IMF study: decades of chipping away at unions is “strongly associated” with rising inequality

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IMF study: decades of chipping away at unions is “strongly associated” with rising inequality

FEBRUARY 08, 2016 by

Surprise!

After decades of undermining labour unions, it turns out the biggest winners have been the super-rich.

According to a recently published study from the research department of the International Monetary Fund (IMF), declining unionization around the world since the 1980s has driven down wages and left top earners even richer than they were before.

“We found strong evidence that the erosion of labor market institutions in the advanced economies examined is associated with an increase of income inequality,” says the study’s authors, IMF economists Florence Jaumotte and Carolina Osorio Buitron.

The study says that although globalization, technology and financial deregulation have contributed to rising inequality, declines in unionization “limit workers’ influence on redistributive policies,” while “the rise in top income shares is possibly supported by the weakening of labour market institutions” since this “reduces the bargaining power of average wage earners relative to top earners”:

“The most novel result is the strong negative relationship between unionization and top earners’ income shares. This finding challenges preconceptions about the channels through which union density affects income distribution. Indeed, the widely held view is that changes in labor market institutions affect low- and middle wage workers but are unlikely to have a direct impact on top income earners. We argue that if de-unionization weakens earnings for middle- and low-income workers, this necessarily increases the income share of corporate managers and shareholders.”

The study compares declining union density with rising inequality between 1979-2010 using data from twenty advanced economies (including Canada):

Read more here

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