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Those who seek to defend capitalism have been having a rough time of late. Despite the UK having a record high employment rate, many people seem to be losing faith in the system.
In a sense this is unsurprising; for too many people, the system isn’t working. While unemployment is low, employment isn’t giving people what it’s supposed to. Wages remain below the pre-crash peak, and most people in poverty are now in a working household. That’s partly due to woefully poor productivity growth, but it’s also about how wealth is shared. Even before the crash, productivity and average pay had decoupled – increases in GDP are no longer benefitting the majority of workers.
Beyond wages, for too many people, work is a miserable experience. We’ve seen a massive rise in insecure forms of work – including zero-hours contracts. Too many people are stuck in low-pay jobs with little chance of progression. And just one in three workers feel able to influence decisions at work. In this context, with millions feeling left behind and lacking a voice at work, it is no surprise that the ‘take back control’ narrative had such resonance during Britain’s EU referendum.
The decline of the union movement is a major factor in explaining the ills of our current labour market. The purpose of a union is to aggregate the power of working people so that they can protect and improve their pay and working conditions. Weaker unions has meant weaker labour power, and this has contributed to rocketing inequality, as workers have been less able to secure a fair share of the wealth that they help generate. In the four decades up to 1979, union membership more than doubled, and the share of national income going to the richest 1% fell by two thirds. Stronger unions made Britain a more equal country. In the nearly four decades since, union membership has fallen by half, and the share of national income going to the top 1% nearly trebled.
Left-wing voices aren’t the only ones raising concerns. The Chief Economist of the Bank of England has recognised that declining union membership has contributed to wage stagnation, and the OECD has shown that falling collective bargaining coverage is associated with rising inequality.
While many advanced economies have seen a weakening of the union movement, the change has been particularly stark in the UK. Since 1979, the proportion of workers who are union members has fallen by half, and the coverage of collective bargaining has fallen by two thirds. What’s more, it’s the workers who could most benefit from membership – low skilled, low paid workers who lack bargaining power in the labour market – who are least likely to join. While most public sector workers are still union members, 13.5% of private sector workers are.
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