UK report on social dialogue in wage setting

Katsaroumpas, Ioannis (2019) UK report on social dialogue in wage setting. Working Paper. Ethos Consortium.

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This national report examines the use of social dialogue in wage setting in the UK. It forms part of a broader comparative investigation on social dialogue as a form of institutional resistance to injustice in six European countries. The report offers an overview of the trajectory before and after the 2008 economic crisis and a justice-based evaluation of two social dialogue mechanisms: collective bargaining and the tripartite Low Pay Commission (LPC) advising the Government on minimum wage rates.

The 2008 social dialogue landscape is found to be the result of two contrasting trends. On the one hand, since the 1980s, a process of rapid de-collectivisation and de-centralisation of employment relations has significantly weakened and fragmented collective regulation. This process was driven, or at least facilitated, by the dismantling of the supporting institutional apparatus. The analysis discusses the overall decline of collective bargaining coverage and unionisation (especially in the private sector) and the abolition in 1992 of the tripartite Wages Councils (with the exception of the Agricultural Wage Board) which previously set legally binding sectoral minima. On the other hand, since 1998, the UK has a Government-led statutory minimum wage regime where social partners are assigned a consultative role through membership of the tripartite LPC.

This report adds two sets of findings to existing literature. Firstly, it demonstrates that while not as dramatic as in other countries, post-crisis developments reinforced and deepened pre-crisis trends (Part 3). This effect is manifest in the continuation of the decline in collective bargaining coverage and unionisation as well as the abolition of the last national-level Wages Council in 2013 (Agricultural Wages Board). These developments are complemented by new legal reforms placing additional constraints on unions’ already heavily circumscribed ability to act as effective collective bargaining and political actors. However, the minimum wage has gained strength in terms of value and legitimacy in recent years.

The second set of findings is evaluative. Part 4 makes an assessment of two social dialogue mechanisms (LPC and collective bargaining) against a suggested evaluative framework comprising five dimensions: autonomy, inclusiveness (encompassing, equal and representative inclusion), effectiveness (meaningfulness, sustainability, distributive impact), transparency (justification and accessibility of reasoning) and justice-sensitivity (whether justice considerations enter explicitly or implicitly in the process). This part draws on desk research and interviews with high-level social dialogue participants (three sitting Low Pay Commissioners, four trade union officers and a policy officer of a sectoral employer organisation).

Concerning autonomy, the LPC combines independence with some forms of indirect state influence, most notably through the determination of its remit (and by extension the substantive factors to be taken into account in minimum wage rate determination). In relation to inclusiveness, the encompassing nature of the process is facilitated by the LPC’s tripartite composition and its inclusive evidence base, drawn from research, oral and written submissions from different stakeholders and ‘on-site visits’ where Commissioners meet low-paid workers and employers. However, the process evinces deficits in terms of representativity, at least in the classic sense of the 5 term. This is because the LPC differs from ‘mandate-based’ collective bargaining where negotiators act on behalf of their organisations and their actions and mandate are subject to internal democratic mechanisms of scrutiny, debate and accountability. The analysis highlights the formally equal status of all parties within the Commission and its evidence-based process as a unique mix of ‘deliberation’ (in the sense of collaboration, preference flexibility and openness) and ‘negotiation’ relying on persuasion rather than threats of sanctions. While the report reviews two criticisms of evidence-based approaches (de-politicisation and the biased nature of evidence sources), it suggests that the LPC offers ways to address them. The LPC process is effective in that it is meaningful, sustained by the positive feedback on its outcomes and has a positive record on reducing extremely low-paid work. The evidence-based nature of the process means that it is not explicitly justice-sensitive as it is more dominated by economic considerations. However, the whole exercise can itself be seen as the practical realisation of a justice imperative. Finally, the transparency of the process is secured by the accessibility and wellreasoned nature of the Commission’s annual reports.

By contrast, collective bargaining is a more autonomous form of social dialogue, though its precise effect is highly conditioned by state rules, economic conditions and the legal framework. It offers an encompassing ‘mandate-based’ form of inclusion of employers and employees through negotiators acting on behalf of their respective organisations. However, the analysis highlights two forms of potential exclusions associated with collective bargaining: (i) exclusion of some workers from the scope of regulation and (ii) exclusion in the actual representation of non-union members. In collective bargaining, the equality of inclusion between parties is more power-sensitive than in the LPC, as it is contingent on labour market circumstances but also underpinned by the possibility of industrial action. As a result, collective bargaining may give the appearance of a ‘struggle’ that is ‘owned’ by the workers to a greater extent than the LPC. The report draws attention to the different effects of centralised, mainly sectoral, and firm-level negotiations. Sectoral negotiations tend to strengthen the position of workers by aggregating power among all employers and workers. If they constitute the only level of social dialogue, however, they may come at the cost of workers’ direct participation. While the collective bargaining process leads to a more equal distribution by potentially affecting more workers than the statutory minimum wage, its sustainability is more precarious because of the higher possibility of deadlock with detrimental consequences for workers eventually exposed to individual negotiations. Justice-sensitivity and transparency are not required for collective agreements but the process itself, like the LPC, may be considered as a practical realisation of justice. Transparency may be achieved by internal democracy mechanisms or, in the case of sectoral agreements, because of the wide-ranging effects of the regulation for the national economy.

The final section of this part considers the interplay between these two social regulatory mechanisms by identifying positive and negative complementarities between minimum wages and collective bargaining and between various levels of collective bargaining.

Item Type: Reports and working papers (Working Paper)
Keywords: Low Pay Commission, collective bargaining, justice, minimum wage, wage-setting, UK
Schools and Departments: School of Law, Politics and Sociology > Law
Depositing User: Ioannis Katsaroumpas
Date Deposited: 27 Mar 2019 09:18
Last Modified: 01 Feb 2021 16:28

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