Introduction Industrial Relations System as managers, workers and their



The title sets
scope for a broad meaning on the term state. The definition used throughout this
essay will be in the context of national governments and their ability to implement
frameworks, legislation and economic policy within employment relations. However,
Weber goes so far as to say that the
modern state expropriated the means of a political organization to legitimise the
use of physical force. The term actor is referred in Dunlop’s Industrial Relations System as
managers, workers and their union representatives and government institutions,
working in three contexts; technology, industry markets and power distribution.
Dunlop does not, however, specify how these
actors create employment relations rules. This essay suggest that the state is
the most important actor in driving the changes seen in employment relations. Finally,
the term employment relations is critical to understand the direction of this
essay. The definition nonetheless is disputed literature which can encompass a
host of relations between actors; from coffee breaks with managers to the collective
bargaining power of unions over the state. This essay will focus on the interactions
and importance of the actors in driving regulation. Flander describes the study
of these interactions by

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“the study of the institutions of job regulation”. These interactions will be analysed
and critically assessed through three themes. The power transition from unions
to state, citing the growing importance of the state as economic growth becomes
key policy. The state and its ability to implement new legislation on the
nation. Finally, the states framework in employment relations to deal with new financial
intermediaries such as Private Equity Firms.


Power Transition
from Unions to States


Over the last century there has been a fundamental
shift in how the state intervenes in employment relations. Post war
intervention from the state, up until 1979, was limited and saw trade unions
with a large proportion of power. However, with
global economic forces taking a forefront of Western economies there was a
power dynamic change between trade unions and the state. The emphasis grew on
the state as an Economic Manager. This meant greater indirect labour market
intervention and thus the states importance as an actor in employment relations
grew. The privatisation of British Telecom, British Gas, British Airways and
British Rail, is key example of this, and highlights how the state could
heavily influence employment relations, without a debate with trade unions.


This indirect approach shows how power shifted from
the unions and back to the state post 1979. Thus, consequently the abolishment
of its original tripartite system between the unions, firms and itself, the
state. Furthermore, by decreasing the states total level of direct employment
in the public-sector, through privatisation, it would allow potentially
negative intervention within the labour market without a conflict of interest. This movement to a prioritised
economic focus has caused a decreased level bargaining power to employees. Thus, an era of returning market
individualism has meant employment relations are at the mercy of the state and
its new primarily concentrated focus on market forces and their imperfections. The
UK is also seen to have an abstentionism policy on matters concerning
employment relations compared with others such as that of Sweden. The UK is
defined by others as having a lassies-faire approach. “Laissez-faire was in this respect as resonant a slogan for trade
unionist as it was for early British Capitalists” Yet it still heavily
influences employment relations. Thus, it can further be argued that this shows
the extent to which the state is an important actor across the world, further
citing evidence for the state’s major importance as an actor in nearly all


However, this is dependent upon the governance of the
economy. The labour government in the UK has a greater emphasis on the
importance of the employee voice and consequently the decision of employment relations
falls more heavily on trade unions and not the state. A Conservative
government, on the other hand, intervenes less directly in the market. The
party uses indirect approaches which can heavily influence employment
relations. The conservatives often-looser fiscal policy influences the labour
market heavily by allowing companies to increase employment opportunities and
potentially wage growth. Thus, making the state the major actor in employment
relations over and above trade unions. It
would therefore appear that within the UK the importance of state as an actor
changes with political party changes. Shifting power from trade unions to the
state, during a transition from a labour to a conservative government.


The State
as a Legislative Body


The state has the power to create legislation that
directly affects employment making it the key actor in this market. For
example, the national minimum wage act of 1998, creates an industry wide
minimum wage dependent upon the age of the employee. This ability to implement
law binding acts coupled with penalties if firms choose to ignore them creates
a level of employee security, thus making them the key actor. Trade unions
nonetheless, still play a key role in asserting employee voices. Hence, we must
“emphasise the gains made by trade
unions on the Wages Councils” We recognise the trade unions ability of
collective bargaining from this, verifying their importance along with the
states. However, in recent times their power has a limited reach, often
resulting in a change in one industry or in most cases an individual company.
Therefore, the ability of the state to create legislation that affects a broad
range of industries and businesses makes its role more effective in adjusting
employment relations, and thus arguably the most important actor.


The trade unions role in recent times has become
increasingly an advisory role instead of an implementer. The Low Pay Commission
is an example of this. In addition, the movement towards individualism as
employees notice the effectiveness of legislation on their employment has led
to general acceptance of the power of the state to which they are powerless. “experience had taught them that in the
face of greatly superior power it was the best they could do and their own
leaders … were anxious to assure them that this was so” This acceptance
has caused a fall of in trade union membership as employees become confident in
the state’s ability to act on behalf of them in a positive way. In 1979 union
membership stood at 57% of the UK workforce, in 2016 that number stood at
23.5%, showing the employees lean towards individualism rather than
collectivism, as confidence about the state’s ability to implement legislation
becomes clear.


However, the execution of the state’s new implemented
policy leads for concerns over the states importance as an actor. “compliance appears to constitute an acute
problem in developing nations”. As countries ability to execute its
legislation is of key importance. As firms and employees notice a lack in penalties
to those who do not abide, the result will be a decreased a lack of faith in
the state. The consequence of this is that the state’s power is undermined and
it no longer becomes and important actor in employment relations as legislation
becomes meaningless. In addition, there is a clear difference between
legislation effectiveness on the private sector versus the public sector. “public sector workers earn higher wages
than comparable than comparable private sector workers”. This differential is a clear example
that demonstrates the private sectors ability to scrutinize policy to derive
financial efficiencies. This differential can therefore be used as a tool to
understand how effective a state’s legislative ability is. Thus, a large
differential validates an ineffective state decreasing the importance of it as
an actor in employment relations.


framework and Private Equity


The state plays a crucial role in establishing a
framework to minimise the effects of new businesses practices developed to
exploit loopholes in the employment relation law. Trade unions and regulators have accused private equity firms of
seeking short-term efficiencies in acquired firms through introducing severe
job and wage cuts. The state as an external actor can create a framework
which allows for the economy to work efficiently and avoid these criticisms.
With an effective framework, it allows all stakeholders in the business,
employees and suppliers for example, to retain stability and security, thus the
state provides a crucial role in employment relations. For example, the
creation of the 401(k) pension scheme allows employee contributions to be recovered
and prioritised over debt holders should a firm be facing bankruptcy court. The
importance of such frameworks in business allows employment relations to remain
secure, a key fundamental aspect in ensuring a healthy relationship between
stakeholders, thus making the state the most important actor. The validity to
the importance of such frameworks can be proven by new financial intermediaries
such as Private Equity firms.


Equity, relatively new intermediaries, acquire and alter operating companies to
maximise shareholder returns at the expense of long established stakeholders. By assessing these new
intermediaries, the ‘varieties of capitalist’ literature is said to be
changing. The intermediaries no longer sit within the national business system
to which normal actors of employment relations would work and thus trade
unions, NGO’s and employee collectivism can no longer act. With these normal
actors, no longer able to drive employment relation demands, it falls upon the
state to implement an effective framework to deal with these new financial
intermediaries. The transactions that PE firms deal in are highly leveraged and
consequently very risky for the stakeholder who are unable to have a voice in
the decisions being made. One might
expect a nontrivial fraction of leveraged buyouts to end in bankruptcy. For the
total sample, 6 per of deals have ended in bankruptcy. The high level of
bankruptcy occurring through such transactions are currently, legally, creating
negative effects on employees within those deals. Firstly, the job security of
employees is lost and during bankruptcy thousands of jobs are lost. The
leveraged buy-out of and later re-structuring of Mervyn led to insolvency and
30,000 jobs were lost. The role of the state framework in this case proved
effective in that the 401(k) pension scheme allowed its employees to claim a
large majority of their contributions to the company.


The state and the framework it creates is
important in securing stakeholder confidence and prosperity. Its continuing
role in updating framework to contest these new financial intermediaries is an
important stewardship role. Thus, the state remains at the forefront of
employment relations issues and maintains its key actor status. However,
empirical evidence has shown that increased levels of regulation in the market,
especially pro-worker framework can lead to decreased level of economic growth.
“results show that pro-worker labor
regulation resulted in lower output, employment, investment, and productivity
in the formal manufacturing sector”.  A
key element that could therefore be argued is balancing the economic
growth/financial reward and pro-worker framework. Economic growth which is
derived from buy-outs and restructuring of companies can lead to further employment
opportunities in deals which are successful. “Evidence suggests that buy-outs…contributed positively to the UK
economy from the early 1980’s onwards… these enterprises are estimated to
employ in excess of 1.3 million people”. This would mean that the state no
longer has an important role in employment relations. Wealth creation and
employee benefits are gained because of this activity and hence no need for an
external actor.




We see that the state becomes a key actor in employment
relations as unions global economic forces take a greater stance in society.
The resulting outcome is that the state begins to intervene within the employment
relations in an indirect yet significant way through its economic policies. To this
level, we have identified why the state gained its importance but also the extent
of its abilities to impact employment relations heavily, for example privatisation.
Nonetheless, through critical analysis, the identification of the UK as a
relatively Laissez-faire state gave a notion for its impact compared to other
countries such as Sweden. The assessment of the political party influence also
gave rise to the changing importance of the state. The state being identified
as a legislative body, strongly suggested that it was the omnipotence actor as
its regulations affected the nation and could be created without consulting
third parties. However, on evaluation of the state’s ability to execute this legislation
it became apparent that developing nations could not use this power effectively
because it became undermined by the lack of penalties on firm who did not
abide. In addition, a key differential stood out in public versus private sector
wages sighting evidence for a flaw in the states legislative ability. Finally, the
states framework to deal with new financial intermediaries such as private
equity firms, concludes my thoughts on the states importance as an actor. The
state being the singular actor in employment relations issues at the forefront of
private firm innovation provides evidence for it being the most important.
Although there is evidence to suggest framework is unwanted to promote economic
growth, without the states framework, employment relations would suffer on this