05 May 2017

By John Hendy QC and Professor Keith Ewing, Chair and President of the IER

The Labour Party has identified the restoration of Sectoral Collective Bargaining as a key element in its proposals for new laws at work. Our chair John Hendy QC and President Professor Keith Ewing explain how sectoral collective bargaining workers.

This is Part One of a two-part series - see Part Two for the purposes and benefits of sectoral collective bargaining

What is Sectoral Collective Bargaining?

Collective bargaining is the process of negotiation between a trade union (or several) on the one hand and an employer (or several) on the other to try to agree the terms and conditions for the workers concerned.

The tradition is that the collective agreement which results is applied to all the workers concerned, whether or not they are members of the union. Collective bargaining can take place at the level of the workplace, or the enterprise (which may be several workplaces) or it might be in respect of several employers in a district.

Otherwise, collective bargaining might take place for an entire industry nationally, covering all the workers and all the employers in it. This, latter, is what is meant by Sectoral Collective Bargaining.

What is the Purpose of Sectoral Collective Bargaining?

The Labour Party’s proposal for Sectoral Collective Bargaining was adopted from the Manifesto for Labour Law written by 14 of the UK's leading experts and published by the Institute of Employment Rights in 2016.

The rationale is that the terms and conditions of work are best set by negotiation between the representatives of those who will pay and those who will receive the wages, rather than being left to the market or to minimum terms set by the State and enforceable only by the courts and tribunals.

A sectoral collective agreement will apply to all workers in the sector in question, and will regulate a wide range of working conditions, from pay to pensions, and from equal opportunities and dismissal procedures.

Sectoral collective bargaining does not remove the need for minimum standards set down in legislation but builds upon these statutory standards and ensures that minimum rights do not becomethe maximum.

How Could a System of Sectoral Collective Bargaining be Implemented?

Schemes of this kind have operated in this country in the past, delivering very high levels of collective bargaining coverage, and they operate also in many other developed countries.

The IER proposal is for the establishment of a Sectoral Employment Commission (SEC) for each industry, to be established by negotiation between the two sides of industry under the oversight of the (proposed new) Ministry of Labour to represent the interests of workers in government.

These were previously called Joint Industrial Councils or Wages Councils before they were largely dismantled, or abolished in the 1980s. Where negotiations fail to establish an SEC, one will be set up by the Ministry of Labour itself, which will add its own appointed members to break any future deadlock in negotiation.

The SEC will set minimum terms and conditions for the industry. It is expected that enterprise-based collective agreements improving on the sectoral terms will follow. The SEC may also negotiate other issues in the industry such as pensions, apprenticeships, abolition of zero-hours contracts and the like. Minimum pay rates, travel allowances, special rates for specific jobs, enhanced rates for overtime, unsocial hours, night-work and so on will be matters for the SEC.

The terms and conditions set would apply to all employers and workers in the industry. They would be enforceable by the industrial parties through the machinery in the agreement setting them up, by Labour Inspectors and by workers and employers using Labour Courts.

Conclusion

This proposal is a refutation of the illogical neo-liberal dogma that unions constitute a distortion of a free labour market in which it is said to be good to drive wages down to the lowest sustainable level. Trade unions, collective bargaining and fundamental rights at work are all unacceptable to the advocates of this creed.

What is at issue here is an ideological conflict not just about the role of trade unions but also about the role of the State in regulating the economy to produce just outcomes. A progressive economic strategy will require a strong State presence in regulating wage determination and wage levels.

The restoration of collective bargaining is crucial in the UK because collective bargaining in the UK has suffered a virtual collapse. In 1979 82% of workers had the benefit of collectively bargained terms and conditions. Today only 20% have that privilege (against a Europe wide average of over 60%). For the rest, they are at the mercy of employers and the so-called 'labour market'.

The result of the collapse in collective bargaining in the UK has been stagnant real wages for all but the richest 1%. This has hugely increased inequality. The collapse of collective bargaining protection has also meant: pensions cut, terms and conditions slashed, insecurity escalated, new forms of engagement such as zero-hours contracts and false self-employment have mushroomed, and productivity has slumped.

Our next post will address the benefits and purposes of collective bargaining. In the meantime, for further details see IER, A Manifesto for Labour Law (2016), and for further explanation our youtube video, Collective Bargaining – What is it Good For?.

This is Part One of a two-part series - see Part Two for the purposes and benefits of sectoral collective bargaining