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Three things we can learn from the Nordic trade unions

Trade Unionism globally has been in decline for the majority of the last 40 years, with only a few notable exceptions.

Scandinavian nations have only seen a minor fall in the percentage of unionised workers while in the UK, membership has dropped off dramatically from its peak in the 1980s and unions have become less powerful resulting in rising inequality.

In the UK, unionisation rate is 23.4% and has only risen once in the last 10 years. In comparison in Sweden, the unionisation rate is 71%. On average its around 3 times higher on average in Nordic countries than in the UK.

Unions are not just well populated but also have a considerable impact on politics and economics. They have helped made Nordic countries the most egalitarian societies in the world, by having roles typically taken by the government in other countries. In Denmark, Sweden and Finland for example, there is no government-mandated minimum wage, instead, unions negotiate on behalf of workers via collective bargaining for the minimum wage sector by sector. 

Despite the lack of government interference, the minimum wage is comparably higher in Scandinavian countries compared to the rest of Europe and Denmark has the highest median wages of any country in Europe. A McDonalds worker in Denmark earns around $21/hour, three times more than the US minimum wage, and in addition gets a 5 week paid vacation.

Collective bargaining is extremely rare in the UK, due to legislative differences, and its decline in Britain has been singled out by various studies as a key reason for rising inequality over the past three decades. The number of workers that were classified as ‘low-paid’ (i.e. earning less than two-thirds of the median income) was 13% in 1979 when collective bargaining coverage was near its peak but has since risen to 22%.

Unlike in Scandinavia, collective bargaining is not mandated in the UK and can only be done on a voluntary basis and therefore it should become a primary aim of the UK’s trade union movement to extend collective bargaining coverage to allow it to dramatically improve wage conditions for its members. Although Nordic unions face an easier political landscape, unions should work hard to establish collective bargaining arrangements in emerging sectors of the economy.

Another example of this un-statist approach in Nordic nations, except Norway, is their use of “The Ghent Model”, where employees can acquire voluntary unemployment insurance, provided most often by unions. Those with insurance enjoy greater unemployment benefits (typically 55-70% of their wages) that are paid for by insurance payments and subsidies from the government. This is another example of unions having the role that in many other countries is taken by the government. Oxford political scientist Bo Rothstein, similarly, has found that adopting a Ghent system leads an additional 20 percent of the workforce to join a union. One of the greatest challenges Nordic unions have faced has been the rise of non-union unemployment insurance funds. However, failures of non-union unemployment insurance providers to payout during the COVID 19 pandemic has led to more and more Scandinavians joining unions for these benefits. In Sweden, for example, The Swedish Association of Graduate Engineers have seen a 400% increase in union applications compared to last year. 

If unions were to increase their membership via these methods it should allow them to command more political capital that can help pass the legislation required for them to be increasingly effective. One such reform is co-determination, workers on company boards. In Sweden, Norway and Denmark it is mandatory for companies over a certain size to have board members elected by the employees. This was in Labour’s 2019 manifesto but it has also resonated with the Conservatives. Before she became PM, Theresa May was stated “If I’m prime minister … we’re going to have not just consumers represented on company boards, but workers as well.” Unfortunately, this proposal was not included in the Conservative manifesto and she did not deliver on this promise

Co-determination allows unions to have a say in company affairs such as pay structure, profit allocation and general management. It helps increase wages for workers, can reduce the risk of outsourcing and often shift companies to taking a more long term and sustainable approach to profit maximisation. Companies also benefit from co-determination as it is proven to have numerous other benefits, such as boosting productivity.

One aspect of co-determination that could lead to a changing role of unions is that they then have a role in running the company as well as representing workers directly. This could be extended in their bargaining tactics. While unions usually bargain for wage increases or lower hours another aim could be profit-sharing initiatives or share distribution to workers. 

76% of Brits believe large companies should be forced to share a percentage of profits with their workers and this may show an appetite for similar approaches by unions. Delta Airlines has been a notable example in an industry where companies are falling out of the sky at present. In 2019 it gave out $1.6 billion to it’s employees from its profit-sharing pool, a record for a US company. This translates to 16.7% boost to their annual salary. It shows there is another way workers can have their labour rewarded and offers a path to increased income with a lesser risk for companies. 

Unions in the UK and across the West need a re-think. They face a ticking demographic bomb and its time they re-invent their offer to workers while still fighting hard to represent them. The nature of employment is changing, and unions must adapt to keep up with this.The lesson to be learned here is that unions need to offer real economic advantages.

Unions in Nordic countries provide a greater variety of benefits to their members compared to the UK, with employees, especially younger ones, more likely to see joining as a good investment.  This is leaving unions smaller and older in a world where membership size has a large bearing on union power.

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