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ET Go Home - Trade Unions, Workers Rights And The Modern Economy

27/07/2017 13:01

Wednesday's court ruling on employment tribunal fees is good news for working people.

Employment tribunal fees were introduced in the summer of 2013. In the twelve months before they were introduced, there were 187,000 employment tribunal claims accepted. In the twelve months following the introduction, there were just 44,000. There can be two possible conclusions for this: that three quarters of employment tribunal claims before the introduction of fees were unnecessary or vexatious. Or, perhaps, the introduction of fees was denying workers recourse to justice.

With the government seemingly unwilling to enforce workers' rights, trade unions are more important than ever. GMB took on Uber over their dubious classification of their workers as 'self employed', and won. Unite took on Sport Direct over abuse of the minimum wage, and won. Now Unison have taken on the Government over employment tribunal fees, and they've won.

But while unions are still able to fight for workers' rights through the courts, and in the workplaces where they are present, across much of our modern economy, trade unions are barely visible.

The story of the decline of union membership is familiar, and it is not unique to the UK. From over 13 million members in 1979, union membership has fallen progressively to under seven million today. While the public sector accounts for just one in six workers, three in five union members are public sector workers. Membership has fallen to just 13 per cent in the private sector. Union membership is lowest among workers who arguably could most benefit from collective representation. Among full-time workers earning less than £250 a week, just one in ten are in a union. Membership among middle-income earners is three times higher.

The steady decline of union membership and of collective bargaining should be a cause for concern for all of us. Working people have seen the poorest period of wage growth in decades. Average wages in 2016 were still 4 per cent below where they were a decade before. This can partly be explained by our woeful performance on productivity, which has stalled since the recession. Productivity has grown by just 1 per cent in a decade. The Government released Fixing the Foundation, their plan to boost productivity two years ago this month. Since then, productivity has grown by 0.0 per cent.

Beyond productivity though, wages depend on how output is shared. This is why the decline in union membership really matters. The decline in union membership has been matched by a decline in the wage share of GDP. Within this wage share too, the decline in union membership has been matched by an increasing proportion going to those at the top. This shouldn't be a surprise. Unions exist to represent working people, and to push for a fair share of the wealth we all create. As their presence and power has declined, so too has their share of national income going to ordinary working people. It's about power, and how power is becoming dangerously unbalanced in the modern economy.

If you don't take my word for it, take Andy Haldane, the Chief Economist at the Bank of England, who recently argued that the decline in union membership and the growth of insecure work can help explain sluggish wage growth despite our historically high employment rate. This is not the preserve of the radical left. Low union membership is bad for wages, and bad for our economy.

The weakness of trade unions may help explain why our economy is so chronically short-termist. Recent IPPR research has shown how higher employee participation is closely correlated with higher investment and R&D expenditure. Our model of shareholder primacy, which barely gives workers a look-in, and which focuses on short-term profits over long-term investment, is damaging our economy.

Beyond the economic impact, unions play a vital role in promoting employee voice too. The UK performs poorly here. In the ETUI European Participation Index, which ranks employee representation and involvement, the UK comes 23rd out of 28 European countries. Just one in three workers are satisfied with their ability to influence decision-making at work.

Through our Commission on Economic Justice, IPPR are examining the root causes of the endemic challenges in our economy. In the coming months we're looking at the role of trade unions in a modern economy.

The decline in union membership has been influenced by a number of factors. The change in the composition of the economy with de-industrialisation has certainly played a role, and changing social attitudes may have too. But government policy has clearly played a role. The Even before the Trade Union Act tightened them further, the UK had some of the most restrictive union laws and regulations among advanced economies.

If the decline in union membership and collective bargaining has been in part due to government action, then the solution to addressing and reversing the decline must also - in part - lie in government action.

Wednesday's court victory for UNISON demonstrates trade unions remain as important as ever. Yet union membership continues to decline. If we want to boost pay for working people, if we want more investment and higher productivity, if we want fairer workplaces and a voice for employees, we should all be concerned about the decline of trade union membership. And we should do something about it.

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