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Tony Cliff

The employers’ offensive

Chapter One: Why productivity deals?

The avalanche of productivity deals

Few would dispute that productivity agreements are among the most important facts of industrial life in Britain today. Yet it is less than ten years since the first major deal was negotiated at the Esso oil refinery at Fawley in Hampshire. How many workers who read of this strange new phenomenon would have guessed that in such a short time it would come to dominate the lives of so many? The Fawley deal was signed in July 1960. It was not until the spring of 1962 that the details became known to the press. News of the agreement marked the beginning of a movement which was slow in getting off the ground. During 1963 and 1964 negotiations for four similar agreements were taking place at British Hydrocarbon Chemicals Ltd, Shell Chemicals (Petrochemicals) at Carrington, Alcan Industries at Rogerstone, and the Spencer Steelworks at Richard Thomas and Baldwins. Negotiations for a productivity deal also went on for several years in the electricity supply industry, culminating in an agreement on 1 July 1964.

The Esso Milford Haven agreement and the Mobil Oil Coryton agreements followed suit. Roughly at the same time several agreements concerned with the distribution of oil were made, followed by various other road haulage agreements for such bulk products as beer. London busmen were encompassed by a productivity deal in 1964. A year later, in November 1965, municipal busmen were granted a productivity bonus when they operated large capacity standee and one-man buses.

In December 1966 the PIB estimated the spread of productivity deals thus: “Over the last six years, productivity agreements ... have probably affected no more than half a million workers”. [1]

But immediately after the publication of this report there was a landslide towards the adoption of productivity criteria throughout the nation’s negotiating machinery. In 1967 the number of productivity deals registered at the Department of Employment and Productivity averaged about 60 per month. Once the rush had started, the pace grew more intense. For the first five months of 1968 the number of deals registered rose to 75 per month, and the number shot up in June of that year to a level of about 200 per month for the remaining seven months of the year. Since the beginning of 1969 the number of productivity deals registered at the DEP was at a lower level, but still double that of the first half of 1968.

In February 1969 this register recorded some 2,500 cases covering around 41 million workers, or 20 percent of all employed workers ... at the end of June 1969 the register recorded some 3,000 cases covering approximately 6 million workers, or 25 percent of all employed workers. [2]

It took about 100 years for the piece-work payments system to spread until it encompassed two fifths of the British working class. Productivity deals engulfed some 25 percent in a few years. What fantastic speed!

With justified satisfaction the Financial Times could declare, “The country’s present obsession with productivity probably exceeds the wildest dreams of those who were trying to spread the word five years ago”. [3]
 

All-embracing

Productivity deals have engulfed all sections of the labour market, from the 350,000 miners and 138,000 workers in the electricity supply industry to the 120 employees involved in the Milford Haven agreement. Altogether around 5 million manual workers are now involved in productivity deals. But that is not all – for increasingly white collar workers are being drawn into the net.

In a research paper on productivity agreements in offices, published by the Engineering Employers’ Federation, it is stated:

The notion that white collar, especially clerical, workers cannot be measured effectively is a myth that must be dispelled. Investigations made during the course of this study have shown that there are few areas indeed which are impractical or non-economic to measure.

Information collected by the writer from many organisations in addition to the one providing case study material bore out the contention that most white collar areas were only 50 percent effective, and that in most clerical areas the effectiveness was less.

Installation of control techniques almost invariably increases total effectiveness by at least 25 percent. [4]

Although slow to start with, productivity bargaining has advanced rapidly into offices since 1967, and by 1970 around 1 million office workers were covered by them.
 

The “productivity” offensive

It is the aim of this book to show that the dramatic growth of productivity bargaining is not an accident but part of a determined offensive by the employing class which has as its final aim the shifting of the balance of forces in industry significantly in its favour. The attack is a total one – in other words, it seeks to bring all the weapons into the field against the worker: the state with its Prices and Incomes Board and anti trade union legislation; the trade union bureaucracy, almost unanimous in their backing for “productivity”; the so-called “science” of work study; and a massive propaganda campaign through the mass media aimed at convincing workers that they have a common bond with employers in promoting industrial efficiency and the “national interest”.

The aim of the employers’ strategy is to split the workers one from another, to destroy workplace organisation by either muzzling the shop stewards or integrating them into the union machine, and to use the union leadership as a disciplinary agent against those who fight back. In other words, the strategy is aimed at finding a permanent solution to employers’ problems.

That this strategy has been clearly and carefully thought out is nowhere more dramatically demonstrated than in a secret circular from the headquarters of ICI to the senior management of its local factories, which has come into our hands. This document, sent out during ICI’s battle to implement its first productivity deal in 1965, which was known as MUPS (Manpower Utilisation and Payment System), shows very clearly the forces at play – on both sides – in the productivity battlefield. For this reason I have reproduced it in full at this stage [5]:

MUPS progess report

Q: Some considerable time has elapsed since the publication of the company’s proposals. Why has so little real progress been made?

A: It appears that resistance to MUPS is mainly due to organised groups of militant stewards in the main centres of production (Teesside, Huddersfield and Manchester).

Q: What action has the company taken to combat this attitude?

A: The policy of the company has been to “short circuit” this activity by direct appeals to employees via company publications (house magazines, etc) and to enlist the aid of national officers to “discipline” the most active participants.

Q: Has this resistance any political significance?

A: It is thought that certain “leftist” groups are active on Teesside, and at Huddersfield there are at least two members of the “extreme” political “left”. The position in other areas is more obscure.

Q: Why has the company not used sanctions against the “offenders”?

A: These militants are active in recognised “official” trade union bodies (district committee, branch officers, etc) and any attempt to discipline them by the company could result in the hardening of national officer opinions of our objectives within the scheme.

Q: What is the extent of “unofficial” shop steward activity within the company?

A: There exists an unofficial “national committee” comprising a number of the most militant shop stewards, which meets regularly, from time to time.

This sort of activity appeals to the more militant of the company’s employees and for that reason must be taken seriously.

The policy of the company is to engage these groups in protracted discussions on limited objectives, at the same time attempting to make real progress in the more receptive areas.

Q: What about factory “organisation”?

A: Shop stewards “committees” exist in some factories, but these are by no means general throughout the company. There is conflict of interest between craft and general workers’ unions, and the MUPS proposals sharpen the more basic of these.

Q: When can the elimination of this resistance be expected?

A: It is thought that as government pressure is brought upon the unions’ national bodies to conclude the MUPS, some of this pressure will be exerted by the national officers on their more recalcitrant members, so that in time the trade union side will itself remove this resistance.

There is evidence that “outside the company” influences have a bearing on this problem (tutorial staff at further education centres and universities are formulating policy, etc, and providing research for the more organised militant groups).

Q: What steps can be taken locally?

A: Every effort must be made to publicise the successes of the trial sites and to minimise the “setbacks”. Militant shop stewards should be “presented” to more reasonable employees as “troublemakers”, etc, and any action, industrial or otherwise, should be accorded the minimum of publicity, if any.

Attempts must be made to isolate the militants from their membership before any sanctions are applied.

Motivation of the Teesside manufacturing complex appears to be egotistical on the part of the main protagonists and some success may be achieved if this is recognised and approaches made accordingly.

“Official” trade union opinion is that a “hard core” of shop stewards is responsible for the relatively slow progress of the MUPS proposals.

These, then, are the questions we must answer. Why is it that ICI is so desperate to implement the deal? How can it be so certain of the support and backing of the government and trade union officials in this job? What are the weaknesses in the workers’ unity that ICI expects to exploit, and why does the management expect the unofficial committees and “militant groups” to provide the only serious opposition to its plans? Above all, it is clear that ICI sees as its greatest strength the ignorance of the mass of the workers of the real aims of the deal and its results in terms of their wages and conditions. This is where we hope that this book can play a part in developing an effective counter to the “productivity” offensive.
 

Reasons for incomes policy

One cannot grasp the massive move towards productivity deals without understanding the role of the government’s incomes policy in softening up workers, preparing them to accept the plunge. The motives behind productivity bargaining are the same as those that animated the incomes policy.

Practically all the Western capitalist countries have embarked on an incomes policy course – France, Italy, Sweden, the Netherlands, Belgium and Austria. In Britain it was the Tory government of Macmillan that first started on this road. In July 1961 the then Chancellor of the Exchequer, Selwyn Lloyd, introduced a pay pause as part of a national incomes policy. The pause was to end in March 1962, and be replaced by a more permanent regulation of wage rises. In February 1962 the government issued a white paper called Incomes Policy: The Next Step, which set out the notion of the “guiding light”. The increase in wages and salaries in 1962 was to be kept within the 2.5 percent figure by which it was expected productivity would rise during the year.

When Wilson came to power he continued along the same path.

To understand the motives behind the move towards incomes policy over the past decade in practically all countries of Western Europe, we need to comprehend the changing situation facing those who own and control industry, the capitalist class.
 

The changing pattern of investment

Firstly, in present day capitalism the individual investments made by big business have grown enormously, both in size and in the time they take to mature. And at the same time the risks involved in the act of investment have also increased, because the pace of technological change is greater today than ever before. While it is true that the rapid advance of technology offers very high profits nowadays when investments are made in the right place, it is also true that the penalties for investment in the wrong place or at the wrong time are also much greater. Secondly, the threat of obsolescence (machinery, etc becoming out of date) has radically increased during the present technological revolution. Thirdly, the pressure of international competition is greater than ever, and has been made sharper still by the systematic lowering of the barriers to international trade since the early 1950s, notably inside the European Common Market and the European Free Trade Association,

Because of these developments it has become increasingly vital under contemporary capitalism for the typical board of directors to be able to plan ahead over a number of years with some degree of certainty and confidence. And thus planning has become very respectable with big business:

It is indeed characteristic of modern capitalist planning that the impulse to embark on the seemingly speculative enterprise of long-range prediction comes from the industries which find that they are compelled, because of the nature of the technology that they employ, to commit large indivisible blocks of capital to projects that will only pay for themselves after the lapse of several years.

Systematic economic analysis, preferably in collaboration with other industries similarly placed, whose decisions will also influence the outcome, is then the obvious way of reducing the risk. In Britain it was the steel industry which took the initiative in this field. The Iron and Steel Board, the public agency which had been set up in the early 1950s to supervise this industry, found that its attempts to guide the direction of steel investment, and to check whether its volume was adequate, required a close examination of trends over the economy as a whole. The third five-year development programme issued in 1961 was in some ways a pilot project for the full-scale planning operation on which the British government embarked with the establishment of the National Economic Development Council in 1962. [6]

As an illustration of the tendency towards the very long period before investments start to pay their way, the following recent example will suffice. In July 1965 the British Motor Corporation (BMC) took over the giant Pressed Steel Company for £33½ million. At the end of December 1965, partly to avoid being investigated by the Monopolies Commission, BMC sold the Pressed Steel factory at Linwood, near Glasgow, to the Chrysler-Rootes group. For this lone factory Rootes paid £14½ million. What matter here are the terms for payment – Rootes paid £3.6 million down, with a promise to pay another £2 million by the end of 1971. The Board of Trade is staking the other £8 million to £9 million (at an undisclosed but no doubt very favourable mortgage rate). [7]

As for the risk of equipment becoming out of date, we have only to remember the common saying in the United States that any aeroplane that exists is obsolete, and that many an aeroplane or missile is already out of date before it even leaves the drawing board. The same applies, even if not quite so dramatically, to other products. The huge British ICI combine provides a recent example:

At Wilton on Teesside engineers from Kellogg International are putting the finishing touches to ICI’s new 200,000 ton a year giant ethylene cracker. When it comes on stream in the spring it will be the biggest in Britain, and it is already scheduled as likely to close down next year, when the 450,000-ton super-giant being built by Lummus comes into operation. Some £7 million worth of gleaming hardware straight into mothballs waiting for demand to catch up – this is the alarming price of technical progress. [8]

ICI is Britain’s largest manufacturing company, and the threat of obsolescence illustrated in the above example is expressed in the company’s changing depreciation policy:

The period of depreciation for equipment in ICI, which was commonly 20 years plus before the war, was reduced from 1950 onwards, when, according to the chairman, the company was “beginning to think in terms of 15 years for new projects.

In the early 1960s this came down to 12 to 15 years, and more recently the average for new plant has come down to about ten years. For certain kinds of investment, where the risks of technical obsolescence are thought to be high, the amortisation period is down to five to seven years (information supplied by Paul Chambers, chairman of ICI). [9]

Also research takes a larger and larger place in production. According to the National Institute Economic Review, in 1959 the American aeronautics industry spent on research a sum equal to 35.7 percent of the value of its net production in 1958. The figure for the electronics industry was 36.5 percent. [10] Because of competition, research is shrouded in secrecy, and each firm is forced to spend huge sums of money on research that may well be obsolete long before it produces any results.

The long term nature of investment and the rapid pace of technological change impel large firms towards attempts at long term control over all aspects of cost – and particularly over labour costs. This is why the employers need greater predictability in their labour relations – wages, hours of work, grading, productivity – so that they can increase the area within which they can plan ahead in the working of their firms.

Another reason why the employers need an incomes policy is to be seen in the increasing unevenness between the conditions in different sections of capitalist industry in one and the same country. While industries with very fast rates of growth can easily afford relatively high wages demanded under full employment, other slower growing industries find it much more difficult to pay. The traditional capitalist solution, of leaving the problem to be solved by simple

laissez faire (the rule of the jungle), would tear the ruling class apart today, in the modern conditions of very high concentration and centralisation of capital. In the present situation the solution that becomes necessary is one that involves state intervention to make sure that wages don’t rise at a rate faster than the more backward industries can afford. [11]
 

International competition

Another factor making it vital for the employers to increase the predictability of their costs, and above all of their labour costs, is the increasing tendency for profit margins to decline. This is the effect of increasing international competition.

In the first decade after the war, when the rehabilitation of Germany, France, Italy and Japan had only just been achieved, it was quite easy for employers to put up prices when wages were increased. After all, the Employers’ Federation that agreed to the wage increase was usually made up of exactly the same people as the trade association that determined prices. With world prices going up generally, until the late 1950s there was very little to prevent the employers from compensating for wage increases by putting up their prices, even in the field of exports. But as international competition increased, profit margins began to get squeezed. Take the case of the British engineering industry, which is responsible for a third of manufacturing employment in Britain, and for over half of all British exports – the following table shows the undoubted tendency for profit margins to decline:

R.R. Neild, too, found a decline in profit margins in relation to value added as a fairly general picture in manufacturing industry during the period. [13]

The problem of international competition is especially acute in the British economy. International competition has forced a squeeze on profit margins, but this squeeze threatens to become even tighter in an economy like the British capitalist economy which has large-scale troubles with its balance of payments. For in trying to solve the balance of payments problems, a succession of British Chancellors of the Exchequer have resorted to a system usually referred to as “stop-go”, which has meant forcing industry to work below capacity for an extended period, every four or five years. This has meant that unit costs in British industry have gone up too.

Indeed British capitalism has suffered under a double burden since the early 1950s: firstly Tory chancellors have operated stop-go policies that alternately released and shut off demand in response to the pressures of the balance of payments situation; and secondly there has been an enormous expenditure on armaments that devoured roughly half the amount available each year for investment. The result has been an economy that looked stable on the surface, but that grew at a rate lower than any other developed economy. From 1950 to 1955 the real national product per man-year in Britain grew by only 1.8 percent, and from 1955 to 1961 by only 1.6 percent. In other countries over the same period the figures were as follows: Germany 6 and 3.5 percent; France 4.3 and 3.5 percent; Italy 5.4 and 4.1 percent; Netherlands 4.4 and 2.6 percent; United States 2.8 and 1.4 percent. [14] And from 1954 to 1962 Britain’s share of exports in world trade fell from 20.1 to 15.2 percent. [10]

At the same time, largely because of relatively full employment, workers’ bargaining power has increased considerably. In many industries the employers have found themselves, without the disciplining sanction of unemployment, in a weaker position vis-à-vis organised labour than ever before. Up to the late 1950s the employers’ main reaction to this situation was to make the best of it, giving way to the workers’ demands wherever the only alternative was an extremely expensive stop in production, and passing on the higher costs in the form of higher prices. For the boom was on, and such a boom as never before.

Inflation was of course deplored, publicly, but as long as profit margins were maintained it was not felt as a real problem. But, as we have shown, international competition put a squeeze on profit margins, and with a semi-stagnant economy workers’ bargaining power become more and more of a problem for the bosses. So at the end of the 1950s, and increasingly in the 1960s, state and industry together have sought to find ways to achieve the ultimate aim of any ruling class – a working class that knows “its place” and keeps it, that demands no more than the iron rations offered by its rulers, and that is prepared to pay the costs of its rulers’ mistakes.

The coming together of state and business in economic planning and its twin brother, incomes planning, has been made that much easier by the fact that the state has already become a central factor in the economy of the capitalist countries:

Central and local government together employed 3 million people who earned 15 percent of all wages. The public sector as a whole was responsible for over 40 percent of all fixed investment and for as much as 50 percent of the building work done in the country. [16]

In 1962 total public expenditure, including interest paid on the national debt, was equivalent to 44 percent of GNP. The ratio had varied but never fallen below 40 percent in the previous decade. [17]

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Notes

1. Prices and Incomes Board report no.23, Productivity and Pay During the Period of Severe Restraint, Cmnd 3167, p.8.

2. Prices and Incomes Board report no.123, Productivity Agreements, Cmnd 4136, p.3. Among the number included in the DEP register are some which were regarded by the department as not authentic productivity agreements. In August 1968 the number of such agreements was considered to be some 130, covering about 48,000 workers.

3. Financial Times, 29 September 1969.

4. J.E. Bayhylle, Productivity Improvements in the Office (Engineering Employers’ Federation, 1968), pp.6-7.

5. ICI, CLD 6/68, Senior Management, Div MUPS CO/RD.

6. A. Shonfield, Modern Capitalism (London, 1965), pp.95-96.

7. Guardian, 31 December 1965.

8. Sunday Times Business News, 16 January 1966.

9. A. Shonfield, Modern, p.42.

10. Quoted in S. Mallet, Continental Capitalism and the Common Market, New Left Review, March-April 1963.

11. C. Vittorio Foa, Incomes Policy: A Crucial Problem for the Unions, International Socialist Journal, June 1964.

12. W.A.H. Godley, Pricing Behaviour in the Engineering Industry, Economic Review, May 1964.

13. R.R. Neild, Pricing and Employment in the Trade Cycle (Cambridge, 1963), p.42. Similarly, it was found that the net return on capital (before tax) of the “big six” car producers changed between the years 1954 and 1963 as follows (A. Silberston, The Motor Industry 1955-64, Bulletin, Oxford University Institute of Economics and Statistics, November 1965):

14. National Institute of Economic and Social Research, Economic Review, no.16.

15. N. Davenport, The Split Society, Spectator, 8 November 1963.

16. A. Shonfield, Modern, p.106.

17. A. Shonfield, Modern, p.106.

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Last updated on Last updated 14.5.2003