What Has Happened to the Union Wage Differential in Britain in the 1990s?
| DOI | http://doi.org/10.1111/1468-0084.00114 |
| Published date | 01 February 1999 |
| Date | 01 February 1999 |
| Author | Andrew Hildreth |
WHAT HAS HAPPENED TO THE UNION WAGE
DIFFERENTIAL IN BRITAIN IN THE 1990s?
Andrew Hildrethy
I. INTRODUCTION: UNIONS IN DECLINE
In the last 15 years there has been an unabated decline in union recognition
and union membership in Great Britain. Part of this decline can be
attributed to legislative restrictions on the power of trade unions. Starting
with the 1980 Employment Act, trade union power was steadily eroded over
the following decade, culminating with the 1990 Employment Act that
effectively outlawed the `closed shop'. As well as suffering from legislative
restrictions trade unions have been losing members on their own account.
Unions have less of a role to play in the workplace and in some instances
have moved to become worker organisations offering private member
bene®ts (Booth, 1991; Willman, Morris, and Aston, 1993).
While there has not been any subsequent legislation on trade union power,
a study of what has happened to the union wage differential during the ®rst
half of the 1990's will indicate what continuing effects the legislation and
the noted secular decline in union association have been. A recent study by
Geroski, Gregg and Desjonqueres (1994) on trade union decline during the
1990± 3 recession showed that union recognition among quoted companies
had declined by approximately 2 and a half percentage points. As the union
wage differential measures the wage premium that union association brings
relative to non-association the union wage differential can be taken as a
proxy for the extent of union power. This study examines a representative
set of workers in the private sector, over the 1991± 95 time period, to see if
the union wage differential has remained unaltered.
Some basic ®gures on union recognition and union membership reveal
the extent of the decline in union representation in the British private sector
workforce. Disney, Gosling and Machin (1996) give ®gures from WIRS
(Workplace Industrial Relations Survey) which show that, in 1980, 61
percent of all private sector establishments recognised manual unions and
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 61, 1 (1999)
0305-9049
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#Blackwell Publishers Ltd, 1999. Published by Blackwell Publishers, 108 Cowley Road, Oxford
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yI am grateful to Alison Booth (in particular), Tim Hatton, Fumio Ohtake, David Card (for
pointing out some missing references) and seminar participants at the University of Essex for
comments on an earlier version. An anonymous referee gave valuable advice that greatly improved
the exposition of the paper. All data, programs, and results alluded to in the text are available on
request. The BHPS data are available from the ESRC Data Archive at the Universityof Essex.
50 percent recognised non-manual unions. The respective ®gures for 1990
were 48 percent and 43 percent. Union membership has shown a similar
decline. In 1980 the proportion of workers in the private sector that were
union members was 50 percent; by 1993, this had fallen to 36 percent.1If
union wage differentials are viewed as an indicator of the degree of strength
that the trade unions have, then examining how the differential has altered
over the last 5 years, for the same set of private sector workers, will indicate
if union bargaining power has changed. Other studies (using workplace
surveys) have shown that the union wage differential has remained stable
over the 1980's (Stewart, 1991, 1995).2Although these studies have also
stressed the importance of product market power and trade union conces-
sions on effort in creating rents to share, the union wage effect had remained
unchanged.
The decline in union power has also occurred during a period of rising
wage inequality (Machin, 1997). Machin (1997) notes that the decline in
union power did contribute to rising wage inequality in the 1980's. This
paper also examines what has happened to wage inequality and the role of
unions within any change that has occurred.
Any change in the union wage differential that might be detected might
not affect all groups in the private sector workforce to the same degree.
Initially we separate the sample into male and female workers. Studies such
as Nickell (1977) and Main and Reilly (1992) have questioned whether or
not union presence at the workplace has a different effect on women than on
men. We then disaggregate the data into various groups to examine further
which sub-sections of the private sector workforce may have been affected.
The disaggregated sectors are production and service industries, blue and
white collar jobs, and size of workplace. The disaggregation into various
sectors was motivated by a variety of reasons. Disaggregation by industrial
sector and type of job were motivated by trends in recent of®cial ®gures.
Figures from the Employment Gazette and Labour Market Trends show that
union membership declined in the production sector more rapidly than the
service sector during the 1990's. Union density in the production and
service sectors was 39 and 37 percent respectively for 1991, and 33 and 35
percent respectively for 1995. Union density also changed by type of
occupation. In blue collar jobs, union density fell from 38 percent in 1991
to 34 percent in 1995. The corresponding ®gures for white collar jobs were
35 and 33 percent. Disaggregation by size of workplace was motivated by
recent evidence (Andrews et al., 1995) that the number of employees at an
establishment has a signi®cant impact on the union wage effect. Further,
1See Corocan and Wareing (1994) for details of a special report from the LFS on union
recognition. Although, in 1993, 40.4 percent of the private sector workforcewere union members,
only 36% were members at a workplace where the union was recognised. Union recognition (in
one form or other), according to their ®gures, covered 49% of the private sector workforce.
2Also see Coles and Hildreth (1996) for an examination of the effects of the 1980 and 1982
Employment Acts on union wage agreements.
6BULLETIN
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