pieria.co.uk/articles/would_stronger_labour_unions_resolve_the_uks_current_economic_problems">This is the question posed by Tomas Hirst in the outstanding Pieria magazine. Tomas suggests that if workers were given greater collective bargaining power though stronger unions and greater employee protection in law, companies may react by automating more of their processes to keep a lid on labour costs.
Perhaps. Perhaps companies would also respond by seeking lower-wage countries to locate in*.
There is little doubt that both eventualities – greater automation and a flight to [insert name of country to be demonised for stealing “our” jobs here] – may well happen. Surely they would do so at the bit of the landscape so beloved by economists, the margins. Undoubtedly some companies would respond to higher wages by hiring robots or shipping jobs abroad, but I contend that the effects would be marginal – and offer the following thoughts in support.
Firstly, the sectors of the UK economy with the highest proportions of low-paid workers appear less susceptible to both automation and off-shoring – who knows if we’ll have robots waiting tables, cleaning toilets and providing care for the elderly in the future, but for now it is sectors like retail and hospitality that provide most low-paid employment. You can’t hire waiters in China to serve meals to diners in Britain – not easily anyway. [Bringing in waiters from China, or any other Bloody Foreigners – TMDaily Mail – to do so has its own problems]. It’s hard to see how companies could react to demands for higher wages through automation or outsourcing in these sectors.
Secondly, there already are stronger collective bargaining arrangements in place that haven’t led to levels of automation or outsourcing that are detrimental to living standards – albeit, they are in place in countries like Germany and Denmark. These two countries have interesting approaches to worker engagement in remuneration, and the UK could learn from both. Germany uses wage councils such as those Thomas refers to, even going as far as to have a two-tier company board structure – the adoption of which forms part, whisper it, of Liberal Democrat party policy on workplace democracy. Denmark, as Danish Camdenite Kirsten de Keyser blogs, has such strong worker representation within companies that it can afford to do away with a statutory minimum wage – although this arrangement can, in straightened times, give rise to below-inflation pay rises, Kirsten reminds us that “the average minimum wage for all private and public sector collective bargaining agreements currently stands at 109 kroner per hour (£12.52). In Britain it’s £6.19 – less than half that.” Similar arrangements are in place in the Netherlands and other European countries.
Whilst it is true that Germany recently experienced a period of painfully high unemployment (see chart), the regional distribution of said worklessness (anecdote) and its timing suggest factors other than high wages may be at play – not least given the relatively modest wage increases that have kept a lid on domestic demand, to the detriment of the European economy. Note also how the unemployment rate has fared in the aftermath of the financial crisis, particularly in Germany – I haven’t the time to dig our employment rate stats and earnings data for Germany and Denmark as I did for the UK last week, which would give us a fuller picture.
So I doubt that stronger employee engagement with remuneration would necessarily lead to automation or the loss of jobs to lower-wage countries – just as well given union membership appears to be rising. Given that the lowest paid sectors are also the least unionised and are hard-to-reach for traditional unions, how to achieve that engagement where it matters the most is the key debate – direct workplace democracy appears to be the way forward, as we will discuss at the Social Liberal Forum conference on ownership, democracy and power in Manchester.
* As an aside, I wonder if any readers [Hi Mum!] know economists have calculated where the greater pressure on UK wages comes from, automation or globalisation.
