Thursday, October 22, 2015

Union Power and Inequality: Australia.


Florence Jaumotte and Carolina Osorio Buitron (both from the Research Department, IMF) consider the influence of declining union density (union membership) on income inequality in the 20 top economies (here).

For Jaumotte and Osorio Buitron (J/OB, in what follows), research on the increase in economic inequality has traditionally neglected the relationship between labour market institutions and inequality.

In contrast, in a recent research paper, the authors find that:
"The most novel aspect of our paper is the discovery of a strong negative relationship between unionisation and top earners’ income shares (Figure 2). Although causality is always difficult to establish, the influence of union density on top income shares appears to be largely causal, as evidenced by our instrumental variable estimates."
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From their Vox summary:

(right-click for a larger version in a separate tab)

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What is the causal relationship between a declining union membership and an increasing incomes share for the top 10%?

For one, J/OB find that "the decline in union density has been strongly associated with less income redistribution, likely through unions’ reduced influence on public policy."

But there's another link, one for which J/OB lack a specific technical term, but which Marxists call exploitation:
"Our finding of a strong negative relationship between union density and top earners’ income share challenges preconceptions about the channels through which union density affects the distribution of incomes. Indeed, the widely held view is that changes in labour market institutions affect low- and middle-wage workers but are unlikely to have a direct impact on top income earners. Our finding highlights the interconnectedness between what happens to the middle class and top income shares. If de-unionisation weakens earnings of middle- and low-income workers, the income share of corporate managers and shareholders necessarily increases.
"There are several channels through which weaker unions could lead to higher top income shares. In the workplace, the weakening of unions reduces the bargaining power of average wage earners relative to capital owners and top executives. Channels include the positive effect of weaker unions on the share of capital income – which tends to be more concentrated than labour income – and the fact that lower union density may reduce workers’ influence on corporate decisions, including those related to top executive compensation".
In other words, weaker unions are less able to reclaim a higher proportion of the surplus workers produced, which high executives and capitalists expropriate, exactly as Marx (and others) explained.

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This research comes barely a month after the 7-Eleven Australia wages scam was exposed (here) and at a time when Australians are witnessing an unprecedented effort to lower wages and destroy unions, and union organisers are bullied and persecuted by the Australian police for the crime of bargaining wages for union affiliates: see here.

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