The Effect of Unions on Productivity Growth, Investment and Employment: A Report on some Recent Work
| Published date | 01 November 1990 |
| Date | 01 November 1990 |
| Author | Sushil Wadhwani |
| DOI | http://doi.org/10.1111/j.1467-8543.1990.tb01001.x |
British
Journal
of
Industrial
Relations
28:3
November
1990 0007-1080
$3.00
The Effect
of
Unions on Productivity
Growth, Investment and Employment:
A
Report on some Recent
Work
Sushi]
Wadh
wani
*
Final version accepted 21 January 1990
ABSTRACT
Using t wo British microeconomic data sets, this paper reports the follo wing.
(I)
Union firms experienced faster productivity growth during
1980-4,
but there
was
no
difference in performance in
1975-9,
or
19854.
So
unions do not
necessarily reduce productivity growth.
It
is
also unlikely that the above pattern
can be explained by changes in union legislation.
(2)
Unionism appears to have
nosign@cant effect
on
investment, once one allows for the eflects
of
differential
productivity growth.
(3)
Wages
in
union and non-union firms are equally
responsive to changes
in
the capital-labour ratio.
(4)
Contrary to what is often
alleged, unionism
per se
does
not
reduce employment growth. Instead, the
negative correlation observed in
19804
probably arises from
a
significant
reform of working practices in unionized firms during
1980-4.
1.
INTRODUCTION
Unions have received rather bad press recently. In the UK, the present
government has asserted that
‘Recent research shows that trade unions have used their power in ways which
adversely affected labour costs, productivity and jobs. Managements who recog-
nized and negotiated with trade unions were more likely to suffer
job
losses than
managements which did not. In general, trade unions tended to push up the
earnings
of
people they represented while blocking the improvements in produc-
tivity which are needed to pay for these higher earnings.’ (White Paper
on
Employment
for
the
1990s,
Cm.540)
A
recent survey
of
academic research in the USA contended that unions
inhibited investment and reduced productivity growth (see Addison and
Hirsch 1989). These authors also attempted
to
cast doubt on work (e.g.
Freeman and Medoff 1984) that argues that unions might actually increase the
level
of
productivity.
Centre
for
Labour
Economics. London School
of
Economics
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