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IEA - Giving in to trade union demands could hold back productivity and spark recession

There are several measures the government could take to reduce the influence of militant public sector unions, without compromising the fundamental right to join a trade union.

  • After two years of on-off lockdown, a long period of pay restraint and rapid inflation, it is not surprising we are facing demands for substantial wage increased.
  • Strikes and threats of strikes are concentrated in the public sector or former nationalised industries, employees in which were largely protected from job losses and pay cuts during the pandemic.
  • The government should be wary of offering over-generous pay awards, or making commitments to maintain existing working practices and job guarantees.
  • Large pay increases for public sector employees could lead to more borrowing, higher interest rates to control inflation, and monetary contraction that could precipitate a recession.
  • Concessions on working practices could also thwart necessary reforms in parts of the public sector where there are long-term productivity issues.
  • If the government wishes permanently to reduce the influence of militant public sector unions, this will require a long-term strategy (as in the Thatcher-Major years) rather than immediate legal action.

​​​In light of the current upsurge in strikes and threats of strikes, a new briefing paper by the Institute of Economic Affairs considers the options the government has to challenge union militancy more aggressively.

The number and scale of disputes are greater than in the immediate pre-Covid years (in 2018, there were just 81 stoppages recorded (the second lowest figure since 1893). However, as the author notes, it is unlikely that we are facing a growing revival in union power and influence across the board.

This is because unionisation has declined dramatically from its peak in the 1970s for several reasons. As well as the Thatcher-Major reforms, there are other more significant factors, including the dramatic shift away from manufacturing and extractive industries to a more dispersed service-based labour market.

The job market has also become increasingly flexible, so people are less likely to stay with one employer for long periods of time as in the past. And the growth in employment regulation has in many ways substituted for the protections traditionally offered by trade unions.

This is reflected in the figures that show in 2021 just 23.1 per cent of employees were union members, compared to approximately 50 per cent in 1979. Militant unions also appear further out of touch when you consider the intergenerational divide in their membership: in 2021 41 per cent of all union members were aged 50 or over, compared to 4 per cent aged between 16 and 24.

Faced with the current resurgence of industrial disputes, should the government decide to take a markedly tougher line, there are a number of measures which could be taken without compromising the fundamental right to join a trade union. The government could:

  • Tighten the rules on trade union recognition
    • By raising bargaining units from at least 21 employees to 50, for example. Employ a mandatory ballot, at the union’s expense, with a higher hurdle for granting recognition.
  • Alter the terms of union “facility time”: Under the 2016 Trade Union Act the government could cap the proportion of time allowed during paid time off work to be spent on union work.
  • Replace striking employees with agency workers.
  • The government could consider the following tougher measures, some of which are already operative in other European and other developed economies:
  • Introduce minimum service agreements for the railways, and possibly other services to prevent total walkouts by rail union members, by specifying a level of provision of normal working, such as 20 per cent.
  • Introduce strike bans and compulsory arbitration in key areas
  • Reform ‘fire and rehire’ rules to allow dismissal of those rejecting changed conditions of service in a broader range of circumstances.
    Shorten the period of protection of strikers from dismissal from the current 12 weeks under the Trade Union and Labour Relations Act 1992.
  • Privatise government functions and break up concentrations of union power in key businesses and institutions, such as the civil service, education and railways.

Notes to editors

IEA spokespeople are available for interview and further comment.

‘Summertime Blues: Unions, strikes and the law in 2022’ is under embargo until 00.01 Monday 18 June. An embargoed copy of the paper can be found here: https://iea.org.uk/wp-content/uploads/2022/07/SUMMERTIME-BLUES-SHACKLETON.pdf

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expanding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.

Original article link: https://iea.org.uk/media/giving-in-to-trade-union-demands-could-hold-back-productivity-and-spark-recession/

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