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Trade Unions and Financial Performance


  • Stephen Machin
  • M Stewart


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.

Suggested Citation

  • Stephen Machin & M Stewart, 1995. "Trade Unions and Financial Performance," CEP Discussion Papers dp0242, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0242

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    References listed on IDEAS

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    Cited by:

    1. Machin, Stephen, 1997. "The decline of labour market institutions and the rise in wage inequality in Britain," European Economic Review, Elsevier, vol. 41(3-5), pages 647-657, April.
    2. Blanchflower, David G. & Bryson, Alex, 2008. "Union decline in Britain," LSE Research Online Documents on Economics 19603, London School of Economics and Political Science, LSE Library.
    3. Melanie K. Jones & Richard J. Jones & Paul L. Latreille & Peter J. Sloane, 2009. "Training, Job Satisfaction, and Workplace Performance in Britain: Evidence from WERS 2004," LABOUR, CEIS, vol. 23(s1), pages 139-175, March.
    4. Dongphil Chun & Yanghon Chung & Chungwon Woo & Hangyeol Seo & Hyesoo Ko, 2015. "Labor Union Effects on Innovation and Commercialization Productivity: An Integrated Propensity Score Matching and Two-Stage Data Envelopment Analysis," Sustainability, MDPI, Open Access Journal, vol. 7(5), pages 1-19, April.
    5. Patrice Laroche & Heidi Wechtler, 2011. "The Effects of Labor Unions on Workplace Performance: New Evidence from France," Journal of Labor Research, Springer, vol. 32(2), pages 157-180, June.
    6. Addison, John T. & Siebert, W. Stanley, 2002. "Changes in Collective Bargaining in the U.K," IZA Discussion Papers 562, Institute for the Study of Labor (IZA).
    7. Sergio Salis & Allan M. Williams, 2010. "Knowledge Sharing through Face-to-Face Communication and Labour Productivity: Evidence from British Workplaces," British Journal of Industrial Relations, London School of Economics, vol. 48(2), pages 436-459, June.
    8. Alex Bryson & John Forth & Patrice Laroche, 2009. "Unions and Workplace Performance in Britain and France," CEP Discussion Papers dp0920, Centre for Economic Performance, LSE.
    9. Francis Green & Stephen Machin & David Wilkinson, 1999. "Trade Unions and Training Practices in British Workplaces," ILR Review, Cornell University, ILR School, vol. 52(2), pages 179-195, January.
    10. Belfield, Richard & Marsden, David, 2002. "Matchmaking: the influence of monitoring environments on the effectiveness of performance pay systems," LSE Research Online Documents on Economics 3636, London School of Economics and Political Science, LSE Library.
    11. S. Dobbelaere, 2003. "Joint Estimation of Price-Cost Margins and Union Bargaining Power for Belgian Manufacturing," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/171, Ghent University, Faculty of Economics and Business Administration.
    12. Addison, John T. & Belfield, Clive R., 2007. "Unions, training and firm performance," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 40(4), pages 361-381.
    13. Battu, Harminder & Belfield, Clive R. & Sloane, Peter J., 2001. "Human Capital Spill-Overs Within the Workplace," IZA Discussion Papers 404, Institute for the Study of Labor (IZA).
    14. Alex Bryson & John Forth & Lucy Stokes, 2015. "Does Worker Wellbeing Affect Workplace Performance?," National Institute of Economic and Social Research (NIESR) Discussion Papers 447, National Institute of Economic and Social Research.
    15. John T. Addison & Clive R. Belfield, 2004. "Union Voice," Journal of Labor Research, Transaction Publishers, vol. 25(4), pages 563-596, October.
    16. Addison, John T. & Belfield, Clive R., 2002. "Unions and Establishment Performance: Evidence from the British Workplace Industrial/Employee Relations Surveys," IZA Discussion Papers 455, Institute for the Study of Labor (IZA).
    17. John H. Pencavel, 2004. "The Surprising Retreat of Union Britain," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 181-232 National Bureau of Economic Research, Inc.
    18. Addison, John T. & Heywood, John S. & Wei, Xiangdong, 2001. "Unions and Plant Closings in Britain: New Evidence from the 1990/98 WERS," IZA Discussion Papers 352, Institute for the Study of Labor (IZA).
    19. Jed Devaro & Fidan Ana Kurtulus, 2011. "What types of organizations benefit from teams, and how do they benefit?," UMASS Amherst Economics Working Papers 2011-16, University of Massachusetts Amherst, Department of Economics.
    20. Jaime Saavedra-Chanduví & Máximo Torero, 2002. "Union Density Changes and Union Effects on Firm Performance in Peru," IDB Publications (Working Papers) 3282, Inter-American Development Bank.
    21. David Metcalf, 2002. "Unions and Productivity, Financial Performance and Investment: International Evidence," CEP Discussion Papers dp0539, Centre for Economic Performance, LSE.
    22. Clive Belfield, 2005. "Workforce gender effects on firm performance and workers' pay: evidence for the UK," Applied Economics, Taylor & Francis Journals, vol. 37(8), pages 885-891.
    23. repec:iab:iabzaf:v:40:i:4:p:361-381 is not listed on IDEAS
    24. Addison, John T. & Belfield, Clive R., 2008. "Unions, Training, and Firm Performance," IZA Discussion Papers 3294, Institute for the Study of Labor (IZA).
    25. Brown, W., 2006. "The Influence of Product Markets on Industrial Relations," Cambridge Working Papers in Economics 0652, Faculty of Economics, University of Cambridge.

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