Only just over a third of employees now have their pay and conditions set by collective bargaining. At the zenith of union power two decades ago, that figure was 75 per cent.
Collective bargaining corroded away for a very straightforward reason. It was not because macho managers took the opportunities provided by the Tebbit-Thatcher laws to derecognise unions. The derecognition rate was around just 1 per cent a year in the 1980s and 1990s. Rather, it was that unions found it very difficult to achieve recognition in workplaces set up after 1980 - there were few births to offset the deaths in traditional sectors such as coal, steel and shipbuilding.
There was a dearth of new recognitions not simply because private services dominated manufacturing. It has always been difficult to organise in sectors such as catering, cleaning and hospitality. Similarly, new service jobs - for example, call-centres now employ almost half a million people - do not easily fit the pattern of collective industrial relations. But even in manufacturing, the bedrock of private sector unionisation, only one workplace in every seven set up in the past 20 years is now unionised, compared with half of those established before 1980.
So one major challenge facing the trade union movement is to boost the flow of new recognitions. But there is another, less remarked hazard. Of the 8.5 million employees covered by collective bargaining, 3.1 million are not union members (see table on the next page). They are free-riders who get all the benefits of union membership but make no contribution to the resources required to negotiate collective agreements and to serve members.
Closed shops - where union membership is a requirement to get or keep a job - were outlawed by 1990. About a quarter of employees (five million) were in a closed shop in 1980, so it is not surprising that some of these defected from the union when they got the chance. But even where there was no closed shop, the percentage of the workforce in the union has declined. As Neil Millward of the National Institute of Economic Research put it, many employees "seem to have lost their taste for unions".
The table shows that 70 per cent of employees are not union members. If just 2 per cent of these 16.7 million employees could be signed up each year for the next ten years, the union movement would be transformed - with more than three million extra members. But how is this to be done?
Unions are already showing vision both at the TUC and on their own. The Organising Academy trains young union activists and they have achieved considerable success in recruiting new members. Individual unions are making judicious use of the new laws promoting recognition which came into force last year. Hardly any of these new recognitions have gone through the full legal process - that would result in a shotgun marriage between capital and labour. Instead, most new recognitions are marriages of convenience, arranged in the shadow of the law - a pragmatic deal that suits both parties. And sometimes such marriages will blossom into true love, perhaps like the partnership agreements at the Inland Revenue, European Gas Turbines, Unisys and Tesco.
But unions are having to run hard just to stand still. For example, despite the young activists and the use of the new laws, the membership of TUC-affiliated unions fell last year. The trade union movement should surely make more of its achievements in its efforts to sign up employers and recruit individuals.
Writing four decades ago, Alan Flanders, the most thoughtful contemporary observer of industrial relations, stated: "Trade unions can fairly be described as a 'sword of justice'. That is the continual social purpose which has fired their idealistic motivation." He believed that unions "are not making the most of their own stirring music, their great theme of the cry for justice, and by default seem only to be listening to the clinking of cash".
The "clinking of cash" is less relevant now - it is only in firms with monopoly power that unions extract much of a wage premium. But the sword of justice remains sharp - surely able to appeal to some of the 17 million or so non-members. Consider some examples, all drawn from recent research in the Centre for Economic Performance at the London School of Economics.
Unions lower the industrial accident rate. Unions are more likely to be recognised where the number of accidents is high - workers need union protection in such sectors. But the evidence shows that the number of injuries is 25 per cent lower in these unionised workplaces than in non-union workplaces in comparable firms.
Next, companies that recognise the union are much more likely to have some form of equal opportunity policy and an array of family-friendly policies designed to encourage female employment. Sue Fernie and Helen Gray of the LSE summarise the evidence: "Women in unionised workplaces are much better off in terms of career opportunities, flexible work arrangements and general support for family responsibilities than their counterparts in non-union workplaces." Unionised workplaces are more likely to have an equal opportunity policy, to monitor it and to measure its impact on the workplace. Likewise, where a union is recognised, flexible work practices are more common, including parental leave, working from home, term-only contracts, the possibility of switching from full- to part-time employment and job shares.
Finally, unions reduce the spread of earnings. Low-paid cleaners and highly paid City bankers are obviously less likely to belong to a union. But even when we compare similar employees in similar workplaces and jobs, the dispersion of pay is lower for union employees than for non-union workers. This has profound implications. Unions compress the wage structure between men and women, blacks and whites and those with health problems and those without (see table). If there were no unions, the gender pay gap would be 2.6 per cent wider and the black/white pay gap 1.4 per cent bigger. These are big effects. For example, the introduction of the national minimum wage in 1999 narrowed the gender gap by nearly 1 per cent - but the impact of unions is treble this.
The trade union movement certainly yields many attractive outcomes - if only it would make more of its "stirring music" to appeal to employees. But what about management? A US management consultant speaking at a recent union-busting conference in London likened union recognition to "an economic heart attack". Many managers probably agree. But they are wrong - again, there is no reason for unions to be defensive.
It is true that the probability of above-average financial performance is lower, on average, where a union is recognised. But this overall, average effect comes about only because unions siphon off some of the monopoly profits where there are few competitors - a benign transfer from capital to labour. By contrast, in sectors where there is real competition in the product market, union recognition enhances the likelihood of above-average performance. I have never heard a single union leader refer to this crucial outcome of collective bargaining.
Similarly, many organisations try to steer clear of family-friendly policies, fearing they damage the bottom line. The reverse is true - family-friendly policies (which, remember, are more likely to be found in unionised workplaces) boost economic performance. Workplaces with an array of family-friendly policies, as compared with those without, enjoy better financial performance, faster growth in labour productivity, harder-working employees, a better-quality product or service and lower rates of staff resignations and absence. Again, why has no union leader publicised this - particularly when seeking a partnership agreement to gain recognition?
In order to flourish, trade unions must appeal to both individual employees and to management. The evidence of the impact of unions - for example, fewer accidents, a fairer pay structure and superior business performance via family-friendly policies - suggests they can win over workers and management. Have they the will to do so?
David Metcalf is professor of industrial relations at the London School of Economics and a member of the Low Pay Commission. He is director of the Leverhulme Trust-financed project on the Future of Trade Unions in Modern Britain, being undertaken by the Centre for Economic Performance at the LSE
Fuller details of some arguments in this article are in CEP Discussion Paper 493 (April 2001) available from email@example.com