Dealing with inequality: a job for unions
Over the next few years it looks as though it is going to be harder to persuade the government to take the lead in using the tax and benefit system to reduce inequality. Ministers may genuinely want to make progress, but the commitment to cutting spending seems to trump all other considerations.
Obviously, everyone campaigning against poverty will continue to argue the case for redistribution, but there’s work to be done that will have a more immediate effect.
You can think about inequality as a two-stage process: there’s the level of inequality produced by wages and other sources of income, and then there’s the level of inequality we have after taxes and benefits are taken into account. If you have an ideal of a certain degree of equality, the tax and benefit system will have to work harder if original inequality is higher.
If you look at the chart below, we have the level of inequality in a number of OECD countries in the mid-2000s. The chart uses the Gini coefficient, a popular measure of inequality – the higher the number the worse the inequality. The darker bars represent inequality before taxes and benefits, the lighter ones after; countries are ranked in order of their level of inequality after taxes and benefits.
You can see that there’s no necessary connection between the ranking before and after. Denmark and Sweden aren’t particularly equal before taxes and benefits, their greater degree of equality has a lot to do with re-distribution. But Finland, Switzerland and Iceland begin with comparatively low levels of inequality.
If the UK could achieve a more equal distribution of income before taxes and benefits, we could reduce the amount of inequality even if we had no increase in the amount of re-distribution.
How can we get the world of work to do more of the heavy lifting?
There are many elements to an answer to this question. It will, for instance, involve addressing persistent discrimination against working mothers and addressing the insecurity and low pay that characterise so many jobs at the bottom end of the labour market. It will involve raising the level of skills and qualifications across the workforce.
And it will mean getting more workers into unions and more jobs covered by union negotiations.
Ten years ago, an important paper by David Metcalfe, Kirstine Hansen and Andy Charlwood showed that unions have a powerful “major egalitarian influence on the British Labour Market”. Unionised workplaces, they found, made more use of objective criteria to set pay, and set pay by the characteristics of the job, not the individual worker. As a result, unioniosed workplaces had much less low pay and lower differentials between women and men, blacks and whites, those with health problems and those without, and between manual and non-manual workers.
Some years later, some of the authors revisited the subject and found very difficult truths for unions about membership decline, but they also found that the “sword of justice” effect was still there, that unions “narrow the spread of earnings, cut accidents and promote family friendly and equal opportunity policies.” Since then, the evidence shows that unions continue to make a difference.
One of the key findings of the Metcalfe, Hansen and Charlwood study was that it wasn’t just being in a union that makes a difference, it was having a union collectively bargaining your wages. One of the key problems was the move away from national bargaining to decentralised bargaining, which had “caused pay dispersion to rise”. The report noted that “workers in the organised sector have much lower pay dispersion than those in the unorganised sector.”
That is why the task for unions isn’t just to recruit workers into unions, it has to be to persuade employers to recognise the union for bargaining and win good pay deals – especially national deals that cover whole industries.
That is why I am looking forward to a TUC seminar on 9 June, when we’ll be discussing Which Way Forward for National Collective Bargaining? Chaired by Rita Donaghy (former Chair of ACAS), the speakers will include Alastair Hatchett (Head of Pay and HR Services at IDS), Leslie Manasseh (DGS of Prospect) and Heather Wakefield (Head of Local Government at UNISON).
We’ll be talking about the national deals that still exist and how to win new ones. Obviously this is an important issue for union professionals, but it should also be a an important issue for everyone campaigning against poverty and inequality.