Trade Union Power and Railways post privatisation

There can be no doubt that this effective introduction of competition into the bus labour markets has meant that the call on the taxpayer is now much less than it would otherwise have been – and that it has staved off a major contraction of the bus industry.

Figure 1 shows that this pattern was not repeated in the case of the railways. This may partly explain why government continues to find it so hard to control costs and subsidies in the rail industry. In the 1980s the average hourly earnings in the rail industry were close to the average for all manual workers and those for train drivers and assistants were about 10% higher. After the structural change of 1993 rail industry earnings rates moved ahead of general earnings by over 10%. After privatisation in 1996 rail industry earnings rates accelerated ahead of general earnings and by 2002 they were nearly 50% higher. Real earnings of train drivers moved ahead of general rail industry earnings throughout the period, and they appear to have accelerated in the more recent years so that by 2002 they stood 80% above general manual earnings.

Of course, this might just be a reflection of rapidly increasing productivity and, if the number of employee-hours has fallen enough to offset the hourly wage increase then the total wage bill could have fallen. Certainly, railway output has increased since privatisation but it is not known how labour productivity may have changed and how that may be reflected in real earnings. However, it seems likely that the onset of aggressive competition that occurred in the bus labour market did not occur in the rail labour market. 

Maybe there was some reason that the labour unions had more success in protecting the position of their memberships in railways than in buses. One plausible explanation for the difference lies in the greater flexibility of buses and the difference in high level political salience of the two modes. Bus routes come and go. If a bus company runs into financial difficulty with a route it will quickly withdraw and the route may or may not be taken over by a competing company. In short the forces of competition are effective at punishing attempts to extract returns to labour or capital over and above the going competitive rate. Jobs are genuinely at risk.

Railways are quite different. They are inflexible and highly visible to politicians. Experience over decades has repeatedly demonstrated that when a rail service gets into financial difficulty then the chances are that some political authority will intervene to rescue it, whatever the cost, rather than be seen to allow the service to contract or to close. The competitive services are not usually alternative rail based but they are, ironically, bus services, the car and, increasingly in the UK, aviation services. Those who negotiate on behalf of labour know this. They sense that at the end of the day they have a direct line to the taxpayer and that they are in a strong bargaining position.

12 Glaister S and Travers T (1995), Liberate the Tube!, Centre for Policy Studies.

STEPHEN GLAISTER