Why we can’t tackle inequality without strong trade unions

In 2009, David Cameron said research by Richard Wilkinson and Kate Pickett “has shown that among the richest countries, it’s the more unequal ones that do worse according to almost every quality of life indicator“.

Wilkinson and Pickett’s work brought a new understanding of the damage caused by inequality, and in the process placed it at the forefront of politics. This idea has not been lost on Ed Miliband who has declared inequality to be, not just the biggest moral concern of our time, but also the key political challenge facing Britain.

This is not just because inequality creates poverty and suffering, not just because it is unfair, but also because the effects of inequality extend to the vast majority of the population and damage the whole social fabric.

Now, in an important new think piece for the Centre for Labour and Social Studies (Class), The importance of the labour movement in reducing inequality, Wilkinson and Pickett, call for a major shift in our thinking. They outline a vision capable of responding to the challenge of inequality.

In this intellectually compelling paper, they examine the roots of increasing inequality in incomes and power and show how the strengthening and then weakening of the labour movement during the 20th Century was mirrored by patterns of inequality.  Globally, from the 1930s until about 1980, inequality declined, while trade union membership increased but this was followed by a period of decline in trade union membership and collective bargaining coverage, during which inequality has expanded to levels not seen since the 1920s.

Last week new ONS data showed that household disposable income increased for the richest fifth of households while it fell for everyone else. Wilkinson and Pickett stress that the growth of top incomes has played a big part in generating inequality. For They  cite figures which show that from the 1970s to the early 1980s, the CEOs of the largest 350 companies in the US were paid 20 or 30 times as much as the average production worker. By the early 21^st Century, they were getting between 200 and 400 times as much. The pattern in the UK is the same. Among the 100 largest UK companies, the average CEO is paid 300 times the average wage. Importantly, Wilkinson and Pickett attribute this widening gap to the absence of strong trade unions and the lack of an effective constraint on top pay.

But the relationship between trade union membership and inequality is not just a reflection of the wages unions achieve for their members. The weakening of trade unions and the rise of inequality is also demonstrates the weakening of the political and ideological influence of the left in the era of neoliberal ideology. In the words of Professor Jacob Hacker (of ‘pre-distribution’ fame) “unions did not just happen to be in the way of a fast-moving economic train. They were pushed onto the tracksby American political leaders“.

So while Wilkinson and Pickett recognise the importance of progressive taxation and more generous social security systems in reducing inequality, like Hacker they seek a more fundamental approach to reducing inequality by acting before the stage of taxation. Tackling inequality, they argue, can only be achieved by extending economic democracy both through strengthening the role of the labour movement and by reforming the way companies operate.

What this paper does is highlight that trade unions are important for society and the public interest at large. Improving living standards and reducing inequality are inextricably linked to policies which assist the growth of trade unionism, and collective bargaining. Government action on the minimum wage, zero hours, agency labour and public sector pay is essential, but without policies which promote collective bargaining and produce a more favourable environment for trade unionism, inequality may falter but it will not reverse.

In 1974, Labour defeated the Tories with a manifesto which pledged to “Bring about a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families“. Unfortunately, they failed to produce the necessary structural changes and the victory of neoliberalism ensured that the shift was in the wrong direction.

This contribution from Wilkinson and Pickett suggests that it is only through creating a progressive alliance, with trade unions playing a central role that appalling levels of inequality can begin to be tackled. As they did five years ago, Wilkinson and Pickett again provide the inspiration and analysis so that if we listen, this time we can get it right.

The importance of the labour movement in tackling inequality by Prof Richard Wilkinson and Kate Pickett is released today by the Centre for Labour and Social Studies (Class).