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Britain's labor markets have been thoroughly transformed over the past two decades by the decline of collective bargaining: in the 1970s, three-quarters of British workers were covered by union-negotiated collective bargaining agreements; by the end of the 1990s, this figure had fallen to forty percent and to one-fifth in the private sector. Working days lost to strikes in the mid-1990s were merely four percent of those twenty years earlier. Industry-wide wage agreements have become much less common and the focal point for collective bargaining is now the firm or workplace. In the 1970s, no one anticipated these changes. What accounts for them? A popular explanation refers to the pieces of legislation introduced by Conservative governments in the 1980s and 1990s to constrain the exercise of discretionary power by labor unions. However, laws never operate in a vacuum, but in a particular context and the context defines their impact. In this instance, the context was a much more competitive product market environment that required firms to reform their industrial relations practices and macroeconomic policies much more inhospitable for organized labor. This means that changed economic policies had a lot to do with the decline of unionism, but it was the policies regarding product market competition and macroeconomics that were paramount and that created the climate for the new laws on industrial relations to have their impact. As a consequence of these changes, union-nonunion differences in labor productivity by the end of the 1990s were negligible. This is shown in this paper using data from the Workplace Employee Relations Survey.