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The UK Labour Market is in Need of Dire Revision

No doubt a product of the dreaded ‘cost of living crisis,’ UK labour markets are in an immense state of flux with strike action manifesting all across the country. With inflation at 10.1%, we can already see multiple professions such as Teachers, nurses & rail workers mobilising over real pay.

This recent turmoil leaves one burning question in my mind. How did it get so bad? One obvious answer is inflation. Unfortunately, the ill-written headline “People need to accept they are poorer,” has taken the Bank of England’s take on our problem out of context. The logic? Increasing import prices have led to ‘second round effects’ whereby costs are carried over from businesses to consumers. However, while this is a technical answer to our question and is still correct, what I aim to look at is a more historical and institutional perspective.

First, let's look at old history - the history of Thatcherism. One cannot look at the industrial conflict of today without reminiscing about the 1980s. This was a period of severe strike action brought upon by a similar spell of high inflation - a direct result of, you guessed it, rising import prices. This exogenous shock, at the time, was a surprising one. Yet, the remedy was equally unexpected. UK labour markets were built on voluntarist principles, meaning that the relations between unions and employers were ones built by free exchange, and by implication, the free market. As such, when Thatcherism hit, it hit unexpectedly. Like a powerful enema, neoliberal doctrine swept through the UK and once Thatcher was done with dismantling the unions, employers found greater power in their directives. The landscape of British industrial relations shifted from a high degree of collectivisation towards one the individual disputes between employer and employee. With this, attitudes towards the employment relationship changed. Before Thatcherism, scholars saw UK industrial relations as Pluralistic, meaning that the employment relationship was one of conflict, which was represented by trade union action. Yet after, this moved towards Unitarism, a philosophy whereby one assumes that employee & employer interests are similar, and one which blames unions for creating conflict - rather than being a representation of it.

Shifting the focus to today, UK labour markets have stayed strangely unitarist. I propose that the reasoning behind this was the development of the low-wage, low-skill economy. After the Thatcher years, the integration of the A8 into the EU helped to boost migration to the UK. Equally, subsequent Labour & Conservative governments introduced legislation that promoted migration, such as flexible working which helped build the low-wage and low-skill sects of the UK labour market. Whilst equally beneficial to higher-skill sects, this decision-making, I believe, contributed to depressing the level of industrial action over the years as disgruntled, domestic labour, was replaced by migrant alternatives. As such, before COVID, UK labour markets were in a state of false ‘Unitarism.’ With the introduction of migrant labour into the UK (which is less likely to unionise), UK trade unions were left with less power compared to employers. Moreover, the introduction of HRM and other employer policies have helped to insofar limit union action as workplace disputes have tended to be solved individually. The pre-COVID period was also one of relatively low inflation, which, is significant as when inflation is stable, workers suffer from money illusion and are less likely to keep track of real wages. Consequently, unions were unable to reflect the inherent conflict of interest of the employment relationship over factors such as pay, working conditions and work-time directives as they had little power, and, workers did not see these as prevalent issues.

However, times have now changed and inflation is a prevailing issue in the eyes of employees. As such, employment relations have clearly moved towards a state of conflict with pay being the primary battleground where the war is fought. This presents us with an interesting result. Post-COVID and Brexit, UK industrial relations are shifting towards increasing employee collective voice and therefore power as the UK can no longer rely on cheap migrant labour due to new migration directives. As such, we may see a recalibration of the UK labour market towards a high-wage, and, high-skill economy. One where we see a revision of where we place labour and worker power against employers and private interest.