Unions and inequality

How much can trades unions do to reduce inequality? I ask because Polly writes:

If unions had been stronger over the past 20 years, we would not have slid back to the same level of wealth inequality as 1937, nor would the top 3% own three times the wealth of the entire bottom half of the population.

I fear this overstates unions' force for egalitarianism. Yes, they do help increase equality. But their effect is modest.
For example, this paper shows that the standard deviation of wages in unionized firms is only around one-fifth lower than that of non-unionized firms, even controlling for obvious causes of inequality. And this paper (pdf) estimates that deunionization accounts for 34% of the rising wage inequality in the UK and 41% of the rise in the US between 1983 and 1998.
Even if unions had stayed quite strong, therefore, wage inequality would still have risen a lot.
I'd highlight two limits to unions' ability to restrain inequality:
1. Globalization. Low-wage workers face intense competition from India and China. There's not much unions can do in the face of this huge supply of cheap labour.
2. Unions don't sufficiently combat the managerialist ideology that's helped top pay rise relative to the median. In some (many?) cases, unions should be saying to managers: "You serve no useful function here. You have no great skills that justify your high pay. You owe your success merely to office politics. We can run this organization better than you."
But unions don't say this; they accept management's right to exist. And in merely fighting for better pay and conditions, they help create the impression that it's unions that are the rent-seekers, when the truth is that it's the bosses who are.
In this sense, unions help underpin capitalism.

Comments

[john b]

3) unions only function and have only ever functioned to any significant extent in skilled and semi-skilled trades, doing little or nothing to protect or promote the interests of the lowest-paid.

[Paulie]

On your second point, may I use your comments box to appeal for a source?

A while ago - I really can't remember where - I read an account of how the 1945 Labour government tried to hand over the mining industry to the Unions because they wanted them to have a crack at worker control. Apparently, The Brothers hated the idea.

If any of your readers can source this for me again, I'd be v.grateful.

Either way, it would be a mistake to draw the conclusions that....

Worker control = socialist,
Unions = socialists,
Therefore, Unions support worker control.

If Ken Livingstone really wants to shut Bob Crow up, he should offer the RMT the chance to put in a worker-control bid to take over Metronet.

If low-risk / low-growth / low-innovation businesses (both public and private sector) were to become co-ops (and these are the businesses that most suit the co-op model), Unions would lose millions of members because this is their heartland - and in co-ops, people don't see the need for a Union.

The main retail Co-ops are in derecognition disputes with Unions, and at least one major UK Union was recently threatening a boycott of Co-Op products.

[reason]

And the effect of lower marginal rates on capital income???? Money makes money so without progressive taxes the system has a built in inequality accelerator!

[Tim Hicks]

Rueda et al provide evidence to suggest that unionisation compresses the wage distribution at the bottom, but the compression at the top requires government action: http://users.ox.ac.uk/~polf0050/Rueda%20BJPS.pdf .

(To declare an interest, I am supervised by Rueda.)

[Matti Linnanvuori]

Unions cause unemployment by driving minimum wages etc. Therefore, I think unions increase inequality in incomes and well-being. It is not enough to consider the effects on wage structures because some people are left without a wage at all because of minimum wages etc.

[dsquared]

[In some (many?) cases, unions should be saying to managers: "You serve no useful function here. You have no great skills that justify your high pay. You owe your success merely to office politics. We can run this organization better than you." ]

do I detect the clanking chains of the ghost of a "transitional demand", walking down the corridors with its 'ead tucked underneath its arm :-)

seriously, presumably the reason that unions do not say this during, say, the annual wage round, or perhaps a discussion of the final salary pension scheme, is that they are aware that if they do they are quite likely to be mistaken for ordinary loonies and treated as a public health problem.

[price]

I don't know if your supporting evidence for the modest effects of unions actually show that union effects on equality are modest. In the first case, it seems reasonable that unions would have the most success where inequality was the highest to begin with. This would mean that the modest increase is due to different starting levels of inequality.

The other could be questioned by pointing out that a large part of the inequality grow happened in fields that were not unionized to begin with.

[James G]

Hi Chris,
A correlation to your first point is that unions are looking at the undocumented low end of the pay spectrum for potential membership expansion.

An American friend of mine was over here for a while to show a British union how they go about it in the States. His specialty is in organising industries staffed by illegals.