BRITAIN’S WEAKENED TRADE UNIONS STILL REDUCE WORKPLACE PROFITS
Union influence may have declined in Britain in recent decades, but unions still have
enough power to reduce workplace profits. That is the central finding of research by
John Forth and colleagues.
While only one fifth of private sector employers in Britain still negotiate over terms and
conditions with unions, in these workplaces, profits are lower than they would be if
there were no union.
These effects are larger than estimated by previous research, which had suggested
that unions no longer depress profits, but which did not take account of union strategies
that target resources on better-performing workplaces.
The researchers use data from the authoritative Workplace Employment Relations
Survey to investigate whether Britain’s trade unions still reduced firm profitability, as
unions had done in earlier decades when their presence was more widely felt.
They find that, on average, profits in unionised workplaces were lower than profits in
otherwise equivalent workplaces. This indicates that the effect of unions in securing
higher wages for employees remains greater than any positive effect they may have on
productivity.
The authors comment:
‘Since other research finds that unions do not, on average, harm workplaces’
prospects of survival, it seems likely that our findings reflect a reallocation of
surplus profits from the employer to the workforce in unionised workplaces.’
Twenty years ago, unions negotiated over wages in 48% of all private sector
workplaces in Britain; now the figure is less than half that, standing at just 22%. Unions
are also weaker where they are still present: only 60% of unionised workplaces have an
on-site union representative, compared with 80% in the mid-1980s.
Despite this organisational weakness, the research indicates that unions do still have
enough power, where they are present, to reduce workplace profits through wage
bargaining.
Previous research had suggested that unionised workplaces were no longer less
profitable than non-union workplaces, attributing this to the reduced power of trade
unions. But it did not account for the fact that, as competitive pressures have reduced
the profitability of many workplaces, unions have increasingly targeted their resources
and organising campaigns on the better-performing employers.
This has made the impact of trade unions on workplace performance look less
substantial in recent years. The researchers use statistical methods to account for
these changing patterns of unionisation and thereby to obtain a more accurate estimate
of unions’ impact on profitability.
Broader effect in Britain than in France
The research also compares the impact of trade unions in Britain with the situation in
France. Workplace union representation is far more extensive in France than in Britain,
largely because the state requires many employers to bargain with union
representatives even if few of the workers are union members.
But the research finds that workplace union representation in France only reduces
profits in the small proportion of workplaces (7%) where union membership is high. The
proportion of workplaces where unions reduce profits is therefore smaller than in
Britain.
Recent legislation in France has tried to restrict workplace union representation to
instances in which there are substantial numbers of members; the research suggests
that this will not ameliorate the negative effect of unions on workplace performance in
France.
ENDS
‘Unions and workplace performance in Britain and France’ by Alex Bryson, John Forth
and Patrice Laroche was presented at the Royal Economic Society Annual Conference,
20-22 April 2009. The full paper is available at:
http://www.niesr.ac.uk/pdf/200309_121425.pdf
Alex Bryson is a Senior Research Fellow at the National Institute of Economic and
Social Research (NIESR). John Forth is a Research Fellow at NIESR. Patrice Laroche
is Professor of Economics at the University of Nancy (France).
The findings for Britain were based on data from around 900 private sector workplaces
collected as part of the 2004 Workplace Employment Relations Survey. The findings for
France were based on data from around 1,800 private sector workplaces collected as
part of the 2004 REPONSE survey.
For further information: contact John Forth on 07815 906118 (email:
[email protected]).