Are unions good for productivity? It’s a perennial question and economists have answered it differently depending on their ideology. Perhaps the American labour economists Richard Freeman and James Medoff expressed the most balanced view in the early 1980s.
If industrial relations are good, with management and unions working together to produce a bigger ‘pie’ as well as fighting over the size of the slices, productivity is likely to be higher under unionism. If industrial relations are poor, with management and labour ignoring common goals to battle one another, productivity is likely to be lower under unionism.
So the answer appears to be both yes and no. There is good trade unionism and bad trade unionism, just as there are good and bad employers. Perhaps that old adage that employers get the unions they deserve contains a grain of truth.
But why should unions care about this issue? Isn’t productivity the employer’s responsibility? The simple answer is that rising productivity is critical to union success. A failing organisation will be unable to offer the sustained wage increases that deliver higher standards of living. By attempting to squeeze more out of an inefficient employer unions are sweating a wasting asset.
The TUC’s own research suggests that unions should care about productivity because it is important to their members, too. Ninety-one percent of union members believe that working with the employer to improve productivity and performance is either an important or very important issue for unions. Yet only forty-four percent of members believe that unions are ‘excellent’ or ‘good’ at doing so.
The most influential factors shaping member perceptions of pay-bargaining effectiveness are good performance on this dimension and the ability to protect workers against unfair treatment. All this suggests that workers apparently have a more balanced view of employee relations than the ferocious anti-employer rhetoric of some general secretaries might lead you to believe.
And what about employers? Where do they fit in this equation? Many employers in the private sector operate in a virtually union-free environment. They would be surprised to hear that unions can improve productivity. In their minds, the supposed union contribution to productivity can be better delivered through individual employee involvement policies.
Unfortunately, this rosy view is contradicted by the most authoritative studies of the subject. The 1998 Workplace Employee Relations Survey and the 2001 Working In Britain survey show that there has been a decline in the extent and quality of consultation over the last decade. Workers report that while they have more responsibility for deciding how their work is done, they are also subject to more rigorous monitoring and surveillance.
Overall, both surveys suggest a decline in the quality of working life.
Other studies suggest that unions able to develop a wide agenda, working effectively with the employer to solve shared problems are most likely to make a positive contribution to performance. There is also a strong suggestion that collective voice (through a union or a works council) and individual employee involvement are mutually reinforcing practices.
So what does this mean for public policy? First, that government has an interest in promoting those relationships that support and sustain high performance. Second, that this demands more than the encouragement of enlightened human resources. Third, it has to be the right kind of collective voice – with unions (or works councils) and employers focused on delivering mutual gains through a programme of joint problem-solving.
If all this is accepted, then what more ought to be done? Government could play a role by identifying best practice and establishing an institution that would act as a repository of this experience, providing financial resources to those parties that wish to transform their relationship. Some small-scale initiatives have been supported through the DTI’s Partnership Fund but policy needs to move up a gear. Successful implementation could deliver better jobs, better businesses and a guaranteed role for modern and progressive trade unionism.