THE STATE SUBSIDY THEORY OF STRIKES: AN EXAMINATION OF STATISTICAL DATA FOR THE PERIOD 1956–1970*
| Author | W. E. J. McCarthy,J. W. Durcan |
| Published date | 01 March 1974 |
| Date | 01 March 1974 |
| DOI | http://doi.org/10.1111/j.1467-8543.1974.tb00002.x |
THE STATE SUBSIDY THEORY
OF
STRIKES:
AN
EXAMINATION OF STATISTICAL DATA FOR
THE PERIOD 1956-1 970*
J.
W.
DuRcANt
AND
W.
E.
J.
MCCARTHYS
THE
AIMS
OF
THE
STUDY
THIS
article is concerned with some of the evidence for one of the most
widely held and frequently expressed theories of industrial unrest-the
‘state subsidy’ theory of strikes. Holders of all forms of this theory assume a
positive relationship between payments to strikers and their families
(in the form of tax rebates, family allowances and supplementary social
security benefits), and the extent and duration of stoppages of work. In its
general form the theory implies that recent increases in the volume and
level of state payments to some extent ‘explain’ general changes in the
British strike pattern-i.e. increases in the frequency, size and duration of
strikes.
More often than not the causal connections involved in the theory are
implied rather than stated; but this is not always the case. For example,
the Labour Correspondent of the
Sunday Times
has formulated an ex-
tremely general version of the theory in the following terms
:
‘The changing
economic pattern of strike activity which has gone almost unnoticed for
a
decade
is
the direct outcome of growing welfare benefits, wages and
taxation.’
For the most part subscribers to the theory in this form go on
to
use it
as a justification for advocating a general reduction or total abolition
of
‘subsidies’ of this sort
so
that strike activity may be reduced. In this respect
a
recent edition of the
Engineering Employers’ Federation News
is typical. In
an article entitled ‘State subsidies for strikers’ they commented on the
news that the Government was about to undertake a review of present
arrangements for state payments as follows: ‘It is hoped that the review,
when it has been completed, will result in effective measures to plug this
gap in the social security system. It is as illogical as it is unsound. The
State, in the matter of strikes,
is
generous to a fault.’a
One of the main aims of this article is to try to throw some light on the
justifiability and plausibility of statements of this kind.
To
do this we must
*
This
study was financed
out
of
a grant to Nuffield College by the Trustees
of
the kerhulme
Foundation.
Our
thanks
are
due to the Trustees and the Warden and
Fellows
of
Nuffield College.
t
Research Officer, Nuffield College.
$
Fellow
of
Nuffield College and
the
Oxford Management Centre. University Lecturer
in
Industrial Relations.
Sunday
Times,
2
November
1969.
a
Engincning Employns’
Federation
News,
Vol.
4
No.
8,
April
1973, p.
1.
26
THE
STATE
SUBSIDY
THEORY
OF
STRIKES
27
first formulate the state subsidy theory in a more precise form than it is
usually advanced by its advocates. This is the task of the next section of the
article.
THE
THEORY
DEFINED
Three related assumptions are involved in the popular version of the
state subsidy theory. First, a connection is assumed between strike
propensity, strike duration and the loss of income occasioned by strike
activity.
(Ceteris
paribus
the more wages workers forgo by strike action the
more they are under pressure to reach a settlement.) Second, any additional
income that accrues to strikers or their families as a result of going on
strike reduces this effect (e.g. if the length of time for which income is
available increases strikes will tend to last longer). Third, in recent years,
tax remissions and supplementary benefits to strikers have moved more or
less in line with increases in strike activity (i.e. there has been an increase
in the relative level of state payments and this has had the effect of
encouraging workers to come out and remain on strike at the expense of
the state).
Of course the positive relationship the theory assumes between state
payments and strikes does not need to be of
a
particular kind-e.g. linear
rather than non-linear. It is not necessary to rule out the possibility of
lags in adjustment. Certainly, on
a
priori
grounds, we did not think we
were justified in ruling out
any
of these possibilities.
What did seem reasonable was to posit
a
relationship that could not
be measured in terms
of
crude cash flows. Thus we sought to measure
variations in the relative value of state payments to strikers in real terms-
i.e. as
a
proportion of
norma2
net
disposable ea~nings.~
Potential strike
income must be evaluated in respect of how far it enables the household
to maintain consumption patterns.
As
a proxy for this process we have
compared state payments to normal net disposable earnings to see how
far there has been a relative change in the former. If no change is revealed
this may be taken as evidence that the strike decision has not been
affected. In what follows, therefore, the term
value
ofstate
payments
must be
understood to refer to relative values expressed as a percentage of
normal
disposable income,
in such a way that those recorded are those that could
have affected given strike decisions.
By
employing this definition we have been able to introduce a further
sophistication not often stressed by adherents of the popular version of the
theory. Since supplementary benefits are flat rate payments, and tax
rebates remain constant in size within a wide band of earnings, the effect
of increases
is
proportionately greater amongst the lower paid. It follows
that in looking for a validation of the state subsidy theory one should seek
Defined
as
average earnings
less
tax
and national insurance contributions. The increase in
family allowances
in
1968
together with the introduction of the ‘clawback’ scheme made it
impossible to exclude family allowances from the analysis,
so
family allowances are included
in
the series
of
both normal net dispable income
and
the value
of
state payments.
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