By Prof Alex Bryson, Social Research Institute, University College London | 4 min
Union membership as a percentage of the working population – union density – has been falling across much of Europe and elsewhere. Less well known is the fact that collective bargaining coverage – the percentage of workers whose pay is set through employer bargaining with trade unions – is high and stable in many countries across Europe. It is over 90% in France and Austria, for example, while around three-quarters of workers in Scandinavian countries are covered by collective bargaining (OECD, 2017).
The UK is rather different. Back in the early 1980s 70 percent of workers were covered by collective bargaining. But that was before the demise of sectoral bargaining – industry-level arrangements – in the 1980s and 1990s (Millward et al., 2000). Today roughly a quarter of workers in the UK have their pay set via collective bargaining. Unions also make submissions to the Pay Review Bodies (PRBs) which make pay settlement recommendations to government for a further 2.5 million public sector workers.
One of the reasons why sectoral bargaining collapsed in the 1980s was employers’ desire to reassert their right to manage, and to lower wages in an effort to compete on the price of goods and services. There was also a belief that, by avoiding collective bargaining employers could alter labour practices and raise productivity (Bryson and Wilkinson, 2001). Academic studies examining links between collective bargaining and productivity indicate that the sort of fragmented, decentralised collective bargaining arrangements that dominate today in countries like the UK and the United States are not particularly beneficial for productivity, although there is a wide dispersion in estimated effects across studies (Doucouliagos and Laroche, 2003).
However, a growing body of research indicates that collective bargaining arrangements characterised by two-tier arrangements in which ‘base rates’ of pay set via co-ordinated sectoral bargaining supplemented by local pay bargaining at firm or workplace level, can be highly beneficial for both firm-level and country-level productivity.
A good example is Norway. Here, under what Erling Barth and co-authors termed ‘the Scandinavian model’, collective bargaining has delivered high and sustained productivity gains. The system is ‘two tier’, allowing employers to belong to both sector level and firm-level bargaining arrangements (unlike countries like Germany where employers must make a choice between the two). Through the wage compression it generates, and the resultant process or creative destruction it has fuelled investment and fostered enhanced productivity (Barth et al., 2014). It is credited with taking wages out of competition, providing a level playing-field between competing employers in terms of pay, permitting them to focus on other managerial priorities such as competing through product and process innovations (Bryson and Dale-Olsen, 2021). The biggest productivity beneficiaries in the Norwegian system were those firms with the strongest trade unions, as indicated by union membership (Barth et al, 2020). This system is also valuable when facing intense international competition. Across Europe countries with fragmented collective bargaining systems have suffered job losses in firms most exposed to trade with China, but countries with co-ordinated collective bargaining have avoided these losses (Barth et al., 2023)
It seems likely that such a system could operate well in the UK too. The UK was traditionally characterised by the two-tier system too, so the approach is not alien to the UK. Unionisation in the UK is already delivering a number of economic benefits to firms, as indicated by recent research findings for Britain showing unionisation is associated with cutting-edge human resource management practices (Bryson et al., 2005), workplace-level product and process innovation (Bryson and Dale-Olsen, 2021) and even improved worker wellbeing (Blanchflower et al., 2022). But the incidence of bargaining in the UK remains low and so the ‘reach’ of the system is limited. It also lacks the co-ordination required to maximise the benefits of collective bargaining as demonstrated by the Norwegian system.
Now seems like a good time to revisit this issue to establish the pre-requisites to resuscitating sectoral bargaining in Britain. Beginning dialogue between trade unions and employer associations would be a good place to start. Government will also need to consider reintroducing arrangements permitting the extension of collectively agreed terms and conditions to the non-union sector which ensure a level playing field for basic terms and conditions. These arrangements, such as Schedule 11 of the Employment Protection Act and the Fair Wages Resolution, were rescinded in the 1980s but could be re-established. This would be true ‘levelling-up’.
Alex thanks the Norwegian Research Council (grant numbers 255595 and 295914) for funding that supported the research used in this article.
Keep up to date with all the news and ideas from Unions 21 by signing up to our newsletter