Employment Relations in Britain

Alex Bryson (NIESR and CEP)

1st June 2011

Dalian Delegation Talk

Alex Bryson• Senior Research Fellow, NIESR

– http://www.niesr.ac.uk/staff/staffdetail.php?StaffID=307

• Research Fellow, Centre for Economic Performance, LSE

– http://cep.lse.ac.uk/_new/staff/person.asp?id=3818

• Labour economics, industrial relations, programme

evaluation

• Current projects include CEO Pay and Firm Performance in

China

National Institute of Economic and Social Research

• Oldest independent research institute in UK

http://www.niesr.ac.uk/

• Mission: “The National Institute aims to promote, through

quantitative and qualitative research, a deeper understanding of

the interaction of economic and social forces that affect people's

lives, and the ways in which policies can improve them”.

• Macro-economics and forecasting

• Productivity and performance

• Labour markets, Skills and Education

• Industrial Relations and Institutions

• Pensions, savings and household behaviour

The Talk

• Theme: role of government in Employment Relations

• Overview of employment relations in UK

– Actors

– Role of the law

• Topics of particular interest

– UK labour market now – how flexible?

– Worker Representation

– Conflict at work

– Worker wellbeing

• Questions and Answers

Employment Relations in the UK and the Role of the State

The Actors

• State

– Supranational (EU)

– National

– Devolution (England, Scotland, Wales, Northern Ireland, local, cities)

– Legislator, enforcer, employer

• Employers

– Employer associations/trade associations are weak (CBI)

– Mainly firm/organization level and workplace level

– Multinationals must deal with European Works Councils

• Workers

– Independent trades unions

– Joint consultative committees

The Role of the Law

Pre 1979 - ‘voluntarist’ framework

- supporting collective bargaining

- reform intended to support this system

1979-1997 a decisive shift- Removal of supports for union role, eg. Closed shop, extension of

collective bargaining agreements

- Duties placed on trades unions, eg. balloting

- De-regulation on individual rights, eg. Wages Councils

Post 1997- Minor concessions to unions, eg. Employment Relations Act 1999

- Re-regulation on individual rights, eg. Minimum wage

- Legislating for fairness and flexibility, eg. Family rights

The Limits of the Law• Much change but law only one factor in promoting

workplace change– Compositional/structural change in firms/workplaces

• Firm size

• Manufacturing decline

• Female labour market participation

– International competition• Globalisation

• Migration

• Foreign ownership

– Changes in role of the state, eg. Size of public sector

– Employer preferences

– Worker preferences

• Symbolic and ‘shadow’ impacts of the legal changes may have been as important as direct, eg impact of statutory recognition procedure in Employment Relations Act of 1999

Accounting for Variation in Legal Impact

• Nature of legislation and enforcement, eg employers generally required not to discriminate rather than tackle inequalities – exception is ‘reasonable adjustment’ provision in disability legislation

• What is required and of whom, eg compliance may require employers to respond passively, ie on request or when challenged, or it may require employers to take pro-active steps; impact may be individualised or have collective implications

• Mediating Factors, the individualised, passive, private law model of much UK legislation requires strong mediators to be effective; unions are the main body that can play this role, but their influence has declined markedly

…state’s share in the economy also grew substantially between the mid 1960s and mid 1980s but has shrunk

subsequently.

Public Sector Employment: Numbers & Share of Total Employment

3

4

5

6

7

8

1948

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

Millio

ns:

To

tal E

mp

loym

en

t

15

20

25

30

35

40

Per

Cen

t: S

hare

of

To

tal E

mp

loym

en

t

Number Share of LFS Employment Share of Total Workforce Jobs

UK Labour Market: How Flexible?

The UK has never relied on employment regulation for social protection. Its light and even regulations help

deliver one of the highest (voluntary) turnover rates in the OECD...

HIRING & SEPARATION RATES: OECD ESTIMATES:Annual Average: 2000-2007

0

5

10

15

20

25

30

Gre

Hun It

Svk S

lvCze B

elGer

Nor

Aus

Por

Swi

FraSwe

Pol

Hol

Ire

UK

Fin US

Can S

pDen Ic

e

Per

Cen

t

Hiring Rate Separation Rate

…and allows workers and employers to negotiate a more diverse range of types and patterns of work per

week or per year.

UK

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

20 23 26 29 32 35 38 41 44 47 50

Usual Hours Worked

Germany

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

20 23 26 29 32 35 38 41 44 47 50

Usual Hours Worked

France

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

20 23 26 29 32 35 38 41 44 47 50

Usual Hours Worked

Italy

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

20 23 26 29 32 35 38 41 44 47 50

Usual Hours Worked

How did the labour market respond to changes in output? Particularly in recessions?

ANNUAL GDP GROWTH: MARKET PRICES

-6

-4

-2

0

2

4

6

8

10

1948

Q1

1952

Q1

1956

Q1

1960

Q1

1964

Q1

1968

Q1

1972

Q1

1976

Q1

1980

Q1

1984

Q1

1988

Q1

1992

Q1

1996

Q1

2000

Q1

2004

Q1

2008

Q1

2012

Q1

PE

R C

EN

T

Annual Quarterly

…redundancies and job losses seem to be the major response to a downturn in demand both this recession

and last…

Redundancies: 1989-1991

0

50

100

150

200

250

300

350

Jan-8

9

Jan-9

1

Jan-9

3

Jan-9

5

Jan-9

7

Jan-9

9

Jan-0

1

Jan-0

3

Jan-0

5

Jan-0

7

Jan-0

9

Jan-1

1

Th

ou

sa

nd

s

EARNINGS: PRICE ADJUSTMENT

• No relationship between real earnings – the price of labour – and unemployment.

• Despite a more competitive and less collectivist labour market the UK is still characterised by real wage inflexibility.– Real earnings virtually always go up.

– Nominal earnings always go up.

• However, nominal wage growth now seems more affected by demand and less by inflation than in the past.

Real earnings – the price of labour does not adjust in response to changes in the unemployment rate…

REAL EARNINGS & ILO UNEMPLOYMENT

0

50

100

150

200

250

300

Jan-6

3

Jan-6

5

Jan-6

7

Jan-6

9

Jan-7

1

Jan-7

3

Jan-7

5

Jan-7

7

Jan-7

9

Jan-8

1

Jan-8

3

Jan-8

5

Jan-8

7

Jan-8

9

Jan-9

1

Jan-9

3

Jan-9

5

Jan-9

7

Jan-9

9

Jan-0

1

Jan-0

3

Jan-0

5

Jan-0

7

Jan-0

9

Jan-1

1

RE

AL

EA

RN

ING

S I

ND

EX

: 19

63

=10

0

0

2

4

6

8

10

12

ILO

UN

EM

PL

OY

ME

NT

RA

TE

: %

Real Earnings Index: 1963 = 100 [LHS] ILO UNEMPLOYMENT RATE [RHS]

…and in fact, there are very few periods when real earnings fall.

Real Earnings: Average Earnings Deflated by Retail Prices Index

100

120

140

160

180

200

220

240

260

Jan-6

3

Jan-6

5

Jan-6

7

Jan-6

9

Jan-7

1

Jan-7

3

Jan-7

5

Jan-7

7

Jan-7

9

Jan-8

1

Jan-8

3

Jan-8

5

Jan-8

7

Jan-8

9

Jan-9

1

Jan-9

3

Jan-9

5

Jan-9

7

Jan-9

9

Jan-0

1

Jan-0

3

Jan-0

5

Jan-0

7

Jan-0

9

Jan-1

1

Ind

ex

Ja

nu

ary

19

63

=1

00

Nominal wage growth seems to have been shocked down to a lower level in each of the past three

recessions and then settled there…

Average Earnings Growth: Annual Change %:

[AEI 1963-2001: AWE Regular Pay 2001 On]

0

5

10

15

20

25

30

35

Jan-6

3

Jan-6

5

Jan-6

7

Jan-6

9

Jan-7

1

Jan-7

3

Jan-7

5

Jan-7

7

Jan-7

9

Jan-8

1

Jan-8

3

Jan-8

5

Jan-8

7

Jan-8

9

Jan-9

1

Jan-9

3

Jan-9

5

Jan-9

7

Jan-9

9

Jan-0

1

Jan-0

3

Jan-0

5

Jan-0

7

Jan-0

9

Jan-1

1

Pe

r C

en

t

3 Month Average Underlying Rate

Worker Representation

TRADE UNIONISTS: NUMBER & SHARE OF EMPLOYMENT

0

2

4

6

8

10

12

14

1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Nu

mb

er o

f T

ra

de

Un

ion

ists

: M

illi

on

s

0

10

20

30

40

50

60

70

Sh

are

of

To

tal

Em

plo

ym

en

t: %

Number Share of Total Employment

TU membership density, 1989-2009

Source: Labour Force Survey

0%

10%

20%

30%

40%

50%

60%

70%

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

% o

f e

mp

loye

es th

at a

re u

nio

n m

em

be

rs

All employees Private sector Public sector

-1.0%

-0.1% -0.3%

|

| | |

Membership composition

Source: Labour Force Survey

46%

26%

21%

62%

52%54%

34% 34%

68%

61%

0%

10%

20%

30%

40%

50%

60%

70%

80%

% female % aged 50+ % with degree % non-manual % in public sector

1999 2009

Union organisation

0

10

20

30

40

50

60

70

80

90

100

1980 1984 1990 1998 2004

Private manufacturing

Private services

Public sector

0

10

20

30

40

50

60

70

80

90

100

1980 1984 1990 1998 2004

Private manufacturing

Private services

Public sector

Membership density Bargaining coverage

Base: employees in workplaces with 25+ employees

Source: WERS

Percentage of workplaces with 25+ employees

recognizing unions, 1980 - 2004

1980 1984 1990 1998 2004

Manufacturing 65 56 44 28 37

Private

Services

41 44 36 23 20

Public Sector 94 99 87 87 88

All 64 66 53 42 39

Union organisation

0

10

20

30

40

50

60

70

80

90

1980 1984 1990 1998 2004

Pe

r ce

nt

Unions recognised

Any stewards (where recognition)

Members per steward (where any stewards)

Base: workplaces with 25+ employees

Source: Forth and Charlwood (2009) using WERS

Numbers of shop stewards

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1980 1984 1990 1998 2004

Private manufacturing Private services Public sector

Base: shop stewards of recognised trade unions

in workplaces with 25+ employees

Source: Forth and Charlwood (2009) using WERS

Changing activitiesof shop stewards

• Fall in number of issues subject to negotiation

• Growth of 'hollow shell' unionism

• Less involvement in collective disputes

• Greater role for individual casework

Base: shop stewards of recognised trade unions

in workplaces with 25+ employees

Source: Forth and Charlwood (2009) using WERS

What lay behind the collapse of collective bargaining?

• The change in industrial structure away from manufacturing?– Only 10% of the decline in incidence of CB in the private sector

between 1984-2004 can be attributed to change in workplace size and industrial composition

• The anti-union legislation and government action of the 1980s?– The decline was under way earlier:

• In 1998, 45% of 1940s w/ps had CB; 23% 1960s;12% 1980s

• In 2004, 32% of 1960s w/ps had CB; 13% of 1970s

– A change of regime in 1997 did not slow the decline:

• Rate of contraction of CB 1998-2004 much the same as 1990-1998

A more powerful explanation lies in the effects of increasing competition

• A period of increasingly international product market competition and ownership:– UK Mfg imports as % mfg domestic demand rose from 25% in 1980 to

62% in 2005

– Foreign ownership of LSE shares rose from 4% in 1981 to 40% in 2006

• WERS firms were asked about their competition:– those ‘dominating’ their market were twice as likely to use CB as

those with ‘many’ competitors

– use of CB fell between 1984 and 2004 by:• 35% where they ‘dominated’

• 62% where up to five competitors

• 70% where six or more competitors

The impact on collective bargaining of changein relative profitability

Coverage of CB in workplaces in industries experiencing relative change

• CB has been most resilient in sectors with consistently high profits

• Those with consistently low profits saw CB decline at about the average

• Those with relative improvement of profitability saw less decline in CB than those where relative profitability declined

• Profitability collapse was associated with CB collapse

Collective bargaining under the impact of privatisation – a natural experiment

• At sectoral level, CB had varied fortunes under privatisation:

– Energy & water, CB still high

– Trans and coms, CB slight fall

– Other services, sharp fall

• Privatisation does not guarantee product market competition

– Some are natural monopolies

– Ofwat, Ofrail, Ofgen, Ofcom

• Privatised industries’ coverage of CB ends up closer to the old private sector’s

0

10

20

30

40

50

60

70

80

90

100

1984 1990 1998 2004

P rivatis ed indus try

Whole private s ector

Whole public s ector

What has happened to ‘voice’ more generally?- the decline of union only voice

Year

Panel A: All Workplaces 1984 1990 1998 2004

1 No voice 16 19 18 14

2. Voice (all types) 84 81 82 86

Panel B: Voice Workplaces Only

3. Union only 24 14 9 5

4. Union and non-union 42 39 32 33

5. Non-union only 16 28 41 46

6. Voice, but nature not reported 2 <1 <1 2

Non-union representation

• Evidence patchy, but clearly no substantial expansion since 1980– individual non-union reps in 10% of workplaces in 1980 rising to 14%

in 2004

– Workplace consultative committees in 34% of workplaces in 1980, falling to 24% in 2004

• However, the decline of union representation means that, among all workplaces with 5+ employees, the incidence of union and non-union representation is now similar

Base: workplaces with 25+ employees

Source: Forth and Charlwood (2009) using WERS

Unions and Wages• Wage premium from union bargaining identified in 1980,

1984 and 1990 (workplace data)

• General premium absent for union bargaining in 1998 and 2004 (employee data)

• But still a premium attached to ‘strong’ unionism– Where high coverage etc.

• Union membership premium has declined– Secular trend or indicative of counter-cyclical wage premium?

Unions and Other Workplace Economic Outcomes

Association with:

• Employment growth:– Significant negative effects only for early 1980s

• Financial performance:– Significant negative effects only for early 1980s– Though negative association with active collective

bargaining in 2004

• Managers’ perception of ‘climate’ (see below):– Significant negative effects only for 1980s

Conflict at Work

Stoppages 1960-2006

0

500

1000

1500

2000

2500

3000

3500

4000

4500

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

Source: Office for National Statistics

Work stoppages and days lost 1960-2006

Sources: Numbers of stoppages and workers involved - Office for National Statistics Time-Series Databank; Working days lost per thousand employees – 1960-

1979: Employment Gazette (1986); 1980-1986: Davies (2001); 1987-2006: (Hale 2007).

Employment Tribunal Claims: 1972-2006

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

19

72

19

73

19

74

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

Management-employee relations 1980 1984 1990 1998 2004

All workplaces

Strike action 11 15 11 1 3 Non-strike action 11 13 5 1 3

Private manufacturing Strike action 19 9 4 0 * Non-strike action 16 12 7 1 2 Private services Strike action 3 5 2 1 1 Non-strike action 3 3 2 * 2 Public sector Strike action 15 31 31 3 9 Non-strike action 19 24 8 2 7 Base: all establishments with 25 or more employees WERS series

Base: all workplaces with 25+ employees

Source: Dix, Forth and Sisson (2009) using WERS

Expressions of conflict, by ‘voice’Any

industrial action

Any grievances

ET claims Voluntary resignations

Relations between

managers and employees

% of workplaces

% of workplaces

Claims per 1,000 employee

s

Resignations per 100

employees

% of employees rating ‘poor’ or

‘very poor’

Union voice only

9 45 1.3 9.0 17

Union and non-union voice

7 44 2.1 8.8 19

Non-union voice only

1 40 2.7 17.2 11

No voice * 31 2.9 18.3 11

All work-places

2 38 2.4 13.8 15

Base: all workplaces with 5+ employees

Source: Dix, Forth and Sisson (2009) using WERS

Management-employee relations

• WERS ordinal scale: how would you rate the relationship between management and employees generally at this workplace?

• Union negative effects absent after 1990

• But time trend not statistically significant

1980 1984 1990 1998 2004

All 2.49 2.38 2.26 2.30 2.31

Union 2.46 2.31 2.16 2.31 2.22

Non-union 2.53 2.46 2.32 2.29 2.34

Raw gap -.556(4.63)**

-.815(6.32)**

-.525(4.39)**

-.233(2.06)**

-.585(4.58)**

Regression-adjusted gap

-.398(2.70)**

-.582(3.87)**

-.271(1.87)*

-.005(0.04)

-.157(1.05)

Base: all workplaces with 25+ employees

Source: Blanchflower and Bryson (2009) using WERS

Employee Wellbeing

Policy pluses

• National minimum wage 1999• Annual holiday entitlements (EU)• Restrictions on long-hours working (EU)• Right to request flexible working patterns• Reasonable time off in emergencies and for dependents• Extensions to maternity/paternity rights and pay• Restrictions on some forms of flexible working eg. temp

agency staff• Current policy preoccupation with work and wellbeing

Wages

• Sustained real wage growth for most (unlike countries like Germany)

• But big growth in wage inequality since 1980s– Especially at the top– At bottom some compression through minimum wages

• Explanations– Skills-biased technological change– Institutions, especially union decline– Trade?

Job Quality

• Job satisfaction– Rising extrinsic satisfaction– Falling intrinsic satisfaction

• Stress/anxiety– Increasing– Associated with innovation/change– Unions can ameliorate via support

• High involvement management?– Enrichment versus intensification– On balance, declining autonomy, increased monitoring

• Safer workplaces– Reduced accident risk– Partly compositional, partly policy (HSC)

• Health– Continued concerns over absenteeism

The Rise of Employee Involvement?

• Origins in Japanese manufacturing transferred to UK in

1980s, eg. Nissan factory (Wickens, 1988)

• Diffusion has been very uneven

• Looks different in public sector to private sector

• Few workplaces with strong employee involvement

orientation

The Future – New Government Proposals

“We want to create a society where work and family complement one

another. One where employers have the flexibility and certainty to recruit and retain the skilled labour they need to develop their businesses. And one where employees no longer have to choose between a rewarding career and a fulfilling home life.”

Modern Workplaces, p.2

“We appreciate that stimulating culture change on flexible working across the labour market will require more than just regulatory change. We will therefore work with business leaders and employers to promote the business case for flexible working.”

Modern Workplaces, p.7

Further information

• Workplace Employment Relations Survey 2011

Survey documentation and background information at: http://www.bis.gov.uk/policies/employment-matters/research/wers

• Brown W, Bryson A, Forth J and Whitfield K (2009) The Evolution of the Modern Workplace, Cambridge: Cambridge University Press

Further details :

http://www.cambridge.org/catalogue/catalogue.asp?isbn=9780521514569

• New government proposals

http://nds.coi.gov.uk/content/detail.aspx?NewsAreaId=2&ReleaseID=419503&SubjectId=2