It is time to end traditional trade unions and replace them with New Unions

Workers today badly need strong unions. But they don’t need the traditional trade unions of the 20th Century which are as obsolete as the traditional industries and socialist aspirations in which they were born. Labour is currently losing the battle against capital. In the 1950s and 1960s, Western labour and capital worked together pretty well. The returns to labour (wages, conditions, entitlements) rose steadily, whilst the returns on capital were actively reinvested into businesses and grew productivity. It went wrong in the 1970s. Labour got too greedy, it fought against change and the wheels came off. Increasing globalisation left uncompetitive businesses exposed. Capital fought back hard in the Reagan and Thatcher era, and won. Although the next generation of political leaders (Clinton, Blair, etc) used the state to ease the pain, labour has not recovered parity with capital since the battles of the 1980s. But workers need more than just politics to sort this out. Workers need unions who focus on helping their members as individuals to each earn the most money they can in the world we now have – a world of flexible jobs, global competition and technological disruption. They need their unions to be creative players in the economy, not commentators, politicians or protestors.  We need a set of New Unions. New Unions who have just one mission: to help each individual Member earn the most money they can, right now and into the future.  They should compete with each other for Members based on who delivers the best earnings. They should do all and anything they can to win this battle. They should offer a lifelong community, based on careers not particular jobs or employers, be multi-disciplinary so they don’t resist change and focus on total earnings, not an individual wage. If I was starting one of these New Unions, I would call it “EarnMore”. I am going to set out 8 things which an EarnMore could do to win its first 1m members and boost their net incomes.

But first let’s look at the starting point for New Unions. Or, rather, the end point of traditional trade unions.  83% of workers in OECD countries have chosen not to join a union. In the US, the proportion of workers in a trade union has fallen from 31% in 1980 to just 10% today. In the same period, it fell from 50% to 25% in the UK, from 49% to 17% in Australia, from 35% to 18% in Germany and from 19% to just 8% in France. Only the Scandinavian countries (with up to 68% in unions) and Belgium (at 55%) have a majority of their workers in a union. The UK, for example, illustrates the death of the union. Membership rates are just 14% in the private sector, 13% for low paid workers, 15% for temporary employees and 16% for smaller firms. 4 out of 10 members are over 50. Membership levels are only strong in the public services and utilities. In hotels and catering, for example, membership rates are just 4%. One reason for their decline is that much of their job has been done for them by governments. Employment legislation in western countries protects all workers (whether union members or not) against discrimination, dismissal, unsafe working, abusive wages and excessive hours. This problem is shown in France, where trade union membership has always been low and now is far and away the lowest in the OECD. But French workers enjoy the greatest employment protection in the OECD. For example, temporary workers have 10 times more protection in France than in the UK and 3 to 4  times more than Germany, Sweden and Japan But it’s not only employment protection legislation that has rendered traditional unions redundant. There has been a big growth in occupational licensing and regulation by Western governments. Typically, in European countries, a hundred or more jobs are now regulated. Across Europe, between 10-24% of the workforce has a regulated job. In the US, 30% of jobs are now licensed by the government, compared to just 4% in 1950. This licensing in the US and Europe adds a significant wage premium of up to 20%. In most countries, there are more licensed staff than there are trade union members. Trade unions have historically played a big role in campaigning for these employment rights and regulation, and opposing de-regulation and flexible employment. But they have in fact legislated themselves out of a job. The political landscape on employment issues is now a crowded space and traditional trade unions won’t be missed. Anyone who doubts this should look at the current high profile political debates in Western countries – how far to increase the minimum wage, how to liberalise European labour markets, how to reduce the gender pay gap or whether to allow more competition for licensed taxi drivers. Trade unions are no longer the main actors in these debates.

So if we abandon the traditional mission of achieving socialism through political action, what can unions actually do to help their members earn more, now and in the future? One place to look for insight is 15th Century Italy, in Florence. Modern capitalism started in Florence.  It invented investment banking, merchants, the industrial city, patents, trademarks and the trade union. The Florentine union, or “guild” as it was known in the 15th Century, was much more powerful than a modern trade union. The guilds incorporated the city’s businesses and nominated the city’s government. They trained workers, organised trade, protected intellectual property, provided welfare to members’ families and support services (like watchmen) to members’ businesses. Becoming a member of a guild was the route to a skill (through the apprenticeship route to master or even grandmaster level) and to a commercial income (through the protection a licence offered against competition). It was also the route to social and political status. There were 3 levels of guild – Arti Maggiori (the 7 major guilds like lawyers, bankers and doctors); Arti Mediane (the 5 middle guilds like butchers, masons and smiths); Arti Minori (the 9 minor guilds of inn keepers, carpenters, bakers and wine sellers).  But the majority of the population (the Minute Populo) were not even allowed to form or join a guild. This included skilled workers like weavers and boatmen who all remained waged staff. To cut a long story short, the Arti Maggiore became all powerful. Other guilds gradually disappeared as they got in the way of the new capitalist merchants. In the end all of Florence’s guilds were abolished in 1770. The legacy, though, is profound. Today’s Arti Maggiore have many of the characteristics of a Florentine guild. Law, medicine, banking and accountancy: all have tightly regulated professions; they group together to train their apprentices; form partnerships to maximise individual incomes; exclude competition through regulation; enjoy high returns on their scarcity and barriers to entry. The most affluent in our societies are doing really well out of employment unions. Many middling occupations (the equivalent of the Arti Mediane and Minori) have retained the protected trade mix of self-employment and state regulation, e.g. bar owners, taxi drivers or electricians. And the great majority (the Minute Popolo) have remained dependent employees with limited occupational regulation or economic power. We undoubtedly need to tackle the self-interest of today’s Arti Maggiori where they conflict with consumers’ best interests, as they often do. But we also need to help the Mediane, the Minori and, most importantly of all, the Minuto to emulate the economic power of today’s Maggiori. That’s the role of the New Unions.

Here are 8 ideas for New Unions to provoke debate:

  1. Totally replace employment agencies – In the EU, 1 in 7 workers (14%) are on temporary contracts. In some countries (e.g. Poland, Spain, Netherlands) this increases to 1 in 4 workers, or more. The proportion is much lower in countries where it is easier to hire and fire permanent staff (e.g. just 6% in the UK and Australia). Unionisation of temporary workers can be very low. In the UK, for example, only 15% are in a union (vs 25% of the total workforce). Employment agencies are often the best hope for temporary staff, as they are heavily incentivised to match jobs and people. Using the UK as an example, employment agencies place about 700,000 people a year in temporary jobs and about 1.2m people are on a temporary contract secured by an agency.  It’s big business, with revenues of £33 billion last year. There are 11,000 agencies employing almost 96,000 staff. That means there as many as staff in agencies as there are union representatives in the UK. The New Unions should take on these roles. The margins of 20-30% provide a good source of attractive dividends for their members. But more importantly, if the purpose of the New Unions is to maximise staff (rather than shareholder) returns, they can create economic power for their members. This might mean that permanent employees opt to become temporary ones.  We can already see this happening in the UK in healthcare and education (with nurses and teachers choosing agency work as higher paid than regular contracts). A halfway house may be that employers hire staff but they are obliged in the deal to use the particular New Union’s terms, conditions and contract not have their own.
  2. Create a sharing economy within the New Union – A New Union should aggressively drive sharing between Members to help them earn more. A simple example might be childcare. For many parents, the cost of paid childcare is prohibitive, limiting how much work parents can afford to take on. Or if they do pay for childcare, greatly reducing their net income from working. But let’s think differently. Think of a parent working 3 days per week and spending 2 days at home with a young child. That parent could provide free childcare to another parent on 1 or both of those days that they are at home with their own child, in exchange for free childcare for their own child when they are at work. This could transform net income for working parents. Babysitting circles have worked on the same principle for a long time. Similarly, within the New Union, people could exchange or buy the downtime of other members’ tools, vehicles, workshops, offices,etc. Members could sell car sharing to each other for commuting and provide cover for each other to reduce losses due to illness or emergency leave. They might earn a paid commission from other Members for finding them extra work.
  3. Own and expand the “Gig Economy” for Members – The New Unions should compete to offer the best digital solutions to help their Members earn more money. That means, for example, having their own version of Task Rabbit or Uber. It requires New Unions to use the same means as private companies (digital marketplaces, consumer rating of workers, simple apps, etc) but having a different end (the enrichment of Members rather than shareholders). As well as the technology itself, there is lot to learn from the tech economy. This includes providing attractive, flexible workspace in a club-like environment. It means holding frequent networking events, providing mentors and crowdsourcing funding. But owning the Gig Economy means looking beyond tech. For example, many lessons come from looking at immigrant communities in Western countries. For example, Pakistani employment communities have developed in many British cities, often dominating the taxi and restaurant industries with intra-community capital, networking, purchasing and employment. A wide variety of communities exist to connect people with opportunities, including Alumni groups, Soroptomists, Chambers of Commerce, Freemasons, Rotary Clubs, etc. This is the spirit of mutualism, solidarity and serendipity that New Unions need to copy.
  4. Become a welfare provider, over and above whatever the state offers – A New Union should offer a social insurance for its members. The need for this varies by country. For example, in the US, the pressing need is for maternity leave benefits. Only 13% of women have the right to paid maternity leave. A quarter of new mothers are back at work within 2 weeks of the birth. In other countries, like Britain, where most employment benefits are means-tested, the New Union could offer premium benefits over and above the State funding or legal rights. But the New Unions can be more inventive. For example, they could provide student-style halls of residence to help their members move to high employment areas. Teney could go further and offer a wide range of financial products. Too many work-related financial products (pensions, insurance, savings schemes, unit trusts) offer poor value to their users. A New Union could create high-trust, low-cost products, e.g. a pension fund with a 0.2%, not 2%, annual fee. The funding of this extra welfare could work in 4 ways: employees paying a monthly deduction into a Union insurance scheme; the New Union using it’s bargaining power with employers to get a greater contribution from them for Union members; having an opt-out from State schemes, where instead of paying social insurance to the State individuals and employers pay into a New Union scheme instead; using the Union’s income surplus (e.g. from commission for temporary staff) to fund member benefits.
  5. Replace government regulation of staff with New Union accreditation – The state regulation of jobs has got out of hand. Instead of looking for market solutions, too often governments respond to consumer concern about issues by regulating jobs. This can mean issuing state licences, requiring certain qualifications or experience. Not only does this impede market innovation, over time it allows the regulated staff to assert their interests before those of consumers or competitors. Research shows that licensing regimes which were in place 40 years ago or more give workers a 30% wage premium. Those established in the last 20 years offer a premium of just 4%. The extent of job regulation is remarkable. In the US, for example, 21 states require tourist guides to be licensed. In Nevada that means 733 days of training and a $1500 fee. In Tennessee, a “shampooer” in a hairdressing salon requires 700 days training, 2 examinations and a licence fee. A different approach would be for the State to withdraw from many areas of regulating individual workers. Instead, where Governments feel that some regulation is necessary, they could license New Unions to run their own schemes. For example, my New Union “EarnMore” might train, accredit and discipline its own home care assistants – just like many professional associations would do. Employers would hire the home care assistants because it trusted “EarnMore” accreditation. If EarnMore doesn’t do it well enough, employers would choose to recruit members of other New Unions. Consumers could come to respect and request the EarnMore workers. This would build brand value for workers. Workers would join the New Union that offered the the best way to be licensed and helped them earn the most money. This would be a market-based solution.
  6. Recruit and support the self-employed – The traditional union has neglected the self-employed as their mindset has been about imposing things on employers. However, many self-employed people are not affluent and some are very poor. They need the support of an employment union as much as anyone else. In the EU, 1 in 6 workers (17%) are already self-employed. This is much higher in Greece (37%) and Italy (25%). With the exception of the UK (17%), self-employment is lower in the English-speaking world (e.g. US 7%, Canada 9%, Australia 10%). But the trend towards more self-employment looks certain. Many employees are also self-employed part-time. With a philosophy of “EarnMore”, New Unions need to be help more people become self-employed, at least part of their time, to maximise their earnings. A New Union can offer a full set of administrative support e.g. bookkeeping, payroll, insurance, office services. They could offer peer-to-peer support within the Union, including mentoring, collaboration, procurement and financing. And they can offer all the other benefits of a New Union (internal sharing, the Gig Economy, temporary work, welfare, etc) to the self-employed.
  7. Turn employees into shareholders – An important way for New Union members to earn more is to have equity in the companies for which they work so that they profit from the profits made. New Unions should have an aggressive agenda to increase employee ownership. This might be full ownership, like the UK’s success stories in John Lewis (with 87,000 staff) or professional service firms like Mott MacDonald or Arup (with a combined 26,000) or the health and social care firms like Sunderland Home Care Associates and Central Surrey Health. Or it might be partial ownership, where staff buy or earn equity, like senior executives do, or how start-up firms incentivise their staff in the early years.
  8. Provide world class learning and development – A key route to earning more is gaining skills and having them accredited. Too many vocational colleges are poor and too many employers fail to offer high quality development. For staff who move between employers or even countries and for self-employed, they need the ongoing support they can’t get from any current job. The New Unions should have learning and development as a central mission. This means organising apprenticeships and other initial training. But it also means lifelong learning. New Unions could use digital learning to create their own Academies. These would not only train Members but also create online professional communities where people collaborate, mentor, counsel and share best practice, top tips and connections.The New Unions should accredit all development, with both proprietary branding (e.g. being an EarnMore Master or Grandmaster) and transferable credits with other New Unions’ accreditation schemes. The New Unions should have active plans and communities to better their members’ interests – e.g. support groups for women in their 30s who are juggling family responsibilities with career progression. The New Unions should also reach out to those who are not in work, taking over welfare-to-work and other employment programmes. They could fill the vacuum in the market for high quality careers information and guidance. How could all this be paid for? Firstly, done digitally and using peer-to-peer approaches, the costs could be managed down. Secondly, the New Unions could take over from traditional vocational colleges (FE in the UK, TAFE in Australia or Community Colleges in the US) and take on their state funding. The New Unions could also take over a lot of other state funding going into apprenticeships, welfare to work and other programmes. A proportion of the funding would come from subscription fees and some of it would come from additional purchases from individual members and employers.

So what’s to stop these New Unions happening? The traditional unions need to step aside or reinvent themselves. Governments need to roll back the legislative approach to employment and create the space for the market solutions of New Unions to take over. Governments also need to give New Unions access to funding, e.g. for training and to allow members to opt-out of some state welfare schemes and put their money into the New Union. They also need to give New Unions a legal status to play its role in the wider regulatory systems. And New Unions need regulation too, e.g. they shouldn’t be allowed to have more than 30% of employees in any geography or industry. But most of all what is needed is for dynamic Social Entrepreneurs to come forwards, start-up the New Unions and attract paying members. Entrepreneurs, not bureaucratic socialists, are what ordinary workers need, helping them to get stuck into the modern economy, become winners and shape the world they live in. The New Unions would combine social solidarity with capitalist dynamism. Labour can have parity with capital again. Ordinary people can earn more.

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