Worker representation is a mess

The most recent unemployment figures have demonstrated the flexibility and resilience of the British labour market at a time of crisis. Most independent commentators predicted that the jobless total would exceed three million by the end of 2009, whereas the consensus forecast today is that unemployment may peak below this figure in 2010 and then begin to fall. Employment performance was also strong before the recession hit. The UK's employment rate (around 75% of the working age population) compared favourably with the best in the Organisation for Economic Co-operation and Development (OECD) countries and the economy had been running at full employment for more than a decade.

These are remarkable achievements when compared with previous booms and recessions. Employers have been ready to cut investment in hard tangible assets like plant and computers, but to maintain their investment in people. People are expensive to sack and expensive to replace later when times get better. It's best to hang on to good, skilled staff, freeze recruitment and negotiate pay freezes. One way or another the feared 3.5 million unemployed or more we were told to expect with such a big decline in GDP is not going to happen.

The surface story is that this is due to Britain's exceptional flexible and liberal labour market. There is truth in this, but in my view the main driver is the deep structure of the knowledge economy and the ever-growing importance of in-house, skilled staff who know the business, its customers and internal processes. The argument is important because some employers are pressing for yet more flexibility when they should be discussing the workplace bargain knowledge workers need.

For there is no cause for complacency. Low pay remains a persistent problem and the gender pay gap is stubbornly wide. Moreover, according to a recent report from the Department for Business, Innovation and Skills, around a third of all people at work have experienced some form of unfair treatment in the past year.

The employer case for flexibility is now widely accepted. But there is very little evidence to support the argument for more deregulation. One of the arguments for less red tape is that the volume of claims to employment tribunals is significantly higher today than during the mid-1980s (38,000 claims in 1986, more than 130,000 today). But a swift glance at the data confirms that the most significant increases took place during the period of Conservative Government before New Labour's modest expansion of employment rights. It is because unions are not acting for people that they resort to tribunals to get redress of grievances.

As John Monks, former general secretary of the TUC, pointed out in 2003, it is all very well for employers to complain about red tape but, if they want something better, then they must accept the case for a more effective collective worker voice in the workplace. This is how disputes can be resolved without recourse to law. Monks's message was blunt: the choice is either more representation or more litigation.

But what we have today is a growing corpus of individual rights, a thin residue of collective bargaining in the private sector, some limited intervention to promote a weak form of negotiation under the statutory union recognition system, increasing intervention from the EU and an employment relations culture in the public sector that would look familiar to a time traveller from the 1970s. This is better described as a mess rather than a system. It hardly corresponds to what workplace representation should look like in a knowledge economy. The non-system affects the quality of employment relations, organisational performance and productivity. We need a new workplace settlement fast - it's the precondition for sustained growth.

- Will Hutton is executive vice chair at The Work Foundation