Until a few years ago, only geeks had heard of 'auto-enrollment'. Now millions more people are in pension schemes. Could a similar plan revive trade unionism in the UK?
In the influential book ‘Nudge‘ – the publication which put behavioural science on the map – Richard Thaler and Cass Sunstein showed how small changes can make huge differences to people’s decisions and livelihoods, for the better.
They noted that even though most people want to be in a pension scheme, barely two thirds of people opted to join one. It was, quite simply, a faff – to fill out the forms, pick a plan, and face the financial drop after having worked at a company without paying into one.
Allow people to be automatically enrolled however (with the freedom to opt out at any time), and barely a couple of percent of people ended up dropping out. In other words, it was made incredibly easy to do something that was both rational and which people wanted to do, but just couldn’t be bothered before.
That proposal became UK government policy – and this Friday, it reaches it’s next phase: minimum contribution rates rise to a combined 5 per cent – with a minimum of 2 per cent from the employer and the remaining 3 per cent from workers. Put simply, all staff in the UK earning over £10,000 now know they will have a pension when they retire.
The results have been impressive. IFS analysis shows that that the employee participation rate in workplace pensions went up by a massive 37 percentage points in the UK – from just over half of workers to nearly nine in ten. Put simply – that means protection and security in your old age.
But what about when you’re working?
We live amid the biggest squeeze on wages since the end of the Napoleonic Wars. Last year, the Resolution Foundation noted the average pay packet in Britain in five years’ time will still be lower than it was before the 2008 financial crash.
We are at the bottom of the pile in developed economies when it comes to pay growth. It is no coincidence that we also have the most restrictive trade union laws in Europe.
When trade unions are weak, employers can trample on them. For those of us who want to see our economy shifted towards the interests of working people, here’s a stat which matters: just 13% of private sector workers are members of a union.
Yet three quarters (77%) of the public agree that trade unions are essential to protecting workers’ interests. Workers support unions – they’re just not members at the moment.
A radical new policy idea could reverse the decline – and give our economy a much-needed boost in pay and productivity.
In a policy proposal being considered by the influential Institute for Public Policy Research – a think tank close to Labour – workers in some industries could be ‘auto-enrolled’ into trade union membership, with the inalienable right to opt out.
As the IPPR’s Joe Dromey writes on their site:
“Trade unions need to adapt to rapid changes in the world of work, and many are. There is some fantastic innovation happening in the union movement, most notably the work that the TUC are doing on recruiting young workers. But the scale of the challenge is great. Union membership has fallen so far in the private sector, and it is lowest amongst those who arguably need protection the most. Union innovation alone may not be enough….
“Auto-enrolment into trade union membership for some areas of the economy…could operate in a similar way to auto-enrolment into workplace pensions. On starting employment, in the absence of decision to opt-out, a worker would be automatically enrolled into a trade union, with their union subs deducted from payroll, just as their pension contributions are.
There are those who would fear it marking a return to the ‘closed shop’ – the pre-1980s system of mandatory union membership in some workplaces. But this is simply about switching defaults: from not being in a union, to being in one. Dromey continues:
“Just as auto-enrolment has helped reverse the decline in pension saving, the strong latent support for trade unions would suggest that auto-enrolment could reverse the historic decline in union membership, and strengthen labour power and employee voice in our economy.”
There are plenty more ideas out there to revive Britain’s union movement – and this one, like many, has its flaws.
Sometimes though, you have to think big and bold. Just over a decade ago, putting everyone in a pension scheme seemed like a radical idea – now look at the progress we’ve seen.
The IPPR’s Commission on Economic Justice will be reporting soon – watch this space for policies the Labour party may want to pinch.
Josiah Mortimer is Editor of Left Foot Forward. Follow him on Twitter.
Read the full piece on the IPPR site.
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