Resolution Foundation

Power plays

The shifting balance of employer and worker power in the UK labour market

The cost of living crisis and the return of strikes over pay and conditions have brought the issue of worker power to the fore in 2022. Although some have pointed to a tight labour market as enabling workers to demand higher pay, a very tight labour market is rare and cannot be relied upon to drive sustained real wage growth. Instead, this briefing note focuses on structural shifts of worker and employer power.

Not only have unions and collective bargaining declined since the 1980s, but the bargaining that does take place has become more decentralised. In addition, individual forms of bargaining, such as workers’ outside options, have become weaker. The minimum wage has helped to protect the very lowest earners, but is not a substitute for collective action. Alongside this fall in worker power, managers have taken a more active role in wage-setting, while firms have maintained their high levels of power to set workers’ wages.

This matters for two reasons. First, declining worker power compared to their employers drives down the level of wages. And second, wage inequality tends to rise. Given the scale of the impact, it is clear that the nature of firm and worker power should be an important part of the UK’s economic strategy over the decade ahead.

For all research queries about this report, please contact Hannah Slaughter. For press queries, please contact the Resolution Foundation press office.

Hannah Slaughter
Senior Economist,
Resolution Foundation

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