WORK AND EMPLOYMENT | IN FOCUS
THE NEW EMPLOYMENT RELATIONSHIP
WORK AND EMPLOYMENT
Years of reforms have ensured that the UK has a highly flexible workforce that can respond quickly to economic downturns while ensuring individual workers can take advantage of legal protections and negotiate a type of employment that suits them.
More people are in work in Britain in 2014 than ever before while the employment rate for the 16-to-64 working-age population has now reached the historic high achieved in 1974. This is a particularly remarkable achievement coming in the wake of the global financial crisis and the great recession. The reforms to the labour market carried out over the last three decades have helped drive this success. The downturn of 2008–09 inflicted a larger
fall in output than any other post-war recession. Yet while output fell by 7.2 per cent, the number of people in employment fell by 2.2 per cent. The story is very different to the ones told in economic downturns over the previous four decades when unemployment rose as high as 12 per cent and three million people found themselves on the dole. The labour market into which the CBI was born was one where government, employers and trade unions negotiated pay across industries, many of which were in state ownership. This was
a time when trade unions had some 11 million members – or half of the workforce – and 24 million working days were lost to industrial action in 1972 alone. The miners’ strike of that year had led to an era of “tripartism” which put the CBI alongside the TUC in pole position for negotiating pay and labour conditions across a host of industries through bodies such as the Manpower Services Commission. Although that system broke down, pay,
conditions and pensions were still negotiated between unions and employers’ groups for whole workforces until Margaret Thatcher was elected in 1979 on a mandate to end the industrial relations stand-off highlighted by the Winter of Discontent.
NEW FORMS OF PARTNERSHIP Trade union density has fallen markedly in the UK from a peak of 56.3 per cent in 1980 to 25.6 per cent in 2013. There are 6.14 million members in TUC-affiliated unions, down from a peak of 12.17 million in 1980. In the private sector now just 14.4 per cent of workers are unionised although more than half (55.4 per cent) of public-sector workers are in a union. In many private firms workers engage with managers through staff meetings, employee surveys and direct conversations. Following Labour’s election in 1997 the
incoming Blair administration kept most aspects
of the reformed industrial relations laws; the new relationship with unions was dubbed “fairness not favours”. New forms of partnership between
government, employers and unions have emerged with the National Minimum Wage (NMW) at the heart of this new model of employee relations. Since 1999, this has set a floor for pay awards, and a Low Pay Commission (LPC), which includes a CBI member on its board, sets the rate. Prior to the LPC’s introduction there was some
concern that raising wages would come at the expense of job creation and higher wage inflation. However, the balanced approach of the LPC has meant the NMW has not had negative effects on overall employment, on employment in low paying sectors, on the employment prospects of different individuals and social groups, or on employment levels in different regions. The NMW, by boosting pay at the bottom end of the labour market, also contributed to the slight decrease in inequality between the lowest and highest earners in the UK.
WORKING IT OUT Against that background there have been structural changes in the way labour markets »
Opposite: Trade union activism was far more prevalent in the 1970s, often for good reason
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