26: Opening up the shop
The lessons of trade union reform
The problem: trade union power
Over-powerful trade unions thwart new, innovative ideas for improving productivity. The dynamism of the modern economy is then stifled by outdated working practices. That is particularly damaging where state-owned enterprises dominate the economy and the unions' strike-threat power is large.
The idea: empower the members
One solution is to adopt gradual but systematic programme of reform, taking power from the (often highly political) trade union leaders and devolving it to the members. This may involve compulsory, publicly-funded strike ballots and secret elections. And the power of large public-sector unions can be reduced by opening up the public sector to competition.
Example: Mrs Thatcher treads softly
In the United Kingdom, trade unions accumulated some extraordinary legal privileges over the course of the twentieth century. For example, they could not be sued for damages caused by their industrial action. Perhaps the worst feature of this was the fact that employers who were not involved in any dispute were often caught up in 'secondary picketing' as public-sector union activists attempted to spread disruption more widely in order to force governments to concede to their demands.
Margaret Thatcher's government learnt from the earlier (1970s) Conservative attempts to curb union power by a single Act of Parliament - which resulted in confrontation, strikes and civil strife, leading ultimately to a crisis election and the defeat of the government.
By contrast, Mrs Thatcher's reforms were progressive and remorseless. Six successive Acts of Parliament between 1980 and 1993 reflected four key principles:
(1) Reforming the closed shop. The 1982 Employment Act curbed abuses of the closed shop, which forced people to join a union and meant that anyone who disobeyed union orders and was driven out of membership then had to be dismissed by the employer. (This same system prevailed in other countries, such as New Zealand, which also moved to reform its labour regulation: see the chapter Set the People Free.) The Act made it illegal to dismiss an employee for not being a union member unless the closed shop agreement had been approved during the previous five years in a secret ballot of all employees. Further reform followed with the Employment Act 1988, outlawing the remaining legal privileges associated with closed shop agreements. Henceforth, individuals were free to decide whether they wanted to join a union or not.
(2) Secret ballots. Unions were required to hold a ballot before they launched industrial action such as strikes. Previously, strike decisions had often been taken in open meetings where the closed-shop dismissal threat could be used on dissenters, which dragged on late at night, leaving only the activists present at the final vote. The government felt that secret postal ballots would provide outcomes that were more representative of real shop-floor opinion.
At first, secret ballots were voluntary, but the government offered to fund the cost - something hard for union leaders to reject. Later, once the general principle had been accepted and union members were starting to enjoy the right to vote in secret on important issues, strike ballots were made compulsory.
The 1984 Act introduced compulsory elections for union officials, thereby making them far more accountable to their members. The legislation also required officials to keep accurate records of members' names and addresses, and brought in proper auditing of union finances. Union contributions to political causes had to be endorsed at least once every ten years by secret ballot. For the first time, members were given the right to inspect the accounts and ask the auditors about specific items.
(3) Secondary picketing banned. The 1984 Act also banned unions from extending their disputes to anyone besides their members' employers.
(4) Legal immunities curbed. If unions failed to observe these rules on strike ballots or secondary picketing, they lost immunity from lawsuits for damages caused by industrial action.
John Major's government inaugurated a further fundamental reform when it passed an Act in 1993 that abolished the check-off system, whereby employers were obliged to deduct union dues from wages and salaries automatically. Unions now have to go out and actively recruit and retain members.
Results: withering union power
As a result of this long campaign of measures, union officials gradually lost their ability to dictate policy to the elected government. Incremental reform was supported by the electorate and was welcomed by many union rank and file members. And each assault on the power of the trade union bosses was seen as limited and reasonable - not enough to cause a confrontation and to bring the political activists out on street demonstrations.
One exception was the miners' strike in 1984/5. But the Thatcher government had prepared for such an event and was able to maintain the support of the general public and face down this most tenacious of unions.
Assessment: changed times
Trade union reform has led to dramatic improvements in industrial relations. The UK economy now boasts the most efficient labour markets in Europe. Britain has prospered as the number of days lost due to strikes fell - plummeting a hundredfold, from 29.5 million in 1979 to just 278,000 five years later, for example. By 1997, the figure had sunk to 235,000; and although after four years of Tony Blair's New Labour it had doubled again to 510,000, this is still a long way short of the 1970s levels.
Trade unions lost millions of members over the twenty-year period 1979 to 1999. By 1996 union membership had shrunk to less than 6 million. Unions were obliged to consolidate and compete against one another for members. In 1979 there were 456 separate unions; by 1997 this figure was halved to 233.
Trade union reform curbed the interest-group politics in which powerfully organized groups could force government to submit to their demands. This can be particularly powerful where the state runs many large, essential, and highly-unionized services. In the UK, the reforms gave the government back its power to govern: but the majority of UK trade unionists are still public-sector workers, and ultimately, only the break-up of these state monopolies will remove the power of unions to blackmail governments.
Trade union reform in the UK worked by giving power to the membership, and taking it way from the politically-inspired leadership. When faced with a secret ballot on a trade dispute, many ordinary union members chose continued negotiation, rather than the open confrontation that their union officials had often favoured.
Unions depend on members, but members no longer rely on unions. Most people employed by the private sector believe unions to be irrelevant. But Britain's trade unions are struggling back, offering better membership services such as health and sickness insurance plans. Yet the majority of trades union members work in the public sector: the largest unions are made up of teachers, nurses, and local authority workers.
For further information:
- Hanson, Charles (1995) Taming the Trade Unions: Macmillan.
- There is a good chapter on trade union reform in Letwin, Shirley (1992) The Anatomy of Thatcherism: Fontana Books.
- For an understanding of the benefits brought about by trade union reform consult Smith, David (1999) Will Europe Work? Profile Books.
- Burton, John (1979), The Trojan Horse: Adam Smith Institute (London).
Copyright 2002: Adam Smith Institute
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