‘real’ labour market reform demands collective bargaining’s revival

The version of ‘labour market reform’ we’ve had to swallow for 30 years has successfully destroyed much of collective wage bargaining in Britain and has been the driver of rampant economic inequality. The reestablishment of extensive collective bargaining needs to happen, and needs to be inserted back in ‘labour market reform’ discourse

Outside of trade union politics, discussions concerning the role of collective bargaining in Britain hardly features. Labour party people might (might!) venture into questions of employment rights as they apply to individual workers, but the role of collective bargaining in discussions concerning enhancing political and economic equality has long been cleaved off the necessary debate and ignored. The New Labour era has taken its toll–Labour people barely care about this anymore. It is a concern for the dinosaurs of a union movement it seeks to take money from and talk to as little as possible.

Collective bargaining has been one of the vital institutional pillars in many of Europe’s industrialised economies, not just providing a check on the profit interests of business but also providing means of organising industrial and welfare systems. The relationship between the strength of collective wage bargaining and the health of modern societies is very clearly and causally strong . Some very important interventions into the rather staid ‘labour market reform’ debate (see links below) provide some crucial arguments and ideas as to why collective bargaining is the bedrock of healthy and just societies. Chartist offers its contribution here by seeking to raise three key thematic concerns raised by collective bargaining’s potential role: economic democracy, economic equality and economic performance.

Economic democracy

Most concepts of ‘democracy’ are very limited, often only accounting for our right to vote for a seemingly representative berk in suit every now and again. The economic portion of our ‘democratic expression’ must permanently be part of our understanding of it. More pointedly, collective bargaining, the right to strike and means of collective association at work must be central to this ‘economic democracy’.

Sidney and Beatrice Webb (‘the Webbs’) would shudder with the current state of British ‘industrial democracy’. Many of the rights we apparently have in a ‘democratic society’ certainly only apply to certain corners of our lives. These are almost entirely non-existent as soon as we walk through the door of our workplace. The restrictions on personal freedom abound once we clock on. With modern UK labour law set explicitly to provide the employer with the ‘right to manage’, the worker is given little space to shape their own economic livelihood. Powers of dismissal, the right to ignore the collective will of workers expressed through union voice (recognition), and to use a variety of means to undercut current workers by pitting them against new ones doesn’t just create an extreme form of ‘wage slavery’, but a critical removal of democratic rights of the worker to shape their lives through shaping their work. Having the right (collectively) to make sure you take home in pay what you need to live is a very basic and lowly standard that is simply not met in modern Britain. The right of workers to ensure that their work can provide for them through collective organisation is as important as being able to vote, to wear what you want to outside, to express yourself freely. Democracy without this economic component is near meaningless.

There have been moves, for good reason, to push labour law providing workers rights into the ambit human rights law; a subject that forms a regular part of a more trendy and bourgeois discussion of ‘democracy’. This is not to belittle the nature of the discussion led by Guardian readers and fans of the Liberty pressure group, but certain so called progressive parties need to craft this economic democracy idea within broader definitions of fundamental human and democratic rights. No one will deny these rights are missing in this country. Without them our ‘democracy’ will always be distinctly hollow.


Economic equality and economic performance: two sides of the same coin

The strength of collective bargaining institutions has a strong causal impact on a society’s level of economic inequality. These also have a powerful and positive bearing on how society’s perform and sustain themselves economically. In Scandinavia and post-war Germany a settlement was forged where not only was collective bargaining responsible for wage setting but also was the forum that decided how skills were formed and organised. This happened across industrial sectors and in many countries covered most of the economy. Wages and skills were, thusly, taken out of competition. Leaving competition to occur on the strength of genuine innovation of a product or service. When such arrangements had all-encompassing reach, such collective bargaining systems provided a valuable macroeconomic policy tool to control how wages were set over time and over the entire economy with one keen eye kept on inflation and real interest rates. The issue of inflation is part of a economic outcomes discussion often ignored by left-wing proponents of collective bargaining. It’s just not their natural territory. It is important, not just because ‘inflation is bad’ but because it shoots down a key argumentative plank of the right that collective bargaining provokes the sort of inflationary pressures that destroy the fruits of economic growth. What we also know is that these same economic conservatives are usually those who defend high executive pay and tax cuts for the wealthy. So what they mean is that for a lid to be kept on inflation and for the wealthy to get wealthier, the pay of everyone else must fall. Then these same folks whinge ‘class war’ in the face of rising economic inequality and complaints that result. This is the reality we have in the UK.

In the UK we are also in the midst of a long-standing skills crisis. Employers constantly have moaned for years about British workers not having the skills necessary for their needs. Unlike Denmark, that boasts extensive and well funded state-led re-skilling programmes as part of its unemployment insurance systems, or Germany, that uses collective bargaining to organise skill needs, Britain relies on individuals to skill themselves and usually with their own money. The inequality implications of this are clear. Those who can afford to will obtain the skills they need; everyone else won’t and will be stuck in a spiral of low pay and low skill work. Fitful attempts to correct this have sprouted over the years, but without firms willing to pay for it (either directly or through taxes) this problem will not be resolved in Britain. The Union Learn programme is one isolated example of something positive in this regard. But this does not involve employers coughing up, it was tax-payer funded, and doesn’t involve their skills planning. If this were placed in collective bargaining forums firms could mould their skill needs from within. This may have implications for wage-setting, usually raising them as employees demand security and higher earnings with higher skills, but skills equals productivity and business doesn’t grow without this.

Collective bargaining ticks many boxes. The democracy, moral and economic case for its place in a modern society and economy is overwhelming. Malign caricatures of the 1970s and the ‘three-day’ week still define collective bargaining as an age-old vehicle of trade union largesse, militancy and industrial strife. Other countries’ examples provide starkly different, and contemporary, evidence of something very different. In any event, evidence from our own shores should convince us of our own labour market problems.

The UK is wracked with social and economic inequality and dislocation, poor productivity and skill formation and a fractured economy where different relationships with inflation further divide people who can’t relate to each others’ working lives. Labour market reform must not indulge this dangerous nonsense any further. And the party of Labour must accept its role of pursing this. Its existence is meaningless without it.

A considerable amount of important work is being published on collective bargaining by groups like the Institute for Employment Rights (IER) and Class – Centre for Social and Labour Studies. CHARTIST will be reviewing such work and the broader issues of labour market reform in firm support of a campaign for economic and industrial democracy




Keith Ewing and John Hendy, Rebuilding After the Crisis. A Manifesto for Collective Bargaining. IER and Class (2013)

Trade Unions and Economic Inequality, IER and Class (2014)

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