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It baffles me when people complain that the UK opposition Labor Party under Sir Keir Starmer is bland. When it comes to the labor market at least, the party’s plans are more radical than many realize, even after recent watered-down measures. One example is the commitment to launch sectoral collective bargaining: a system common across the continent but which would represent a sea change in the way the UK economy works.
Labor was at least partly inspired by the New Zealand Labor government, which introduced the so-called Fair Pay Deal late last year. New Zealand’s labor market has similar strengths and weaknesses to the UK: it is very flexible and tends to maintain high employment rates, but productivity and wage growth are generally weaker. The FPA is the solution proposed by the New Zealand Government. The idea is to get employers and unions to sit down and negotiate minimum wages and conditions for different sectors or occupations.
New Zealand Council of Trade Unions policy director Craig Renney said it hoped to persuade employers to compete on “product innovation” or “quality” rather than taking the “lower route” of lowering labor costs. “If I look at countries that have sectoral agreements (like Germany, Denmark, Sweden) – they have industrial peace and higher productivity levels,” he said.
But Rainey may never know if he was right. New Zealand’s employers’ associations are not receptive to the idea and the country’s opposition parties have pledged to scrap the policy if they topple the Labor government at next month’s election, which polls suggest is possible.
The British Labor Party appears to have learned its lesson. It now plans to focus on just one area – social care – if it wins next year’s election. The plan is to get the system running smoothly so that results can be delivered before the country goes to the polls again.
Even this narrowed target will be a huge challenge. When I spoke to David Hopper, a solicitor at Lewis Silkin who specializes in industrial relations, he rattled off a series of questions that needed to be answered. How will employers in the sector coordinate themselves before sitting down with unions? There are likely to be competing interests among different employers, particularly between the largest and smallest employers. What mechanisms will be in place if the parties cannot reach agreement? How does the agreement apply to companies that don’t want to participate? Who will enforce it and how?
Perhaps most importantly: If the agreement succeeds in raising low wages in the industry and improving working conditions, who will pay the higher labor costs?this fundamental problem In social care, government funding is insufficient. The Fair Pay Agreement is likely to ensure that any additional funds are spent on improving working conditions rather than improving profit margins, but it cannot magically make those additional funds exist.
That said, I think it’s a worthwhile experiment. Partly because I think improvements to the low pay, poor training and zero-hours contracts in social care will benefit both staff and the people they care for.
This type of negotiation also has benefits for employers. In Sweden, which has a long-standing system of sectoral collective bargaining, Matthias Dahl of the employers’ body of the Confederation of Swedish Enterprise believes it is better for companies to negotiate pay and conditions with unions than to be regulated by employment law. “We’ve become more flexible – we can change regulations faster than the law. We can renegotiate every third year – which is much better from a business perspective,” he said.
More ambitiously, it could put the UK on the path to a more mature industrial relations system, in which employers and unions see each other as bargaining partners rather than adversaries. In many European economies, such as Sweden, constructive industrial relations have become the norm. Of course, these countries have very different histories and traditions. It’s a long way from here to there for the UK. But that’s no reason not to take the first step.
Some worry that empowering unions in this way will lead to more conflict, but Dahl believes the opposite is true. “The worst thing from an employer’s perspective is that the unions are small and weak,” he said. “That puts pressure on unions. That’s when they might try to attract members by burning tires and screaming.”
sarah.oconnor@ft.com
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