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Tony Cliff

The employers’ offensive

Chapter Three: The sugar on the pill

When the employers prepare the ground for productivity deals, they are all sugar and honey. The changes they suggest in work conditions may be quite moderate, and the main talk is about the benefits accruing to the workers – above all, about the improvement in wages. The question we have to ask is this: is the sugar on the pill as thick as they pretend?
 

Uneven amounts of sugar on different pills

The proportion of labour costs to total costs varies widely in British industry. At one extreme are the capital intensive industries such as refineries, chemical works, electricity supply and multiple steel works, where labour costs are between 5 percent and 22 percent of total costs. [1] At the other end of the scale are the labour intensive industries such as buses, railways and coal mining, where the proportion of labour costs to total costs is as high as 60 or 70 percent. Where labour costs make up a small proportion of total costs it is much easier for the employer to pay high prices for the introduction of a productivity deal. Where labour costs are high it is much more difficult although nonetheless compelling for the employers. The sugar coating depends very much on whether the industry is growing or declining. Last, but not least, the thickness of the sugar coating is in direct proportion to the strength and determination of the workers’ organisation in the industry. Where workers’ resistance is very weak, the employer can make productivity bargaining into a sheer bargain for himself.

So we find the Fawley refinery productivity deal giving the workers a rise of 40 percent in their wage rate, the ICI agreement giving 12 to 22 percent, the first phase of Devlin paying the dockers a large rise of 30 percent, while miners got 5 percent and craftsmen in the railway workshop between 5.8 percent and 7.8 percent. [2]

To appreciate the significance of productivity deals on wage negotiations they must be looked at over a span of time. One must remember that many workers did get a wage rise at the time without accepting the strings of productivity deals. Hence the effect of productivity deals can be gauged by comparing wage rises with other industries not associated with productivity deals. Let us look at a few cases.
 

Fawley

The first and most celebrated productivity deal was the elaborate agreement concluded in July 1960 between the management of the Esso refinery at Fawley, near Southampton, and the trade unions, the Transport and General Workers’ Union and seven craft unions (AEU, ETU, etc). As a result of the agreement the rate of pay was raised by as much as 40 percent. As Alan Flanders, the author of the story of the Fawley agreement, put it:

Fawley management had declared in its introduction to the Blue Book that one of the aims was “to place our employees among the highest paid in the country”. This had been achieved.

Certainly the success of the Blue Book depended on the spectacular increases in wage rates that it was offering. This meant too much to the unions and, above all, to their members, for the “package deal” to be disregarded or treated lightly. [3]

But history has belied the promise of Fawley. Wages in Fawley have risen very slowly indeed since 1960. In September 1962 the wages of skilled workers had risen by 4½d an hour, and in March 1963 by a further 3d. [4]

And then for four years a complete standstill in wage rates. No wonder Fawley wages slipped badly compared to wages of workers elsewhere. In the evidence to the Donovan commission, the management of Esso had to admit:

We did a recent survey in the Southampton area in the oil industry, chemicals, shipbuilding, heavy electrical, light engineering, a nationalised industry and a contracting industry. We found in these eight industries ... on hours worked in the week it was lowest; and on total weekly earnings [Fawley] came sixth out of the eight. [5]

It is also probable that Fawley had become one of the lowest paid refineries in the country – evidence of the loss of shopfloor control. As a result Esso was able to negotiate a new deal in 1968 with radical extensions of flexibility and reduction in staffing.
 

Post Office engineers

There was hardly anyone in this country more enthusiastic for productivity deals than the general secretary of the Post Office Engineering Union, Lord Delacourt (formerly Charles) Smith: “It is by putting the dynamic thrust of the trade union movement for higher pay and better conditions behind the plans for higher productivity that we can produce more rapid progress in the direction of modernisation”. [6]

Prior to the introduction of the productivity deal, the principle underlining the wages of Post Office engineers was the comparability principle, repeated both by the Tomlin commission (1929-31) and the Priestley commission (1953-55). The “Priestley Formula” summarised the position: “The primary principle is that of fair comparisons with the current remuneration of outside staffs employed on broadly comparable work taking account of other conditions of service”. [7]

However, after the introduction of the productivity deal the comparability principle was overthrown and replaced by the productivity principle. The result was that notwithstanding worsening conditions the wages of Post Office engineers have not improved at all compared to those of other engineers. Worse conditions for no extra money – that was what productivity bargaining meant for Post Office engineers.

The rise in wages of Post Office engineers, as compared to other engineers, between January 1966 and January 1969 was as follows (in percentage) [8]:

Thus the Post Office engineers got, in exchange for great productivity concessions, no more than what other engineers got without strings. Not surprisingly it provoked the first national strike of the POEU, some 82 years after the founding of the union!
 

London busmen

On the face of it London busmen got quite a bargain when they accepted their productivity deal for 1968 and then a new one from October 1969. Each time their basic was raised by £1. However, if we look at these “gifts” a bit closer, we find that not a penny was actually paid for productivity.

The 1968 productivity deal gave the busmen £1 in return for accepting one-man operated buses throughout the fleet and a few minor concessions such as a small cut in running time in the off-peak periods. This was the first increase for two years, while in the previous period wages rose every year by this same amount:

In 1969 the board said that the busmen would get no rise unless they accepted further productivity. After wasting six months talking about productivity the Central Bus Committee finally came out unanimously against further concessions. The board then offered to settle on 17s if they accepted one-man operated double deckers plus a commitment to discuss further productivity. After a threatened overtime ban this figure was increased to £1, the final 3s payable in October.
 

Electricity supply

Workers in electricity supply agreed to a very onerous productivity deal in July 1964. When it comes to cash, they found in a very short while that their wages were lagging behind those of workers in other industries.

To add insult to injury, in September 1967 the PIB, in reply to a request of 5 percent wage rise put forward by the unions, offered 3.7 percent with very heavy new productivity strings attached. [10]

While in practically all productivity deals the amount of lolly delivered in the flush of introducing the agreement is much larger than in the follow-up, there are agreements in which this slope is written in and obvious to all the negotiators.

The agreement for electricians in the contracting industry offered the following: at Stage I (March 1967) 13.3 percent; Stage II (January 1968) 5 percent; Stage III (September 1968) 2.9 percent. [11]
 

Other wage benefits cut

Even when wage rises are promised by a productivity deal, other wage allowances are frequently sacrificed. A most important case is the cost of living allowance, which has been sacrificed in a number of productivity deals. Workers in the steel industry had to agree “that future wage negotiations will only take place in the context of productivity bargaining, and this means the abandonment of all outside influences on wage levels, holiday pay, etc, including cost of living adjustments and national awards”. [12]

Then the productivity agreement for the electricians in the contracting industry, referred to above, outlawed bonuses when giving the wage rise:

The rates negotiated in the NJIC are standard and may not be supplemented by bonus, incentive or site payments. Any firm making such payments is liable to expulsion from the NFEA. [13]

As a result, to use the words of the PIB, a couple of years later in the electrical contracting industry “over the full course of the 1966-69 agreement, wage drift may well have been negative”. [14] To put it in simpler English, some electricians lost as much as £6 a week bonus. [15] In the case of workers in the railway workshops, they were granted a wage rise of 5.8 to 7.8 percent, but at the same time other measures, it seems, would cut the wage rise:

The elimination of certain allowances.
The reduction in overtime in the regions.
A reduction in overtime working while still maintaining the same level of output.
Labour costs would remain broadly constant. [16]

The 10,000 workshop workers in Derby, Swindon, Doncaster and Crewe pointed out that earnings would be cut by the switch from piece-work, cut in overtime, etc. No wonder they refused to implement the agreement.
 

Workers’ share in increasing cake

Productivity agreements are on the whole very vague when it comes to sharing out the overall savings. In a general review of productivity deals, the PIB reported, “In about half the agreements, the workers received about half of the estimated benefits; in the others the share varied, sometimes being more and sometimes less than half”. [17]

Furthermore, it is no coincidence that concrete information on the actual sharing of the savings from productivity agreements is very sparse.

The Green Book, the productivity agreement for the steel industry, states that the workers’ share should be 43½ percent of the savings, while 56½ percent should go to the employer. [18]

In evidence to the Donovan commission:

Joseph Lucas gave an interesting example of reorganised arrangements at CAV Ltd for work testing and adjustment of pumps, under which the workers engaged on testing pumps also carried out certain adjustments to faulty pumps. This bargain was very satisfactory to the company. It reduced the labour force by 17 percent – one fifth of the savings secured as a result were paid out in the form of extra wages. [19]

The sharing of savings in other industries can only be vaguely guessed. Unfortunately we needn’t scrimp for examples where workers sold their conditions for a song.

In the years 1964-66 the trading balance of the electricity supply industry rose by 40 percent, while its wage and salary bill rose by only 11.82 percent. [20]

In the mines, between June 1966 – the time of the power loading agreement – and June 1969, the output of coal per man year rose from 380.7 to 453.9 tons, or by some 20 percent. [21] In the same period real wages declined. In June 1966 the daily wage of a miner in Doncaster, paid according to the National Power Loading Agreement, was £4 2s 6d. In November 1967 this was raised to £4 3s 10d, and in November 1968 to £4 5s 2d – altogether a rise of 2s 8d per day, or 3.3 percent over a period of two years. [22] During the same period the rent charged by the National Coal Board to its miner tenants of its houses was raised. Thus in Bentley, near Doncaster, for instance, it rose for old pre-1919 houses from 17s 8d per week to £1 0s 4d, or by 2s 8d (a rise just equal to that of wages!), and for new houses from £1 1s 3d to £1 13s 3d, or by 12s 1d per week. The national average cost of living rose during the same period by 10 percent.

As a consequence of the Post Office engineering agreement, over the last three and a half years the total savings were £89 million, and only £18 million of these were shared among the workers. [23] Getting away with murder, the Post Office dared to offer in July 1969 a wage rise of 4 percent to its engineers, while stipulating that overtime should be cut by one hour. This would have reduced the wage rise offer to 2 percent, and that in exchange for a whole series of new productivity measures. The suggestion was answered by the general strike of the Post Office engineers.

Another interesting case is that of the busmen. When London Transport suggested the wide introduction of one-man operated (OMO) buses into the fleet, the TGWU argued first of all that there should be a substantial increase for all busmen and secondly in addition OMO drivers should get 50 percent of the savings. However, the final settlement was for a flat payment of about £3 5s a week as a bonus. This was then equivalent to about 20 percent of the basic, but as the payment has not been increased with either of the last two wage rises this percentage has declined to about 18 percent. A Bristol busman put it to me this way: “Of the money saved by cutting out the conductor, the driver gets what was saved in social security and SET contributions, uniform, training and other expenses of the conductor while the employer keeps his wages.” That can’t be far off the point and is a long way off the union’s original call for a 50-50 split.

OMO drivers, those who do the job of driver and conductor, got the following bonuses added to their basic rate [24]: 5, 10, 15, 16, 17, 18, 20, 25 percent! How niggardly!

During the long campaign of 1967-68 the London Transport Board tried hard to persuade the busmen to accept its productivity deal. They issued one glossy news sheet which included this sugary promise: “The status, pay and conditions of London busmen ... would ... be improved far beyond that which exists today”. [25]

After finally accepting this deal the busmen found that this was so much eyewash. Real wages have declined since the deal – a fact underlined by the present shortage of drivers and conductors of over 20 percent – one of the highest ever.

At Ferranti’s in Edinburgh the management have introduced automatic design equipment. This equipment does not produce drawings, but tapes which are used on the factory floor directly to operate machines. This process represents the telescoping of three major functions: planning, methods work and draughting together. The DATA (draughtsmen) members at Ferranti, against their union’s advice, accepted such a telescoping in a productivity deal which gave them a pathetic 6 percent increase.

The National Graphical Association signed in October 1969 a two-year productivity deal that granted craftsmen 20s a week on 1 November 1969 and 20s on 1 November 1970, auxiliary workers 17/6 and women 14/6. Since the cost of living is rising annually by something like 14s a week, the NGA sold conditions for practically nothing. The printing employers and the NGA leadership could get away with this because psychologically workers are inclined to treat payment arising from a productivity deal as being just another addition to the wage packet. The danger then is that having accepted a worsening of conditions it is impossible to revert to the usual run of wage rises with which the productivity negotiated wage rise was confused. One ends up financially no better off.

Then take the case of the dockers. We are informed that the “entire UK to Australia container trade eventually amounting to some 2,000,000 tons a year could be handled by one berth at Tilbury employing just 15 men”. [26]

In August 1967 the McKinsey survey estimated that with new cargo handling techniques the labour force at the docks would be reduced by 90 percent over the ensuing ten years. Of course this was an exaggeration, but a deliberate one as part of the general plan to make dockers fear for their employment. But even if the labour force would be cut not by 90 percent but by 50 percent, wages, real wages, should double if the share of workers in the product of labour should remain the same as at present. (In money terms because of inflation wages should rise much more than by double – cumulatively by at least another 7 percent per year.) The fortnightly paper the Port reports that on Number 43 berth at Tilbury, a multi-user berth handling up to 250 containers a day, the “dockers turn round 14 ships a week. Up to four vessels are fully discharged and loaded in a day. The berth is claimed to be the busiest berth in the country.” It employs only 26 dockers and “the average pay packet is in the region of £50 to £55 a week”. [27] That sounds like marvellous pay until one realises that each man is now doing the work previously done by 100.

All these agreements have one thing in common. Not only are the payments relatively small but in almost every case the payments replace the normal wage increases and are not an addition to them. By making productivity bargaining replace normal wage negotiation employers are in fact getting the concessions in the deal for nothing. They can get away with this because workers are psychologically conditioned to an annual wage increase in a particular range – say £1 a week. Also it is here that the previous policies of wage freeze and incomes policy have their value in persuading workers to accept productivity bargains that are particularly advantageous to the employers.
 

Workers’ share – the principle

To justify the small share of wages in savings resulting from productivity deals, one apologist for the system, A.J. Thompson, director of management services of Tubes Ltd Group, argues in the following manner:

For the company as a whole ... some formula is required for dividing the extra profits derived from efforts of workers and management between shareholders, customers, staff, workers and the company for capital investment. One possible solution depends on the interesting fact discovered by Rucker. He found that in any given firm there was a more or less constant ratio over a long period of time between the total labour cost and the added value. Added value is defined as sales minus all bought-out items such as materials, consumables, services, etc. It includes labour and salary costs, depreciation, fixed charges, interest and profit. If, for example, in a given firm, the ratio of labour cost to added value for the past six or seven years has been 27 percent, then it is possible to tell the workers that the company will guarantee to pay this ratio in future. If the workers respond to this and increase the added value, they will continue to get 27 percent of it and hence will increase their wages. [28]

The workers’ share should be in the future, as in the past. This is the natural law ... the natural law of exploitation.

One argument quite often used by advocates of productivity deals is that workers are not entitled to all the benefits of the deal, as a large proportion of the rising productivity results not from labour efficiency, but from that of capital. It is necessary, says the PIB, to carry “a differentiation between the contribution of labour and the contribution of capital. It is important that this differentiation be maintained, and, difficult though it may sometimes be, clearly drawn”. [29]

But who creates the capital, if not the workers? In the main it is workers employed by the company itself. In 1963, 81.3 percent of the funds of all quoted companies (with net assets of £500,000 or more, or income of £50,000 or more) came from internal resources. [30] Another no less phoney argument runs, or rather limps, like this: workers should get only a portion of the savings resulting from productivity deals, as the general public – the consumers – should also share in the benefit. Thus, for instance, London Transport, when introducing its productivity deal, suggested that the public should get an important share in the savings from the “reshaping plan”. [31] Since then services have been cut and fares raised by 50 percent. This was the benefit to the public!

Another really fantastic principle regarding the division of the savings resulting from productivity bargaining is incorporated in the agreement between Swan Hunter and the Boilermakers’ Union: “It is a fundamental condition of this collective productivity scheme that the savings made are divided on the basis of one third to the employees, one third to the company and one third for the acquisition of improved machine tools and equipment”. [32]

How stupid do management and the union bosses think workers are? A third for the workers, a third for the company and a third for buying machines. Who owns these machines? The workers?

The real insult to workers’ intelligence, added to the injury of increased exploitation, is revealed in another paragraph of the same agreement: “Compensation will be paid to those members of the society whose earnings are adversely affected by this agreement at the rate of £30 for every £1 difference between their existing average weekly earnings on normal hours since January 1960 and the new minimum rates for their particular group”. [33]

Imagine a worker loses, say, £1 a week and he gets £30 in compensation – in other words, he is compensated for only 30 weeks. As a matter of fact many welders in Swan Hunter lost more than £10 per week as a result of the productivity deal (for a time the lump sum paid to them kept the welders quiet, but then a bitter strike broke out).

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Notes

1. C. Prattern, R.M. Dean and A. Silberston, The Economics of Large-Scale Production in British Industry (Department of Applied Economics, Cambridge, Occasional Papers 3, 1965).

2. For Fawley: A. Flanders, The Fawley Productivity Agreement (London 1964), p.187; docks: B. Nicholson, The First Year of Devlin: A Review of the Docks, in K. Coates, T. Topham and M. Barrett-Brown (eds.), Trade Union Register, 1968, pp.213-214; ICI: Weekly Staff Agreement, July 1969; railway workshops: NUR, Pay and Efficiency (Workshop Staff), March 1969, p.9; miners: National Coal Board, Report and Accounts 1968-69, House of Commons paper 447, p.85.

3. A. Flanders, Fawley, p.197 (my emphasis).

4. A. Flanders, Fawley, p.183.

5. Donovan commission report no 39, Evidence of Esso Petroleum Co Ltd, p.1676.

6. Charles Smith at POEU conference, 1965.

7. Donovan commission report WE/288, Written Evidence of the POEU, p.22.

8. J. Higgins, Even Handed Justice, Live Wire, POEU Met West Branch, June 1969.

9. Prices and Incomes Board report no.42, Pay of Electricity Supply Workers, Cmnd 3405, p.29.

10. Prices and Incomes Board report no.42, Pay of Electricity Supply Workers, p.22.

11. Prices and Incomes Board report no.120, Pay and Conditions in the Electrical Contracting Industry, Cmnd 4097, p.15.

12. Steel industry Green Book: The Manpower Productivity Agreement Between the British Steel Corporation SCW Division (Margam & Abbey Works) and the Amalgamated Engineering Union, the Electrical Trades Union, the United Society of Boilermakers, the Amalgamated Society of Woodworkers, the Amalgamated Society of Painters and Decorators, the Plumbing Trades Union, the British Roll Turner Trade Society, 8 March 1968, p.3. Hereafter referred to as the Margam & Abbey Green Book.

13. Prices and Incomes Board report no.24, Wages and Conditions in the Electrical Contracting Industry, Cmnd 3172, p.7.

14. Prices and Incomes Board report no.120, Pay and Conditions in the Electrical Contracting Industry, p.15.

15. T. Berwick, Labour Worker, February 1968.

16. NUR, Pay and Efficiency (Workshop Staff), pp.6, 7, 23, 24.

17. Prices and Incomes Board report no.123, Productivity Agreements, Cmnd 4136, p.29.

18. Margam & Abbey Green Book, p.2.

19. Donovan commission research paper no.4, Productivity Bargaining, p.20.

20. Prices and Incomes Board report no.42, p.8.

21. National Coal Board, Report and Accounts 1968-69, p.84.

22. Prior to the National Power Loading Agreement, when piece-rates were negotiated locally, in Bentley colliery, near Doncaster, miners working under the Meco-Moore set-up were paid in 1964 £3 5s 4d, and in 1966 £4 1s 10d, a rise of 16s 6d over two years, or 26 percent.

23. Financial Times, 9 July 1969.

24. Prices and Incomes Board report no.50, Productivity Agreements in the Bus Industry, 3498, p.16.

25. Busman, September 1967.

26. Sunday Times, 23 November 1969.

27. Port, 6 November 1969.

28. Engineering Employers’ Federation, A Productivity Bargaining Symposium, p.100

29. Prices and Incomes Board report no.123, p.35.

30. Economic Trends, February 1966.

31. Busman, September 1967.

32. Summary of Agreement between Swan Hungar and Tyne Shipbuilders Limited and the Amalgamated Society of Boilermakers, Shipwrights and Structural Workers, 25 October 1968 (my emphasis).

33. Summary of Agreement (my emphasis).

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Last updated on 16.6.2004