Unions and profitability over the 1980s: Some evidence on union-firm bargaining in the United Kingdom

In this paper an attempt is made to assess the behaviour of the rate of return on sales of unionised firms as compared to the non-unionised ones in the late 1980s in the United Kingdom. The main aim is to examine what has happened to the relationship between unionisation and profitability after the changes in the union legislation, competition environment and cyclical variations that took place over this period. The impact of different forms of union-firm bargaining on the union-profitability effect is also examined. The data reveal that the negative union effect on profitability exists, even after controlling for firm specific fixed effects, but that it has been sharply reduced over the 1980s.