This is a guest post by Stephen Bronars, a Senior Economist at Welch Consulting, Adjunct Professor of Economics at Georgetown, Ph.D. in Economics from University of Chicago, opinions are his own.
Margaret Thatcher was one of the most influential leaders of the 20th Century. She was Prime Minister of Great Britain for eleven years and was probably the most important leader of the conservative movement of the 1970’s and 1980’s. Among her many accomplishments, part of her legacy will certainly be her role in the transformation of British labor markets and the labor union movement. When Mrs. Thatcher became Prime Minister in 1979, British labor unions were quite powerful but labor markets were rigid, inflexible and in many ways uncompetitive. By the time Mrs. Thatcher left office in 1990, the labor union movement had been substantially weakened. Today’s British economy is more vibrant and dynamic in part due to the labor union reforms of the Thatcher government.
During the 1979 election, Thatcher’s Conservative Party described a five point plan for the country. The first task in the Conservative Party platform (Manifesto) was restoring “a fair balance between the rights and duties of the trade union movement.” It was Thatcher’s view that British labor laws were in need of reform because “militant” pro-union legislation enacted by the Labour Party had allowed unions to bargain for wages and working conditions that made British firms uncompetitive in an increasingly global economy. Mrs. Thatcher also believed that labor laws encouraged unions to use strikes and work stoppages “as a weapon of first rather than last resort” and led to “increasingly bitter and calamitous industrial disputes.”
During the 1970’s, the British economy lost almost 62,000 worker years of production from strikes and work stoppages due to labor disputes. The British rate of lost production due to strikes and work stoppages was about 150% higher than in the United States during the 1970’s. By the 1990’s, after the Thatcher government reforms, lost production due to strikes were less than 5% of the levels in the 1970’s. In fact, during the 1990’s, lost production due to strikes and labor disputes were 22% lower in Britain than in the United States (relative to the size of the countries’ labor forces) and remain lower to this day.
Labor union reforms did not come easily. The coal miner’s strike of 1984-1985 was long, bitter and violent. The global recession in the early 1980’s hit Great Britain especially hard. The British unemployment rate remained above 10% for six years from 1982 through 1987 and peaked at 11.8% in 1984. The employment to population ratio of men age 16 to 64 fell by 10.3 percentage points between 1979 and 1983 (compared to 5.1 percentage points in the U.S.).
The Thatcher government’s union reforms of the 1980’s included limits on closed union shops, secret ballots, and a ban on “secondary” picketing, weakened labor unions and led to a decline in union membership. These reforms also improved the flexibility and competitiveness of the British economy. By 1990 the employment to population ratio for adult men had regained about half of the losses incurred during the recession and the unemployment rate had fallen to 7.1%. When Margaret Thatcher left office in 1990 the economy was in a much stronger position than a decade earlier and British labor markets were better able to adapt to the technological changes and increasing globalization that have occurred in the subsequent 23 years.
While the U.S. economy and labor market recovered more quickly and decisively from the recession in the early 1980’s, recent history has been somewhat different. The employment to population ratio, for men and women, has been higher in Great Britain than in the U.S. since 2002 and the gap is widening.
Since 2008 employment relative to population has declined twice as much in the U.S. as in Britain. This is the opposite of the cross-country differences observed in the early 1980’s, before labor union reforms had been implemented.
Margaret Thatcher was one of the great leaders of the 20th century. Her labor market policies and reforms slowly helped the British economy become more flexible, dynamic and competitive. The legacy of her labor market policies and reforms is that, unlike the 1980’s, the employment situation in Great Britain has generally been stronger than in the U.S., both during and after the recession of 2008.