Private sector unions enter the twilight zone

Professor David Metcalf looks at the daunting uphill task facing organised labour.

Private sector unions have entered the twilight zone - fewer than one in five workers in the private sector belongs to a union. But for the privatisation of utilities and transport, private sector union density would be just 15%. And on present trends that figure will end up at around 12%.

In the face of such an alarming prospect, recent talk of union mergers - one giant union formed from TGWU and Amicus (and perhaps GMB - if anyone can be persuaded to take on its debt) smacks of shuffling deckchairs on the Titanic. The business of unions has become union business - mergers for the sake of it, for want of other initiatives.

It is not surprising that union membership and influence crumbled in the 1980s and 1990s. The climate was cold. The composition of jobs altered such that employment declined in the unions' manufacturing and public sector heartlands. The state did what it could to undermine collectivism through industrial relations legislation, privatisation, contracting-out, introducing performance-related pay for its own employees and subsidising profit-sharing and employee share-ownership schemes for private sector workers. In turn, employers responded to the signal sent by the state and were more likely to oppose unions, such that new recognition became difficult to achieve. Simultaneously many workers lost their taste for membership and the number of "never members" doubled to half the workforce. Union structures and policies - male, pale and stale - compounded their problems.

Whether or not unions follow the road to perdition, or instead become resurgent, largely depends on two things. First, what they do to firm performance and fairness at work. Second, whether or not the intersection of what the unions see as the malevolent forces of the 1980s and 1990s continue over the next decade or so.

The monopoly face (vested interest) impact of unions is less strong now than it was 25 years ago. The roots of union power - the closed shop and the strike threat - are shut down and product market competition is more intense. The evidence suggests that now the average union wage mark-up is low or zero; unionised workplaces no longer have lower labour productivity than their non-union counterparts; and therefore financial performance is, on average, similar to that in non-union workplaces. But there remains one acutely worrying economic outcome from the union viewpoint. On average, employment in a unionised workplace grows some 3% per year more slowly, or falls 3% more quickly, than in a similar non-union workplace. Even though union activity is unlikely to be the cause of this differential, if it persists the implications are serious.

Perhaps unions need to make more of their "stirring music": unions continue to wield the sword of justice - they narrow the spread of earnings, cut accidents and promote family friendly and equal opportunity policy. Further, from around 1870 and for most of the 20th century, the share of profit in national income gradually declined, but this long-run trend has reversed in the past two decades. This too suggests a role for unions in countering exploitation - a return to the rationale for unions set out by the Webbs a century ago.

It is unlikely that future employment in the more highly unionised segments of the economy - the public sector and utilities for example - will grow more rapidly than jobs in private services where union density is well below average. Therefore, the future of unions turns, in part, on the thorny matter of balancing servicing and organising activities.

Unions have 7 million members, but 1.6 million of these are not covered by collective bargaining because, in many cases, the employer abandoned collective bargaining without formally derecognising the union. Unions face a hard task convincing such members that it remains worthwhile to continue to belong. Unions must also service their 5.4 million members who are covered by collective bargaining, mostly in the public sector. Key tasks here include maintaining terms and conditions and providing individual services, including advice on employment matters, promoting lifelong learning and representing members in employers' procedures and before labour courts.

There are 8.7 million workers covered by collective bargaining, but 3.3 million of these are free-riders. Absorbing such workers - in-fill recruitment - is a potentially low-cost route to boost membership. Much more difficult are the 14 million employees who are neither members nor covered by collective bargaining. From 2000 to 2002 unions achieved a 25-year high in the annual numbers of this group being organised, but this figure still represented only 1% per year of the total unorganised and was insufficient to offset the gross outflow of members from workplace closure and contractions, redundancies, new free-riders and derecognitions. And in 2003 and 2004 the numbers newly organised by successful recognition campaigns fell sharply.

Since New Labour came to power in 1997, the hostile forces of the 1980s and 1990s have largely evaporated. Public sector employment is rising, the state is at worst neutral in its dealings with unions and has also established, for example, recognition machinery, a national minimum wage and various family-friendly initiatives. Almost 3 million non-union workers say they would be likely to join if there was a union at their workplace. And the union movement generated a raft of initiatives aimed at their revitalisation. Despite all this, membership is now the same as it was in 1997 and density has fallen two percentage points.

In the longer run, the EU directive on information and consultation may be an important influence. It establishes permanent arrangements for information and consultation for all workers in the UK in organisations with more than 50 employees and will cover three-quarters of the labour force by 2007. The tough job for unions is to build on these schemes and to maintain and expand their role within them such that they are seen as the legitimate voice representing employees.

This article was written by David Metcalf, professor of industrial relations, London School of Economics.