The Trade Union Bill is mostly pointless politicking
15 September 2015
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Trade, Development, and Immigration
14 September 2015
Healthcare
Economic Theory
25 June 2024
Under Margaret Thatcher and John Major, employment relations in the UK were completely overhauled. A series of legislative acts narrowed the scope of industrial disputes, made unions responsible for unofficial breaches of contract, abolished the closed shop, required pre-strike ballots, reformed unions’ internal structures and so on. Despite minor tweaks such as a little-used recognition procedure, the Labour Party in office largely let this legislation stand.
The changes in the law were only one factor in the decline of union power since 1979. Other influences include the rundown of traditional heavy industry, privatisation of many previously state-owned businesses, increased global competition, the growth of service businesses and the change in the composition of the workforce. Since the late 1970s, union membership has fallen from over 50% of the workforce to just 25%, while the number of industrial disputes and working days lost is a small fraction of the levels reached in the 1970s.
Do we need more reforms? The government seems to think so. Its Trade Union Bill, the second reading of which was debated by the Commons yesterday, makes several proposals which are causing controversy – including requirements for 50% of members to vote in a valid strike ballot, with tighter requirements for ‘core public services’ including health, education and border and fire services; removals of restrictions on employing agency workers to cover for striking employees; longer periods of notice for strikes – plus a range of fairly trivial matters such as cutting back on union ‘facility time’ and ending deductions from pay for union dues in the public sector. There are also some frankly weird requirements for picketing.
The powers which trade unions possess arise from two sources. The first, a necessary but not sufficient condition, is their legal exemption from action for breach of contract – which is what a strike or other industrial action amounts to. The second is some degree of monopoly power which enables unions to extract a ‘rent’ from employers, and thus from consumers.
Trade union ‘immunities’ from being sued are always conditional: under Thatcher and Major it became clearly restricted to official action sanctioned by a ballot. Thus the threat of unofficial strikes, the bane of industry and government in the 1960s and 1970s, has completely disappeared.
The second factor, monopoly power, is still present in some areas. However these are now almost entirely confined to the public sector, which last year accounted for over 90% of all working days lost through strike action. Many of these strikes are simply gestures, involving little cost to the general public or government revenue. Strikes in schools create minor inconvenience to parents. But union action in schools, and even more so in universities, is really play-acting by activists reliving student union politics at the cost of losing a day’s pay every few months. Nor do strikes in the civil service have much impact in the real world. And in most of these areas strikes rarely win any significant gains for union members.
On the railways and on the tube system, however, strikes cause considerable disruption and clear and measurable loss of business. If people are prevented from going into London for the day or for an evening, theatres, cinemas, galleries, restaurants and so on lose revenue which cannot be recouped. Even more concerning are vital public services such as fire brigades and border guards, where strikes may (particularly in a time where terrorism is a constant threat) present real risks to public safety.
In these areas, union power remains significant and employees can and do obtain improved pay and conditions as a result of using this power. It seems reasonable, in view of persistent strikes with a clear agenda to change legitimate and widely-supported local or national public policy (for instance in relation to changes on the tube system such as all-night running), to look again at the conditions surrounding union immunities. Whether the voting hurdles set in the Bill are high enough to prevent persistent strikes may be debatable. Free marketeers may also prefer to look at the scope for breaking up some concentrations of union power by further privatisations or outsourcing, though these possibilities may be fairly limited.
So, a qualified ‘yes’ to some changes to ballot requirements. Other of the proposals look unnecessary, however. David Davis has rightly pointed out that the requirements to give the names of pickets to the police, to require armbands to be worn and so on looks like something practised by foreign dictators. It will annoy people for no discernible benefit; the law on picketing already prevents the sort of mass intimidation practised in the 1970s. Nor is the possibility of using agency temps to break strikes likely to do much. Few employers are likely to use it, and many agencies are against the idea: apparently many of the larger agencies are signed up to the ILO convention (which has no legal force, of course) proscribing it.
Refusing to deduct union subscriptions from pay looks a bit petty. If there is a significant cost to doing it, unions should be charged – and presumably would be willing to pay – that cost.
Overall, it’s not clear that this Bill will achieve a huge amount. It looks suspiciously like part of the political game, aimed at wrong-footing the Labour Party (admittedly a tempting target at the moment). To my mind the problems in the labour market these days are not, except in very limited areas, caused by trade unionism – but by excessive regulation. Far from tackling this, the current government seems determined to add to employers’ difficulties with the National Living Wage, the training levy and so forth. Trade unions are a sideshow.
Prof J.R. Shackleton is the IEA’s Editorial and Research Fellow, and a Professor of Economics at the University of Buckingham.
The changes in the law were only one factor in the decline of union power since 1979. Other influences include the rundown of traditional heavy industry, privatisation of many previously state-owned businesses, increased global competition, the growth of service businesses and the change in the composition of the workforce. Since the late 1970s, union membership has fallen from over 50% of the workforce to just 25%, while the number of industrial disputes and working days lost is a small fraction of the levels reached in the 1970s.
Do we need more reforms? The government seems to think so. Its Trade Union Bill, the second reading of which was debated by the Commons yesterday, makes several proposals which are causing controversy – including requirements for 50% of members to vote in a valid strike ballot, with tighter requirements for ‘core public services’ including health, education and border and fire services; removals of restrictions on employing agency workers to cover for striking employees; longer periods of notice for strikes – plus a range of fairly trivial matters such as cutting back on union ‘facility time’ and ending deductions from pay for union dues in the public sector. There are also some frankly weird requirements for picketing.
The powers which trade unions possess arise from two sources. The first, a necessary but not sufficient condition, is their legal exemption from action for breach of contract – which is what a strike or other industrial action amounts to. The second is some degree of monopoly power which enables unions to extract a ‘rent’ from employers, and thus from consumers.
Trade union ‘immunities’ from being sued are always conditional: under Thatcher and Major it became clearly restricted to official action sanctioned by a ballot. Thus the threat of unofficial strikes, the bane of industry and government in the 1960s and 1970s, has completely disappeared.
The second factor, monopoly power, is still present in some areas. However these are now almost entirely confined to the public sector, which last year accounted for over 90% of all working days lost through strike action. Many of these strikes are simply gestures, involving little cost to the general public or government revenue. Strikes in schools create minor inconvenience to parents. But union action in schools, and even more so in universities, is really play-acting by activists reliving student union politics at the cost of losing a day’s pay every few months. Nor do strikes in the civil service have much impact in the real world. And in most of these areas strikes rarely win any significant gains for union members.
On the railways and on the tube system, however, strikes cause considerable disruption and clear and measurable loss of business. If people are prevented from going into London for the day or for an evening, theatres, cinemas, galleries, restaurants and so on lose revenue which cannot be recouped. Even more concerning are vital public services such as fire brigades and border guards, where strikes may (particularly in a time where terrorism is a constant threat) present real risks to public safety.
In these areas, union power remains significant and employees can and do obtain improved pay and conditions as a result of using this power. It seems reasonable, in view of persistent strikes with a clear agenda to change legitimate and widely-supported local or national public policy (for instance in relation to changes on the tube system such as all-night running), to look again at the conditions surrounding union immunities. Whether the voting hurdles set in the Bill are high enough to prevent persistent strikes may be debatable. Free marketeers may also prefer to look at the scope for breaking up some concentrations of union power by further privatisations or outsourcing, though these possibilities may be fairly limited.
So, a qualified ‘yes’ to some changes to ballot requirements. Other of the proposals look unnecessary, however. David Davis has rightly pointed out that the requirements to give the names of pickets to the police, to require armbands to be worn and so on looks like something practised by foreign dictators. It will annoy people for no discernible benefit; the law on picketing already prevents the sort of mass intimidation practised in the 1970s. Nor is the possibility of using agency temps to break strikes likely to do much. Few employers are likely to use it, and many agencies are against the idea: apparently many of the larger agencies are signed up to the ILO convention (which has no legal force, of course) proscribing it.
Refusing to deduct union subscriptions from pay looks a bit petty. If there is a significant cost to doing it, unions should be charged – and presumably would be willing to pay – that cost.
Overall, it’s not clear that this Bill will achieve a huge amount. It looks suspiciously like part of the political game, aimed at wrong-footing the Labour Party (admittedly a tempting target at the moment). To my mind the problems in the labour market these days are not, except in very limited areas, caused by trade unionism – but by excessive regulation. Far from tackling this, the current government seems determined to add to employers’ difficulties with the National Living Wage, the training levy and so forth. Trade unions are a sideshow.
Prof J.R. Shackleton is the IEA’s Editorial and Research Fellow, and a Professor of Economics at the University of Buckingham.
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Some intelligent comments here. I would add that in the case of say a tube strike, yes businesses in London will be affected. But rather than cry foul and use forces of law against the unions, the correct free market approach would be to value the benefit of being located in London alongside the risk that tube disruption will from time to time happen. A business that doesn’t the risk of tube disruption can move out of London.
The problem, it seems to me, is that when the state exercises a monopoly of provision (such as in he case of the NHS or education or the tube), the unions can extract unreasonable concessions from the government/taxpayer because the public have no alternative. However, it can also be argued the other way around – when the state is a monopsony employer, as is often the case in certain occupations (NHS, education, tube) – then the government/taxpayer can also suppress wages. It becomes a power struggle. There is a simple solution to this – the abolition of public sector monopolies/monopsonies wherever possible. Then there would be alternative suppliers and alternative employers and wages would be settled by the market, not by the government or union power.