Larry Elliott reports on the economic effect of shackling British trade unions
THOSE of us who dislike Manchester United winning everything in football all the time should take some lessons from the way the British government has handled the unions these past 18 years.
The first thing to do is insist that United are not allowed any foreign players; then that a member of the Manchester City fan club should referee their games. So, it will continue, season by season, until United have to play both halves up a one-in-four slope at a redesigned Old Trafford and pay a fine each time they commit a foul.
After 10 years, when the fans have lost heart, those of us who support other clubs can suggest United have no future as a team but might prosper if they sell replica kits.
This process will be familiar to trade unions, and it’s easy to see why it has met with such thunderous applause on the right. The attack on the trade unions — through deflationary economic policies and relentless legislation — has been class warfare at its crudest. Why bits of the left should also be parroting such reactionary twaddle is more puzzling.
The fact is that the shackling of the unions is up there with the Falklands war as one of the achievements of four terms of Conservative government. Indeed, it was where Margaret Thatcher’s thirst for a return to Victorian values was fully slaked.
Ministers argue that the tough approach has worked, because turning the clock back has improved the climate of industrial relations, boosted productivity, and brought about a sea change in pay bargaining.
The right insists breaking the power of organised labour has been good for workers as well, if they would but admit it. Unions act more responsibly, are more in touch with what their members want. They should give up the industrial struggle and flog motor insurance instead.
However, unions appear to be a one-off case when it comes to the implementation of Victorian values. No minister has yet suggested a return to 19th-century surgery, dentistry or sanitation. Nor has any member of the government been brave enough to claim that it would boost competitiveness to deprive women of the vote.
Yet a master-servant approach to industrial relations is deemed a good thing, even if it means employers can flout health and safety regulations and sack staff with impunity to prevent them from qualifying for statutory employment rights.
Even such bastions of laissez-faire thinking as the World Bank and the Organisation for Economic Co- operation and Development now agree that this is not the way forward, given that the West is never going to compete in terms of wage costs with south Asia or eastern Europe.
The evidence that the campaign waged against the unions has delivered the economic benefits claimed is tenuous. The argument is that unions distort supply and demand in the labour market by pushing up wages and reducing investment. This reduces demand for labour.
Nice theory, but after 18 years we still seem to be waiting for the higher investment and the lower unemployment. Whereas an individual firm can boost its profits from de-unionisation and holding down wages, the benefits to the economy at an aggregate level are more difficult to discern. The side- effects of the decline in union influence have been widening income inequalities, rising poverty and job insecurity, which have had detrimental effects on growth, the balance of payments and public finances.
Apologists for the new right would argue that this attack on labour is warranted, because it should lead to a fall in the share of national income taken by wages, and a rise in the share for investment. The story of the past 18 years is quite different. Wages as a share of gross domestic product have fallen, but all this has meant is that dividends have gone through the roof.
The government seems proud of this, impervious to the notion that the future for Britain is a decently paid, highly productive, secure workforce. But plans for further curbs on unions would be a bridge too far.
Back in the 1970s, union bosses were the satirists’ target; no longer. If popular culture says anything about the political mood, the public thinks the villains are now the bosses. Union membership may have fallen to below eight million, but the Trades Union Congress (TUC) believes there is a hidden pool of potential recruits — perhaps several million — reluctant to join for fear of reprisals.
Nor is it true that the days of industrial action are over. The number of days lost through strikes has fallen sharply over the past 18 years, but in the first half of this year, there were yes votes in 81% of ballots. Unions have been using the votes to good effect. Following a successful ballot, two out of three disputes were settled without recourse to industrial action.
So, where now? The trend in industry during the 1990s has been for firms to concentrate on their core business — unions should do the same. If unions can’t deliver on bread and butter issues — pay and working conditions — will members think it likely they can beat Direct Line when it comes to car insurance?
Two things will help in this respect. Inflation is weak, which should allow monetary policy to be expansionary — good for employment and union recruitment.
The other factor is the prospect of a Labour government. Tony Blair has said that there will be no favours to the unions, but in power he will need the unions as much as they need him. The TUC believes it can expect a minimum wage, the Social Chapter, the right to recognition, and protection against dismissal during a legal dispute.
It would like more, such as instant employment protection against unfair dismissal and greater freedom to prosecute disputes against companies that divide themselves up to prevent secondary action, but John Monks, TUC general secretary, says Labour’s four commitments should not be underestimated.
Let’s hope so. Some on the left think unions are no longer needed these days but they are fuzzy about what the benefits are to workers. Simple. In the days the boss would say “You’re fired”, you would fetch the shop steward. In the de-unionised “us-and- us boss” world of the future the boss says: “I understand your pain but you’re fired all the same.”