Working Paper: NBER ID: w3167
Authors: Richard Freeman; Jeffrey Pelletier
Abstract: The unionized share of the work force changed markedly in the United Kingdom between the 1970s and 1980s. In the 1970s density rose steadily, making the United Kingdom the most heavily organized large OECD country. In the 1980s, by contrast, density fell by 1.4 percentage points per annum -- a faster drop than in the rapidly de-unionizing U.S. or in Japan. What explains this turnaround - the severe recession of the 1980s? Shifts in the composition of employment from unionized manufacturing to services? The Thatcher government's industrial relations legislation? In this paper we investigate these questions with a quantitative analysis of 1945-1986 changes in British union density. In contrast to studies that concentrate on cyclical determinants of unionism (Bain and Elshiekh, Carruth and Disney, Booth (1983)) we focus on industrial relations legislation. We develop an index of the favorableness of labor laws to unionism and relate it to changes in density in time series regressions that control for inflation, unemployment, and the manufacturing share of employment, among other variables. As a further test, we develop an analogous labor law index for Ireland, whose industrial relations system is similar to the U.K.'s and which experienced a similar severe 1980s recession but which did not pass new laws to weaken unions, and contrast changes in density between the countries with differences in industrial relations law. Our major finding is that the Thatcher government's labor laws caused much of the 1980s fall in British union density. We present the evidence for this claim in three stages. Section 1 lays out the facts of changing union density in the U.K. and Ireland and examines structural explanations of the U.K. changes. Section 2 discusses the 1980s U.K. labor laws and develops an index of their likely impact on unionism. Section 3 presents our econometric analysis of the U.K. time series data.
Keywords: union density; industrial relations; labor laws; UK; Thatcher government
JEL Codes: J51; J52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Thatcher government's labor laws (E65) | decline in British union density (J58) |
| structural changes in the economy (L16) | decline in British union density (J58) |
| severe recession (F44) | decline in British union density (J58) |
| labor laws (J88) | changes in union density (J50) |
| Thatcher government's labor laws (E65) | changes in union density (J50) |