Socio-Legal Studies AssociationLabour Law Stream

Is it Time to Restore Wages Councils & Regulated Collective Bargaining?

Dr Keith PuttickE: k.a.puttick@staffs.ac.uk

Dr Peter BeszterE: p.beszter@staffs.ac.uk

Thanks for the Invite!

Our thanks to Michael and Sam for convening this year’s excellent SLSA Labour Law stream.

Our thanks, too, to the association for our invitation to speak.

2

Summary

After some observations about the wages council system, and comparable systems in Europe, we will argue that a restored wages council system – under that or other name, and probably with new features – could offer attractive ways of addressing current shortcomings in the Labour Law framework. Whilst retaining a national minimum income floor, issues include the need for better, more functional redistributive mechanisms at sectoral levels; the need to address the rising and unsustainable fiscal cost of in-work State support; and the need to arrest the continuing decline of collective bargaining. Issues around the need to address widening inequalities, and gender disparities, as well as employee/employer ‘voice’, also need to feature in the discussion.

3

What were the Wages Councils?Some history!

1909 - There had been some minimum wage regulation by some municipalities - but it was not until 1909 that the Liberal government's Trade Boards Act 1909 started a national system of wage-setting.1945 — After WW2 the Trade Boards - now 'Wages Councils' – focused on a range of low pay sectors: not just those where TU organisation and opportunities for collective bargaining were weak. By 1960s, 60 councils1986 By this point there were about 26 wages councils covering low pay sectors like retail and agriculture: the Wages Act 1986 began the process of dismantling, and some sections of the TU movement welcomed this1993 — Abolition, save for the AWB: a ‘special case’ .As at 2015. The AWB continues in 3 countries, and as part of the JIC system, in the RoI.

4

Why were Wages Councils abolished?

The ‘case’ rested on 3 key arguments:(1) Minimum wages do little to alleviate poverty as most covered workers do not live in poor households (2) sectoral and other minimum wages and conditions setting cost jobs in the industries they covered (3) By 1992 there was no longer a problem of in-work poverty to address– this had ceased to be an ‘issue’ by 1993 .Did the government and policy makers get this wrong..?

5

Was abolition a mistake?

‘Yes’, according to five LSE commentators in 1993 at the time the last 26 wages councils were finally removed…‘Wages councils: was there a case for abolition?’ Richard Dickens, Paul Gregg Stephen Machin et al British Journal of Industrial Relations, 31 (4). pp. 515-530

6

In response to each point…

Said these commentators…‘We find that: (a) 50 per cent of families with at least one earner being paid wages council rates come from the poorest 20 per cent of families; (b) the existing evidence suggests that abolishing the Wages Councils is unlikely to create jobs; (c) the widening earnings distribution in the UK means that low pay is an increasingly important determinant of poverty. If anything, there appears to be an increasing need for minimum wage legislation in the UK…’

7

Existing Evidence?

In fact, this influential paper largely just reinforced what was already well understood.Case studies looking at the aftermath of abolition in some sectors clearly highlighted how abolition then prompted a fall in both wages and prevailing conditions. Eg falls in average wages in the cutlery industry in Sheffield post-abolition, including the loss of wage structures that had taken years to develop.

8

Looking at the AWB (the last ‘model’) what does the system offer?

Reference must be made to the Agricultural Wages Act 1946 and the last Agricultural Wages Order – still operating on a transitional basis in Wales (also NI and Scottish equivalents). In summary:The AWB provides a forum for both sides at which sectoral issues can be discussed: in effect a ‘voice’ for both sides…A claim from the TU/employee sideBargaining, then agreement – facilitated as necessary by tripartite/govt apointeesImplementation by legal order, supported by guidance

9

Abolition: Some controversies

The Coalition argued that the AWB was now ‘irrelevant’ – largely because there is already a minimum wage floor provided by the NMW, and this was ‘sufficient’Also, why should the AWB go on being a ‘special case’, when other sectors did not have this facility?In the consultation, the NFU purported to put the case for employers – but this appeared to be contradicted by many, if not the majority, of respondent farmers – many of whom saw the merit in the AWB system. Wales, NI, and Scotland refused to go along with the arguments, arguing that by the government’s own admission there was a raft of negative consequences in prospect. They opted for retention… In the event, a range of concerns informed this, not least the perceived stability the system offers.

10

Why is are systems like AWB important?And Wages & Conditions as ‘Welfare’…

Within the typologies offered by Esping-Andersen, Pissarides, Nicholas Barr et al… the welfare of workers and family members is achieved by several complementary inter-actions:First, the income from wages, occupational benefits, and other elements of the wage-work bargain: these provide the basic ‘floor’Second, State support and schemes of social solidarity, including in-work benefits, income transfers, wage subsidies, and other forms of social security and assistance. In the USA these were a key element in the US Recovery Act, focused on massive rises in income transfers to key worker groups… Then there’s the on-going importance of regulating and maintaining the value of wages, hours, and the wage-work bargain to sustain aggregate demand: ILO/Bonnet, Saget, 2012

11

The Social Wage: ‘Rebalancing’ Needed?

As in the UK, most European systems now supplement the WWB with schemes which either directly support wages and the wage-work bargain: income transfers, tax reliefs, wage subsidies, tax credits etc, or indirectly assist it.*

In the latter case support may be directed at the family, housing costs, schemes to boost family income thereby reducing the costs which would otherwise be borne out of worker’s contractual wage

Needless to say, this is hugely expensive, and represents a sizeable and growing shift of responsibilities from employers to the State, coupled with unsustainable fiscal costs…

Should this not be re-balanced by the introduction of new, more efficient redistributive mechanisms??

The argument was made at the last European Congress of Labour Law (Puttick, 2014)

*MISSOC (EU Commission, 2014)

12

The Crisis

That shift away from effective redistributive mechanisms and ‘regulation’ has, in large part, resulted from the post-2007 crisis (Puttick, 2014):

Falls in wages, unemployment, austerity, cuts to social security (ILO, 2012/13 and 2014; IDS, 2014)

Weakened labour market institutions, collective bargaining, regulation, etc. Austerity, eg in Spain and Greece, has been taking a big toll (Baylos & Trillo, 2013; Koukiadaki & Kretsos, 2012; Barnard, 2012)

Social security systems’ support adapting as work patterns change: France RSA (Vlandas, 2013; Denis & L’Horty, 2012); Austria BM (Steiner and Wakolbinger, 2010); UK UC (Puttick, 2102a; 2012b); Sweden, Spain (Mai, 2013)

Funding and ‘sustainability’. Have we, as some commentators suggest, started to reach the limits on what is sustainable..?

13

Europe’s Well-Developed ‘Floor of Social Protection’: Bachelet Report/ILO 2011

The ILO, implementing the Bachelet Report (Bachelet, 2010), highlighted the importance of maintaining aggregate demand - if necessary by introducing, new mechanisms to counter low wages

Nearly 25% of EU citizens ‘at risk of poverty’ (Eurostat/EU-SILC); pay cuts (IFS, 2013); 2015 EU Commission reports and Eurofound indicate a likely new deflationary downward spiral

Responses? Repairs to the floor, strengthened collective bargaining (eg ETUC’s ‘social compact’ proposals), alongside improved in-work support and State welfare ‘nets’ (ETUC, 2012a; 2013) and IER’s Manifesto for Collective Bargaining (IER, 2013)

A case study in failure in the UK? The food sector. ‘Supermarkets: The real price of cheap food’:

Winners and Losers in the Supermarket Supply Chain’, August 2014 (UK Channel 4, 2014)

14

Caught between Two Hard Places?Low(er) Wages, Less State Support from In-Work Social Security

Low wages, despite working for profitable companies and being in strong unions like USDAWIn general, workers are visibly better off in TUs and within the scope of collective bargaining – but even then they are often still dependent on in-work State support (tax credits, etc). Typically, part-time retail workers are only 15% above NMW. At the same time it is harder to get Working Tax Credit, HB, etc

15

What is Needed?

Undoubtedly… Strengthened institutions collective bargaining, a more

user-friendly legal framework for unions and union recognition (including recognition for workers in smaller enterprises) also a default mechanism that will facilitate raised wage floors at sectoral level above the pervasive national floor achieved by the NMW

Whilst welcome, the living wage does not deliver what is needed

In the present climate, it is unlikely that the we are going to see a reversal of current trends, and the slow decline of union membership and collective bargaining.

So what are the options, going forward…??

16

The Problem of Regulating Wages Specific Issues & Limitations

As Germany has been discovering, and we know from our experience of operating the NMW and the Low Pay Commission’s work…

If a national minimum wage floor is set that is too low, State support (income transfers, etc) is higher than it needs to be: as wages stagnate other fiscal costs increase – eg HB and other support for rents increase (Kelly, 2013)

If it is set too high, there are risks to job creation, increased non-compliance, and so forth

However, as Resolution reports have been saying, there are some significant differences as to payability at sectoral level. NMW systems are a poor ‘one-size fits all’ substitute for effective sectoral bargaining, wages-fixing, and conditions setting where these produce costs and on-costs.

17

Can we do better than the NMW?

Yes, although this still begs the question… What better mechanisms are there, especially for the ‘unorganised worker’? Eg sectoral wage-setting: UK wages councils, and Agricultural Wages Board model in Scotland, Wales, NI: Ireland’s JICs (Kerr, 2013; Doherty, 2013). As well as maintenance of the last remaining wages council - the AWB in agriculture - the extension of that ‘model’ to other sectors? A choice now being made by 3 of the UK’s 4 countries helped by court intervention (Agricultural Sector Bill, UKSC 2014)Like Angela Merkel and influential sections of the Left in their national government, and employers, the UK’s TUC also now sees these as better options (TUC 2013)

18

Why are Sectorally Regulated Floors Needed? Will Germany follow the UK..?

Where has the German design process got to..?Like us, they now recognise some of the problems of a

pervasive national floor. In particular: NMW floors have a propensity to become a ‘ceiling’ (see

Resolution Foundation reports (2013a; 2013b) The emergence of a ‘two-tier’ labour market is already

evident from Germany’s projections and economic forecasts, mirroring similar problems here (Bain, 2013)

Tier 2 of the UK labour market that has evolved since 1999 highlights growing dependency on sizeable State support exacerbated by labour market transformations – short-term work, part-time work, under-employment characterising much of the ‘new jobs’ - a feature, too, in the rest of Europe (EU Commission, 2015)

19

Further problems, but also solutions?

The scale of low pay in Germany is bigUp from 15% in 1990s to 22%+ (Steen, 2013). Although their NMW will give a sizeable ‘pay rise’ to an estimated 17% of Germany’s low-paid (Meyer, 2014) there are sizeable fiscal on-costs, and complex labour/social security inter-actions, and new ‘dependencies’. A NMW and in-work benefits, in itself, is no guarantee against in-work poverty (Social Mobility & Child Poverty Commission, 2013; Puttick, 2012a and 2012b).Is it right, as some of the countries in the UK have been arguing, to start to build on the model offered by the AWB, and start looking at the way such a sectoral bargaining and wages/conditions regulatory model could be extended

20

Scotland & AWB ‘Extension’s

In Scotland, similar considerations. The SNP has promised…better regulation, better minimum wage, better/fairer trade union organisation and representation rights. Attractive promises, but will they (can they) deliver? If they hold the balance of power in May, they may insist that a revived wages council system be extended to the rest of the UK as part of a coalition or support deal? Let’s see!

21

Schemes like the AWB Offer a ‘Facilitating’ Role - not unlike State Welfare

At the inter-face of employment law and social security law…The State plays complementary roles

Supporting newer forms of work, and patterns, and underemployment, flexible working, etc

Facilitating entry to the labour market for key groups who would otherwise be marginalised and excluded from the mainstream.

In these respects I am very much in accord with the views of early commentators like Hugo Sinzheimer (Sinzheimer, 1924; 1949) who saw the important inter-actions between social security law and rights complementing employment protection and rights. As has been said more recently, in these kinds of contexts, the two systems operate ‘as two sides of the same coin’ (Weiss, 2013).

22

An ‘empowering’ role: especially schemes of social solidarity’: groups like these…

Young Labour Market Entrants

Assisted by disability rights, facilitated by social security

23

Disabled and long-term incapacitated: assisted by a combination of disability rights, and facilitated by social security

Young people: a key group increasingly helped by State wage subsidies, in-work benefits, etc

Single parents and older labour market ‘returners’… the new working poor?

Single parents: welfare-to-work & flexible working arrangements

Older workers with poor pensions/’returners

24

Older ‘returnees’ to the labour market – returning because their pensions are poor: another fiscal burden – but should not that be borne in part by employers?

Single parents with a range of needs, including childcare costs

25

State Support for Work & Family

UK and EU schemes increasingly provide income replacement, eg to facilitate work/family ‘balance’.

But why is it the State doing this? Why not employers, especially in sectors that

can afford it..?

Support for Non-Union, Low-Paid Workers: the ‘Unorganised Worker’

The context: UK and EU Significant number of workers who are not in unions, and who are not covered by collective bargaining are increasingly dependent on State support to address that ‘exclusion’ – but it is coming at a huge, and increasing cost. In the face of austerity measures, it has become increasingly unsustainable. Egs:

Direct support: France RSA (Bourgeois & Tavan, 2009; Vlandas, 2013)

Indirect support: Ireland, the Family Income Supplement (FIS). As from April 2015 new transitional support creating income bridges between jobs, ‘run on’ wage replacement for groups like single parents, and so forth… Not unreasonably, people are asking why can’t the JIC system address this at a private, collective bargaining level?

26

Standards & Socio-Economic ‘Rights’

Does Europe do enough to actually protect core ‘economic’ rights? Sunstein, 2006: The right to a remunerative job…to earn enough. And how, exactly, in the context of what we’ve been saying, are ‘core’ rights?? Besides classic economic/social rights, with regard to matters like wages and conditions should these not be set on the basis of social dialogue? Ie collective bargaining and/or regulatory redistributive mechanisms? Wages councils could offer a model, and practical means, of putting in place solutions at sectoral level, including a better ILO-style social protection floor (ILO, 2012).

27

EU Workers, Free Movement: The Threat to the Social Wage in the UK

EU workers exercising free movement rights make a big contribution in the EU labour market. Quite rightly they have ‘equal treatment’ rights, and that includes social rights.This is currently under threat, however: post-Dano, 2015, the proposal is to ratchet up economic integration requirements.Again, why are sectors like the care industry immune from any kind of collective bargaining, or regulated bargaining ..??

28

Teachers/Teaching Assistants like Jessy St Prix: Dependent on Social Security

Ten years ago, casual and atypical teachers and assistants enjoyed a degree of in-work wage replacement under national agreements with the NUT and NAS/UWT. These were rolled back.

As a result, groups like EU nationals like St Prix are now increasingly dependent on a highly restrictive Social Security system.

How can that be right?And why should they have to turn to a

chronically underfunded, non-contributory social security?

29

Conclusions

As Keith Ewing rightly pointed out some while ago, in a seminal article in the ILJ (Ewing, 2005), the trade union ‘function’ is potentially wide-ranging

It certainly encompasses opportunities for the further development for new forms of dialogue and partnership, contributing a representative voice in forums like the AWB - and, hopefully, new forms of regulated sectoral bargaining.

Assisted by a reformed legal framework to facilitate trade union organisational rights as well as recognition, it is an obvious first step towards a reinvigorated system with dialogue at its heart.

30

Some Discussion Points

1. Do participants agree with our main premise, which is that wages councils (or a similar mechanism) can offer a valuable addition to the Labour Law framework?

2. What feature, in particular, adds value?

3. What obstacles do you see to implementation? Are they insurmountable..?

31

Thank you!

Thanks for attending our session, and for your kind attention!

32

References

Bachelet Report (2011) Social Protection Floor for a Fair and Inclusive Globalisation: Report of the Advisory Group Chaired by Michelle Bachelet, International Labour Organisation (ILO) and the WHO, Geneva: ILO, 2011Bain, G (2013) ‘Minimum wage risks becoming going rate for millions, low pay pioneer warns’, The Guardian 5 July 2013Barr, N (2012) The Economics of the Welfare State, Oxford: Oxford University Press, 5th edBaylos & Trillo (2013) ‘Social Dimensions of the EU and the Situation of Labour Law in the Member States: An Evaluation of the Spanish Experience’, Medel Seminar Paper, Düsseldorf, 25th and 26th January 2013: Revista de Evaluacion de Programas y Politicas Públicas (Journal of Public Programmes and Policy Evaluation), Num.1 (2013) 54-71

33

References

Bonnet, F, Saget, C, Weber, A (2012) Social Protection and Minimum Wages Responses to the 2008 Financial and Economic Crisis: Findings from the ILO/World Bank Inventory, Geneva: ILO, 2012Bourgeois, C & Tavan, C (2009) The Revenu de Solidarite Active or Earned Income Supplement: Its Design and Expected Outcomes, Paris: Trésor-Economics No. 61, July 2009: Treasury and Economic Policy Directorate, République FrançaiseChannel 4 (2014) ‘Supermarkets: The Real Price of Cheap Food’, UK’s Channel 4 TV ‘Dispatches’, 4 Aug 2014: http://www.channel4.com/programmes/dispatches/videos/all/supermarkets-the-real-price-of-cheap-food Esping-Andersen, G (1990), The Three Worlds of Welfare Capitalism, Cambridge: PolityEsping-Andersen, G, Hemerijck, A, Myles, J (2003) Why We Need a New Welfare State, Oxford: Oxford University Press

34

References

Esping-Andersen, G and Regini, M (2007), Why DeregulateLabour Markets? Oxford: Oxford University PressETUC (2012b) ‘Le Cri d’Alarme des Syndicats Européens sur La Crise Economique’, 16 June 2012ETUC (2013) ‘ETUC Position on the Social Dimension of the European Union Brussels’: European Trade Union Confederation, 23rd April 2013 Ewing, K (2005) The Function of Trade Unions ILJ 34(1) 1-22IDS (2014) ‘Average Earnings Figures Show Anaemic Growth’,

Income Data Services, July 2014IER (2013) Reconstruction after the Crisis: A Manifesto for

Collective Bargaining (Hendy, J and Ewing, K), Liverpool: Institute of Employment Rights, 2013

35

References

IFS (2013) ‘Workers Kept their Jobs but One Third Faced Nominal Wage Freezes or Cuts’, London: Institute of Fiscal StudiesILO (2012/13) Global Wage Report 2012-13 Wages & Equitable

Growth, Geneva: Dec 2012ILO (2014) World Social Protection Report 2014-15, Geneva:

International Labour Organisation Islam, F (2013) ‘Wonga: big profits as well as high interest rates:

Exploiting the low-paid, financially vulnerable? A buffer for cash-short young, low-paid workers..?’ Channel 4 News, 3 September 2013

Kelly, L (2014) ‘UK Housing Benefit Bill will Soar to £25bn by 2017’, The Guardian, 24 April 2014

Korda, M (2013) The Role of International Social Security Standards: An In-Depth Study through the Case of Greece (Vol 32, Social Europe Series), Cambridge: Intersentia

36

References

Kerr, A (2013) The Trade Union and Industrial Relations Acts(Ireland), Dublin: Thomson Round Hall, 4th EdKerr, A & Whyte, G (2003) Trade Union Law in Ireland, London & Dublin: Butterworths Koukiadaki and Kretsos (2012) ‘Opening Pandora’s Box: TheSovereign Debt Crisis and Labour Market Regulation in Greece’, Industrial Law Journal 41 (3): 276-304Mai, Verena Maria (2013) The Capacity of Welfare Regimesto Absorb Macro-economic Shocks: National Differences in the Development of Unemployment, Poverty and the Distribution of Income in the Aftermath of the Financial Crisis2008 (Sweden, Austria, Spain), Hamburg: Anchor PublishingMeyer, H (2014) ‘How the German Minimum Wage andInvestment Could Help the Eurozone’, Social EuropeJournal, 30 January 2014

37

References

38

Pissarides, P (2014) Social Europe in A Climate of Austerity,Eurofound Conference, Athens 23rd June 2014, Social EuropeJournal (June 2014)Puttick, K (2011) ‘Paying their Way? Contesting‘Residence’, Self-sufficiency and Economic InactivityBarriers to EEA Nationals’ Benefits: Proportionality andDiscrimination’, Journal of Immigration, Asylum &Nationality Law 25(3), 280–292.Puttick, K (2012a), ‘21st Century Welfare and theWage-Work-Welfare Bargain’, Industrial LawJournal, 41 (1) 122-131Puttick, K (2012b), ‘21st Century Welfare and UniversalCredit: Reconstructing the Wage-Work-WelfareBargain’, Industrial Law Journal, 41 (2) 236-249

References

39

Puttick, K (2015) ‘EEA Workers’ Free Movement and Social Rights after Dano and St Prix: Is a Pandora’s Box of New Economic Integration and ‘Contribution’ Requirements Opening? Journal of Social Welfare & Family Law 2015 (2)Resolution Foundation (2013a) Low Pay Britain, LondonWhittaker, M & Hurrell, A and Resolution Foundation Resolution Foundation (2013b) Fifteen Years Later ADiscussion Paper on the Future of the UK National Minimum Wage and Low Pay CommissionSinzheimer, H (1927) ‘Das Wesen des Arbeitsrechts’ in H.Sinzheimer (ed) Arbeitsrecht und Rechtssoziologie’, Vol 1(Frankfurt aM: Europäische Verlagsanstalt, 1976)Social Mobility & Child Poverty Commission (2013) State of the Nation 2013: Social Mobility and Child Poverty in GreatBritain, London: SM & CPC, 2013

References

Steiner and Wakolbinger (2010), ‘Wage Subsidies, Work Incentives and the Reform of the Austrian Welfare System’, Free University of Berlin, School of Business & Economics, Discussion Paper (2010/19)Sunstein, C (2006) The Second Bill of Rights: FDR's Unfinished Revolution And Why We Need It More Than Ever, New York: Basic Books/PerseusTUC, 2013 ‘Bring Back Wages Councils to Tackle Living Standards Crisis’ (TUC General Secretary, Frances O’Grady at the TUC conference Strong Unions: Turning the Tide: TUC Press Release 8th March 2013)Vlandas, T (2013) ‘The Politics of In-Work Benefits: The Case of the ‘Active Income of Solidarity’ in France’, French Politics 11, 117–142Weiss, M (2013) ‘Reinventing Labour Law?’ in Davidov, G & Langille, B The Idea of Labour Law, Oxford: Oxford University Press, 2013

40

References

Legislation, Conventions, etcCharter of Fundamental Rights of the European Union: http://ec.europa.eu/justice/fundamental-rights/charter/index_en.htm (accessed 13 Aug 2014)What is the EU Doing to Implement the Charter? http://ec.europa.eu/justice/fundamental-rights/charter/implementation/index_en.htm (accessed 13 Aug 2014)Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) http://conventions.coe.int/treaty/en/treaties/html/005.htm (accessed 13 Aug 2014)Opinion of the Court on Draft Protocol No. 15 to the European Convention on Human Rights Adopted on 6 February 2013 (Margin of Appreciation, Subsidiarity, etc)

41

References

Directive 2004/38 (on the right of the citizens of the Union and their family members to move and reside freely within the territory of the Member States)ILO, 1952 Social Security (Minimum Standards) Convention, 1952 (No. 102)ILO 2012 Recommendation concerning National Floors of Social Protection 2012 (No. 202)UN Migrants’ Rights Convention (1990) UN International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families: Adopted by General Assembly Resolution 45/158 18 December 1990

42

References

CasesAWB Case (2014) Agricultural Sector (Wales) Bill: Reference by the Attorney General for England and Wales [2014] UKSC 43 (UK Supreme Court)Dano v Leipzig Center (C-333/13) (2014) 158(44) SJLB 37, 11 November 2014, Court of Justice of the EU, Grand ChamberDocherty & Jones (2013 ) Docherty and Jones v SW Global Resourcing Ltd [2013] CSIH 72: http://www.bailii.org/scot/cases/ScotCS/2013/2013CSIH72.html

McGowan & Others v Labour Court Ireland & Others [2013] IESC 21 (Supreme Court, Ireland)St Prix (2014) Jessy St Prix v Secretary of State for Work and Pensions, Case C-507/12, 19th June 2014, Court of Justice of the European Union (on referral from the UK Supreme Court [2013] 1 All ER 752)

43