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16 April 2018updated 09 Sep 2021 4:30pm

Sluggish firms are stalling growth – trade unions could help

A ResPublica report claims that unions have untapped potential to increase the nation's productivity. 

By Tom Follett

In 2008, the productivity engine in our economy fell out. Ten years of austerity, the Northern Powerhouse, and the Industrial Strategy still hasn’t put it back. Our workers take five days to make what the French finish in four.

The evidence increasingly points to Britain’s “long tail” of middling businesses, whose managers stick to outdated technologies and inefficient working practices. While adopting new techniques might improve national productivity, many bosses prefer to stick with what they know. The public sector could play a bigger role – but the level of knowledge of the individual businesses, and the personalised engagement required with each worker, are beyond the ability of the state.

Trade unions have both in spades, and more productive work would mean better conditions for their members. So we need to ask whether their current role allows them to do all that they could. This is the subject of ResPublica’s recent report calling for a “New Bargain” between business, workers and government.  

In high-productivity countries, unions are central in developing the workforce each sector needs. In Norway, researchers found that a 1 per cent increase in union density raises that business’s productivity by 1.7-1.8 per cent. Even in the US, Gallup found that engaged workforces outperform less engaged workforces by over 20 per cent on profitability and productivity. And in the UK, Acas found that unionised employees were much more likely to use a higher number of more effective working practices.

Despite this, the perception among some policymakers and leaders has been that unions are mainly a faction of the left, using industrial means for political ends. In the economic sphere, Conservatives have, with some exceptions, seen unions as at best negotiators in a zero-sum game, and at worst impediments to growth and political authority through producer capture. The reach, influence and membership of unions has consequently been much diminished.

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There is an alternative. Beyond picking up the pieces for workers once things go wrong, unions also need a role where they can improve processes, shape strategy and take the tough decisions to create sustainable firms. That is what our competitor countries do, and it will mean a big shift for some.

First, we urgently need to renew the idea of collective bargaining. Employers are exploiting their power to hold down wages, and the scales need rebalancing.

Second, with reskilling more important than ever, the TUC/CBI National Retraining Scheme needs to become a real lifelong learning bank that follows workers throughout their career.

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Third, unions are well-placed to improve the productivity of occupations like care and retail – the “everyday economy”. We would like to see dedicated funds in the Industrial Strategy for consortia of business and unions bidding to do this.

Fourth, the Living Wage Campaign has shown how effective certification marks can be in nudging behaviour. We’d like to see a similar scheme for best practice in employee engagement.

Fifth, we need a safety valve to prevent avoidable disasters where employees have serious concerns about strategic decisions. We are calling for a “Workforce Red Card” to management, just as profit warnings alert shareholders.

Increasing productivity by 1 per cent per year would add £250 to the average annual pay packet, and £3.5bn to annual profits. If this is a battle that has to be fought firm-by-firm, enlisting those on the ground would be a very good place to start.

The authors wish to thank Jake Sumner for developing the ideas in this article in the report A New Bargain: People, Productivity and Prosperity, for ResPublica.