Trade Unions and Financial Performance

This paper investigates the relationship between trade unions and financial performance using British establishment-level data in 1990, following the anti-union legislation of the 1980s. We estimate the overall impact of manual union recognition in 1990 to be roughly half what it was in 1984, suggesting that unions are less successful in extracting a share of the quasi-rents for their members than they used to be. Within this overall average we find the effect in establishment with a closed shop or where management recommends union membership to have remained roughly constant, but that the effect in the remainder of unionised establishments has collapsed completely. In addition to a closed shop or management recommendation, we find that a high relative employment share of the 4-digit industry, taken to reflect product market power, is also required for there to be an effect. Within this group we then find the effect to be roughly double if unions are able to limit managerial freedom to allocate tasks. The latter group (with a closed a closed shop or management recommendation, a higher relative employment share and union limits on managerial freedom) constitute about 1 in 10 of the establishments with manual union recognition.