions were able to negotiate on employment as well as pay – these enjoyed similar growth to non-union plants.

Researchers at the National Institute of Economic and Social Research (NIESR) and the Policy Studies Institute assessed the unions’ role in pay and employment using data from a 1998 nationally-representative survey of managers and staff in nearly 2,200 workplaces with more than ten employees. They found that:

• Unions appeared to affect the process of pay determination more than the outcome. Pay increases in the private sector during 1997/8 were no greater where trade unions were involved, once other relevant factors were taken into account.
• The underlying pay levels in companies with multi-union representation, or where pay-setting arrangements covered more than 70 per cent of the workforce, were typically 9 per cent higher than for similar employees in non-union workplaces. However, these were also the workplaces where recently negotiated pay increases had tended to be lower.
• As in the 1980s, unions did not generally increase the likelihood of workplace closure in the 1990s. But unionised plants in manufacturing were, on average, 15 per cent more likely to close between 1990 and 1998 than non-union workplaces. This tendency was particularly apparent where unions represented manual workers only, and where unions were excluded from negotiations about recruitment and staffing levels.

Neil Millward, Senior Research Fellow at NIESR and co-author of the report, said: "The evidence on annual pay settlements and on underlying pay levels suggests that the ability of unions to enhance wages and salaries is in long-term decline. However, it does also seem that the negative effects of unions on job losses are generally avoidable where management allow them a role in determining employment matters as well as pay."

He added: "Our findings have important implications for the new legislation enabling unions to force recognition from reluctant employers when a majority of the workforce want to be represented. On the one hand, it seems that employers have little justification for opposing unionisation on the grounds that it might lead to unacceptable wage costs. On the other, unions will find it harder to appeal for new members on the basis that they generally achieve higher pay."