Working Paper: CEPR ID: DP316
Authors: Charles Bean; James Symons
Abstract: We argue that the 1970s were characterized by attempts to maintain a cooperative, low unemployment equilibrium in the face of considerable union power, through use of incomes policies and neo-corporatist machinery. The 1980s saw a shift away from this, towards direct measures to limit union power. This, together with the adoption of tight macroeconomic policies, explains the initial rise in unemployment. The reduction in union power also helps to explain the acceleration in productivity growth. The craft nature of much of the British union movement has led to a multiplication of bargaining units wihin firms. Bargaining in isolation a union can perceive overmanning and other restrictive practices as being in its intrests, resulting in low wages and productivity. A fall in union power results in a reduction in these inefficiencies and leads not only to a rise in productivity but also in wages.
Keywords: Mrs Thatcher; unemployment; insiders/outsiders; productivity
JEL Codes: 134; 824; 825
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reduction in union power (J58) | increase in unemployment (J64) |
| prolonged unemployment (J64) | negative impact on labor market reintegration (J68) |
| reduction in union power (J58) | increase in productivity (O49) |
| fragmentation of bargaining units (J52) | productivity improvements (O49) |