8 August 2015

The Benefits That Trade Unions Bring




The benefits that trade unions bring have been recognised by a most unlikely source – from within the International Monetary Fund.

The IMF has been at the forefront of the extensive austerity offensive that has driven down standards of living and widened levels of inequality.

High levels of inequality have serious consequences for society, and now the IMF, on reflection, has been expressing its concern that the inequality that austerity has brought is a barrier to increased economic growth.

As its Managing Director Christine Lagarde remarked in addressing a conference in Brussels earlier this year,

“the theme of growing and excessive inequality is not only back in the headlines, it has also become a problem for economic growth and development.”

An in-house IMF Staff Discussion Note  ( Link ):
had found that a lower degree of trade union involvement in the labour market corelated with increased inequality in society as a whole and also with greater wealth for their richest in the countries examined.

The research found that “ the decline in unionization is related to the rise of top income shares and less redistribution, while the erosion of minimum wages is correlated with considerable increases in overall inequality”.

It went further saying that, according to the research , “the decline of union membership explains on average 40 percent of the increase of the top 10 percent income share over the period under consideration (broadly, 1980- 2010.)

It also went further saying that : “unionization and minimum wages can help reduce inequality”

And, as if to speak against the unfair distribution of the income and wealth, Ms. Lagarde in addressing the audience referred to above, referred to : “a league table of the world’s best paid hedge fund managers. It showed that the highest earner was able to pocket $1.3 billion in 2014. One man, $1.3 billion!


“Together, the 25 best-paid hedge fund managers earned a combined $12 billion last year, even as their industry suffered from largely mediocre investment performance.”

Despite that outcome and Ms Lagarde’s speech, the IMF research could not bring itself to indicate an obvious solution - greater trade union activity in the labour market reduces inequality.

Instead it reached a conclusion that was reached was no real conclusion : its data “ do not constitute a blanket recommendation for more unionization or higher minimum wages.”

What should it have concluded ? From the experience elsewhere, in areas of Europe such as Scandinavia where inequality is less than it is here, the workforce is more unionised.

Increasing trade union engagement will help to close the enlarging gap between the rich and the rest.

And that the creation of a fairer society and a better economy needs more than government intervention; it needs the participation of trade unions as well.

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