Signals and cycles productivity growth and changes in union status in British companies

Productivity growth in 329 companies (total employment = 1.96 million workers) is analysed for the period 1984-1989. The study breaks new ground by (i) analysing the impact of changes in union status - such as repudiation of a closed shop or derecognition - on productivity growth; (ii) examining the impact of interactions among product market and industrial relations variables on companies'' productivity changes; (iii) including companies in the service sector as well as in manufacturing. The results suggest no difference in productivity growth between union and non-union companies over the years 1984-7. But in 1988 and 1989 unionised companies experienced faster productivity growth than their non-union counterparts. This wedge in productivity growth over non-union companies was twice as large in companies where there had been a diminution in union status compared with companies where union status was unchanged. The results probably reflect both the signal that management has (re-)asserted its prerogatives and cycles in union effects shaped by the intertemporal behaviour of the economic cycle.