From the TUC

Tackling income inequality and restoring growth: how wages can help

23 Mar 2013, by Guest in International

TUC President Lesley Mercer – Employment Relations Director at the Chartered Society of Physiotherapy – attended a French trade union conference in Toulouse earlier this week. The talk was all about inequality, the damage it does, and what can be done about it.

The ILO has joined the growing list of global organisations expressing concern about the impact of income inequality.  Two months ago, the head of the IMF described excessive income inequality as “corrosive” to both growth and society.

I represented the TUC this week at an international conference hosted by the French union confederation CGT to coincide with their 50th congress.  Delegates from a range of countries, as well as representatives from the ILO and OECD, supported the view that income inequality must be given more attention.  A range of possible ways of achieving great equality were discussed at the conference.  None of these could be described as new, but they are still worthy of reiteration.

In the past there was a view that it didn’t really matter how many super-rich people there were, as long as the rest of us were doing OK.  This view seems to be changing now.  One obvious reason for this is the ever-rising gap between big earners, seemingly untouched by the recession, and lower and middle earners who have seen the real value of their wages eroded by austerity.  Well publicised tax avoiding activities by wealthy companies and individuals have added fuel to the fire.  So too has the research showing the effect that income inequality has on health and society more generally.  As The Spirit Level shows, countries such as Britain with high levels of income inequality have worse child mortality rates, more crime and less trust between citizens, to list just a few of the indicators. 

By contrast some of the progressive governments in Latin America are actively bucking the trend by introducing policies that are bring down levels of inequality at astonishingly fast rates.

Recent research for the ILO shows that boosting the share of GDP going to wages rather than profits would both address income inequality and get the economy moving again, particularly if combined with greater employment security and investing in training and skills to create better quality jobs.

Collective bargaining is one way to increase the proportion of national income that ends up in ordinary workers’ pockets. And there are others.

Worker representation on the panels that decide senior pay rates, together with more pay transparency and sensible pay ratios would help address the problem of excessive renumeration packages that are utterly unconnected to performance (witness the £1m+ pay packets given to over 500 bankers in RBS and Barclays in 2012.) 

Greater tax justice also has a part to play: reversing tax cuts that disproportionately benefit the wealthy and clamping down on tax avoidance within and across countries would play a part in addressing income inequality as well as generating funds to stimulate the economy.

No small wish list here.  But it is good news that trade unions in the UK are not alone in seeing rising income inequality as bad for the economy, as well as bad for working people.