The economic context of labour law reform and union

organisation, 1906-2006

Simon Deakin and Frank Wilkinson

IER, 10 May 2006

The economic context of laws supporting collective bargaining

• Union growth and labour law reform over the economic cycle

• The nature and limits of collective laissez faire• Responses to the poor law and casualisation of labour in

the early twentieth century: enforcement of the ‘common rule’ through collective bargaining and the right to strike, social insurance and legal enactment; tension between Fabian stress on public intervention, and self-organisation under the auspices of the Trade Disputes Act 1906?

• Today’s analogues of the 1900s?: universal labour standards, solidarity, and social rights

Collective laissez faire

• Priority given to the autonomy of the collective bargaining system: exclusion of the courts by the 1875 and 1906 ‘immunities’ legislation

• No universal model of employee representation and no guarantee of basic social protections

• Regulatory legislation confined to a subsidiary role: ‘substitute’ for collective bargaining in underorganised trades and occupations

• Absence of constitutional settlement for labour: ‘no Carta del lavoro or Charte de travail’

• Consequences: vulnerability of collective bargaining to economic shocks and shifts of political sentiment

Figure 1. Trend in Home Costs and Import Prices: (9 year moving average)

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Figure 3. Rates of unemployment: 1895 to 2000.

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Figure 4. Trade union members and trade union density

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TU Members (100,000s) TU density (per cent)

 

Figure 5. All strikes and non-mining strikes, 1895 to 2000

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The problem of disorganisation in the 1890s

• ‘all unskilled labourers being as it were in possible competition with each other, the most incapable in body of feeble in character (and these include the many who have once belonged to a skilled trade but from helplessness or incompetence or misfortune have been unable to maintain themselves in it) get sifted down, and crowd into certain ill-paid occupations at the bottom of the scale, in which their mere superfluity of numbers renders employment irregular and precarious. Lower still below this class of the casually employed and largely recruited from it, comes that of the unemployable’ (Royal Commission, 1894)

The debate over legal enforcement of c.a.s

• ‘It would do more harm than good either to invest voluntary boards with legal powers, or to establish rivals to them in the shape of other boards founded on a statutory basis, and having a more or less public and official character ... many of the evils to which our attention has been called are such as cannot be remedied by any legislation, but we may look with confidence to their gradual amendment by natural forces now in operation which tend to substitute a state of industrial peace for one of industrial division and conflict’ (Royal Commission, 1894).

The labour code alternative

• ‘this policy of prescribing minimum conditions, below which no employer is allowed to drive even his most necessitous operatives, has yet been only imperfectly carried out. Factory legislation applies, usually, only to sanitary conditions and, as regards particular classes, to the hours of labour. Even within this limited sphere it is everywhere unsystematic and lop-sided. When any European statesman makes up his mind to grapple seriously with the problem of the ‘sweated trades’ he will have to expand the Factory Acts of his country into a systematic and comprehensive Labour Code, prescribing the minimum conditions under which the community can afford to allow industry to be carried on; and including not merely definite precautions of sanitation and safety, and maximum hours of toil, but also a minimum of weekly earnings’ (Sidney and Beatrice Webb, Industrial Democracy 1897: 767).

Parasitic trades

‘It is doubtful whether there is any more important condition of individual and general well being than the possibility of obtaining an income sufficient to enable those who earn it to secure, at any rate, the necessaries of life. If a trade will not yield such an income to average industrious workers engaged in it, it is a parasite industry, and it is contrary to the general well being that it should continue’ (Select Committee, 1908)

Collective bargaining and the method of legal enactment

• Debate over whether to legislate over working time resolved in favour of ‘voluntary principle’: 1894 Royal Commission Report; implicitly confirmed by TDA 1906

• Failure to develop embryonic health and safety standard set out in s. 28 Factories Act 1896

• Trade boards set low minimum rates in order not to threaten collective bargaining or undermine employer autonomy

The poor law

• The workhouse test for the able-bodied, by ‘establishing a worse state of things for its inmates than is provided by the least eligible employment outside’, not only engenders ‘deliberate cruelty and degradation, thereby manufacturing and hardening the very class it seeks to exterminate’; it also ‘protects and, so to speak, standardizes the worst conditions of commercial employment’ (Sidney and Beatrice Webb, The Public Organisation of the Labour Market, 1909)

The method of social insurance

• Webbs saw union-based social insurance as a device for maintaining the ‘common rule’

• National Insurance Act 1911, s. 86: effect was ‘to maintain union rates so far as Trade Union members are concerned, and to empower other workmen to demand their customary rate’ (Comyns-Carr, 1912)

• Retirement condition: by preventing combination of retirement benefits with wages, social insurance law sought to control the labour supply

Full employment

• ‘the labour market should always be a seller’s market rather than a buyer’s market…’

• ‘…it means that the jobs are at fair wages, of such a kind, and so located that the unemployed men can reasonably be expected to take them; it means, by consequence, that the normal lag between losing one job and finding another will be very short’ (Beveridge, 1945)

‘Disorganisation’ of the labour market in the 1980s and 1990s

• Ending of ‘full employment guarantee’ in macroeconomic policy (1970s, 80s); replacement by goal of raising employment rate (1990s, 2000s)

• Removal of right to solidarity action in the labour market through reforms to strike law

• Erosion of social insurance• Return of casualisation, aka ‘labour flexibility’

The minimum wage as an alternative to collective bargaining?

• Low Pay Commission should act ‘without risking damage to the economy’ and the rate should be ‘manageable to a wide range of business interests’ (LPC 1st. Report, 1998)

• ‘we found no significant impact, positive or negative, of the National Minimum Wage on productivity…the introduction of the National Minimum Wage had not provided a boost to productivity, but neither had it led to a general increase in unit labour costs’(LPC, 4th. Report, 2003)

• Role of wage subsidies in maintaining low incomes: Tax Credits Acts 1999-2002

Pension fund activism as a new method of social insurance?

• 2000: UK pensions law follows US by requiring pension funds to disclose voting strategies on social, ethical and environmental issues: another version of comply or explain

• Myners report on institutional investment and Operating and Financial Review would create information in how companies discharge social and environmental responsibilities; but so far little real progress on this; New Labour government decides to make the OFR voluntary in 2005

Solidarity, union revival, and the economic framework

• What is the role of solidarity in complementing the methods of legal enactment and social insurance?

• The evidence of the economic cycle suggests that union strength in the twentieth century was highly dependent on wider economic conditions being favourable – can a more permanent institutional solution be found to underpin collective labour organisation?