Impact of trade unions on jobs and pay

Impact of trade unions on jobs and pay


TRADE UNION representation has shrunk over the past 20 years. The Employment Relations Act, the provisions of which came into force on 6 June 2000 could have an effect on this trend. A timely new study considers some key issues concerning the impact of unions: their effect on employment growth; whether they cause workplace closures; and their effect on employees’ pay.

The report by Neil Millward, John Forth and Alex Bryson, for the Joseph Rowntree Foundation, assesses the unions’ role in pay and employment using data from the 1998 Workplace Employee Relations Survey and the 1990 Workplace Industrial Relations Survey. The surveys covered all industries except agriculture and coal mining, and included both private and publicly owned establishments. The results are representative of workplaces in Great Britain with ten or more employees in 1998 (25 or more in 1990).

The research, carried out at the National Institute of Economic and Social Research and at the Policy Studies Institute, found that employment in unionised workplaces in the private sector had declined at a rate of 1.8 per cent a year in the 1990s, while employment in the average non-union workplace grew at a rate of 1.4 per cent. This difference persisted after controlling for other factors known to have an impact upon employment levels – thus union recognition restricted the growth of continuing workplaces in the private sector over the 1990s. This negative effect of unions on employment growth was slightly larger in service industries than in manufacturing. However, it was confined to cases in which unions negotiated over wages, but had no role in determining staffing levels or recruitment. The rate of employment growth among service sector workplaces where unions negotiated over wages and employment was no different to that seen among workplaces without recognised unions. In the public sector, it was found that there were no significant differences in rates of employment growth between workplaces with and without unions once other factors had been accounted for.

In examining unions’ impact on workplace closure, the researchers had to take many factors into account but concluded that, on the whole, closures during the period 1990-98 were little affected by whether workplaces had union representation in 1990. Other factors were far more important. However, the impact of unions was clearly discernible in private sector manufacturing, where unionised plants were 15 per cent more likely to close than non-union plants. Closure in this sector was more likely where there had been unions representing a section of the workforce, such as only manual workers, and where unions were excluded from negotiating with management about employment matters such as recruitment and staffing levels.

Two chapters of the report deal with pay. The first considers the influence of unions on hourly pay rates, and benefits such as pensions, holidays and sick pay. The second looks at how unions might affect pay settlements. The researchers conclude that the most extensive impact of unions was for people being paid between 05 and 10 per hour – at least a quarter of them benefited directly from union bargaining. At higher levels of pay, the effect was less widespread. But the indirect impact was at its most extensive in this upper section of the pay distribution. At 10 an hour or more, over 15 per cent of employees benefited from the spillover from union bargaining on behalf of other employees at their workplace. The report suggests that, since union impact is most apparent in the middle part of the wage distribution, its decline could reinforce the trend towards income inequality, and possibly a widening of the gender pay gap.

The general conclusion of the analysis on pay settlements is that the ability of unions to enhance pay settlements is declining. Settlements were no higher where unions were involved, and in some circumstances were lower than for comparable workers in non-union situations.

Who calls the tune at work? The impact of trade unions on jobs and pay, by Neil Millward, John Forth and Alex Bryson, published by the Joseph Rowntree Foundation. ISBN 1 902633 94 6. Available, price L12.95 plus E2 postage, from York Publishing Services Ltd, 64 Hallfield road, Layerthorpe, I York Y031 7ZQ, tel. 01904 430033, fax 01904 430868, e-mail

Copyright The Controller of Her Majesty’s Stationery Office Aug 2001

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