Collective bargaining is key to equality, report says

19 July 2013

A report by independent think tank the Smith Institute has concluded that trade union freedoms are key to greater earnings equality in the UK.

In a similar vein to a recent Trades Union Council paper on rebooting the economy, the Smith Institute links poverty and income inequality to the decline of ‘predistribution’ instruments – that is, organisations and policies that are set up on the basis of a much smaller wages gap, rather than reactive wealth distribution.

One of the main instruments of predistribution is the trade union movement, as unions negotiate with employers for collective agreements that put upward pressure on earnings and conditions in the workplace. Following the successive attack on trade unions since the late 1970s, the power of workers to bargain for a fair income has become significantly diminished, and so earnings dispersion has soared, leaving a huge gap between the richest and poorest people in the UK today.

The Smith Institute said: “Profound structural weaknesses in the UK labour market have led to rising income inequality, the growth of in-work poverty and stagnant wages.”

“Living standards for those with incomes below the median have been squeezed since 2004. A major reason for this is low wage growth. Rising in-work poverty is responsible for increases in the payment of tax credits and in-work benefits to low-paid workers.”

It continued: “Of all the institutions of workplace democracy, the evidence for a positive impact on reducing in-work poverty and income inequality is most robustly established in relation to trade unions and collective bargaining.”