Government and the labour market - Business Environment

Government involvement in the labour market has taken a variety of forms and its influence on market conditions can be direct or indirect and can operate at different spatial levels. Many of the government initiatives mentioned in Chapter, for example, seek to affect employment prospects in the regions or in local economies and thus clearly have labour market implications. Similarly, in its general management of the economy through fiscal and monetary means, the government will influence the overall demand for labour, which is derived from the demand for the products that labour produces. Some of that demand, of course will come from the government itself, as a central provider of goods and services and hence a key employer of labour, and its attitude to pay settlements will affect wage levels through out the public sector. This, in turn, can spill over to the wage bargaining process in the private sector and on occasions may even involve the use of statutory or voluntary restrictions on wage rises that invariably interfere with the operations of the free market (e.g. incomes policies). While all of these areas would need to be considered in any detailed analysis of labour market policies, in the brief discussion below attention is focused on government initiatives to improve employment prospects and training opportunities for the unemployed, and on the government’s efforts to curb the power of the trade unions. Both of these approaches are particularly pertinent to the discussion on how government has sought to improve the efficiency of markets as part of its supply-side approach to economic management using, in this case, a combination of policy and legislation to achieve its objectives.
Curbing trade union power
As a major force in the labour market, representing the interests of millions of workers, trade unions have been seen as an obstacle to the operation of market forces and as a cause of high wage costs and low labour productivity in the United Kingdom. For almost 20 years after 1979, Conservative governments sought to curb the influence of the trade unions through legislative means, in the belief that morelabour market flexibility would develop and that this would benefit businesses seeking to respond to competition and change. To assist further in this direction, the government with the general support of industry abolished the Wages Councils (which were set up to protect the interests of the lower-paid) and originally refused to participate in the Social Chapter of the Maastricht Treaty (which included a provision for works’ councils and the principle of equal pay for male and female workers for equal work).The government’s step-by-step approach to reducing the influence of trade unions is demonstrated by the following legislative measures, enacted in the period 1980–93.
The Employment Act 1980
This Act gave employers legal remedies against secondary picketing and most other types of secondary action. It also provided for all new ‘closed shops’ to be approved by four-fifths of the workforce and for public funds to be made available to encourage unions to hold postal ballots.
The Employment Act 1982
This Act further tightened the law on closed shops and outlawed union-labour-only contracts. Employers were given legal remedies against ‘political’ strikes and trade unions were made liable for damages, if they instigated unlawful industrial action (e.g. ‘secondary’ action).
The Trade Union Act 1984
This Act sought to strengthen internal union democracy. Unions were required to hold a secret ballot every ten years if they wished to keep a political fund and union executives had to submit themselves for re-election by secret ballot every five years. In addition, pre-strike ballots were required if unions wished to retain their immunity from civil action for damages in the event of a strike.
The Employment Act 1988
This Act strengthened the rights of individual union members. Unions were banned from disciplining members who refused to support strike action; all senior union officials had to be elected by secret ballot; workers were permitted to apply for court orders instructing unions to repudiate industrial action organised without a secret ballot. Moreover strikes in defence of the closed shop lost all legal protection.
The Employment Act 1990
This Act made unions legally liable for ‘wildcat’ strikes called by shop stewards without a proper ballot. Pre-entry closed shops were banned and so individuals could not be refused a job for not belonging to a trade union prior to appointment.
Trade Union and Labour Relations (Consolidation) Act 1992
This Act consolidated previous legislation in the field of labour relations.
The Trade Union Reform and Employment Rights Act 1993
This Act essentially had two main purposes: first, to impose further restrictions on trade unions and trade union activity; second, to enact certain employment rights as a consequence of EU directives and case law. Under section 13, for example, employers are permitted to provide inducements to employees to opt out of collective bargaining or to leave a union, while section 17 introduces a requirement for industrial action ballots to be conducted fully by postal voting. While there is no doubt that such legislation has altered the balance of power between employee and employer and has significantly weakened the power of the trade unions, this has been only one influence, and arguably not the most important.Apart from the fact that union membership has fallen significantly over the last decade, weakening their financial position and making them less able to sustain union action, the unions have at times had to operate in a market that has been severely affected by changes in the economic cycle. Gone are the days when governments aspired to full employment and were willing to use fiscal and monetary means to achieve this objective. In the new climate of less than full employment, the influence of organised labour in the economy has inevitably been reduced and has been replaced, to some degree, by the pursuit of individual self-interest.

As a postscript it is worth noting that since the election of a Labour government in 1997 there has been a kind of rehabilitation of the trade unions and an attempt by government to enshrine certain employment rights in law. Following the Employment Rights Act of 1996, other significant pieces of legislation have included the Employment Rights (Dispute Reduction) Act 1998, the National Minimum Wage Act 1998, the Working Time Regulations 1998, the Human Rights Act 1998, the Employment Relations Act 1999 and the Employment Act 2002.

Employment policies
Employment policies are targeted specifically at the unemployed and over recent decades have included a wide range of measures aimed at assisting individuals to prepare themselves for employment and to gain a job. Many of the schemes have been designed to give a limited amount of work experience and/or to improve vocational training, with increasing emphasis being given to the problem of skills shortages in the economy and to matching the needs of labour with the requirements of firms. Additionally, as the following examples illustrate, governments have sought to promote the idea of ‘self-help’ among the unemployed and to encourage the growth of self-employment, in the hope that an expanding small firms sector will generate a large number of jobs, to replace those lost in medium and larger-sized enterprises.

  • Restart introduced in 1986 and requiring anyone drawing unemployment benefit for over six months to see a specialist counsellor to try to identify possible routes back into employment.
  • Youth Training (YT) replaced the Youth Training Scheme in 1990. Under this scheme any person under 18 who was unemployed was guaranteed a YT place (with some exceptions, e.g. students). It has been used to combine training and education and to allow individuals to acquire nationally recognized qualifications.
  • Employment Training (ET) introduced in 1988 for long-term unemployed people and others with specific needs, including those returning to the labour market. It aimed to provide training in order to help individuals to acquire the skills needed to get jobs and vocational qualifications (or credits towards them).
  • Employment Action (EA) introduced in 1991 and designed to help the unemployed to maintain their skills and find employment. It provided opportunities for individuals to undertake community work and offered structured job search support.
  • Training for Work (TfW) started in 1993 to replace ET and EA, combining the characteristics of both programs.
  • Work Trials designed to give long-term unemployed people a chance to prove themselves to employers by working on a trial basis while receiving benefit.

The change in government in 1997 saw the introduction of the New Deal, a flagship scheme designed to get individuals claiming unemployment benefits off welfare and into work. Targeted initially at 18–24 year olds, the scheme has now been extended to other categories of person (e.g. those over 25 and those over 50, lone parents, the disabled and partners). Funded from the windfall tax levied on the privatized utility companies, the New Deal is an attempt to reduce reliance on state benefits and to make work more attractive to groups often excluded from the labour force. Like other measures, including working families’ tax credits and efforts to increase the numbers going into further and higher education, it is part of an attempt by government to improve the supply side of the economy.
Local schemes
Historically, local schemes have taken a variety of forms, including interest-free loans for individuals wishing to set up a local business (e.g. Sir Thomas Whyte Charity in Leicester), local training awards to stimulate interest among local employers or individuals (e.g. Bedfordshire TEC), programs for groups with specific training needs such as women returners (e.g. Calderdale and Kirklees TEC) and partnerships with local companies to part-fund new training initiatives (e.g. Birmingham TEC’s Skills Investment Program). As a final comment it is important to note that the government’s national training program was initially run by a system of local Training and Enterprise Councils (TECs) which were responsible for providing training schemes for the unemployed and school leavers and for various business enterprise schemes. Funded by central government and run by a board of directors drawn predominantly from industry, the TECs (known as Local Enterprise Councils in Scotland) had control of the training funds for existing training program and were given the wider role of encouraging training and enterprise in the economy, including supporting initiatives aimed at promoting local economic development. To this end the TECs were expected to work closely with local employers in both the public and private sector and to improve the quality and effectiveness of training in their locality, by identifying priorities and needs within the local community. TECs were replaced by theLearning and Skills Council (LSC) in April 2001 which became responsible for all post-16 education and training, excluding higher education. The LSC operates through a network of local LSCs which deliver national priorities at a local level (n.b. LECs in Scotland still exist).


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