Are trade unions essential for reducing income inequality?

It is no surprise that for Frances O’Grady, the first woman to lead the Trade Union Congress (TUC) – and the third speaker in Murray Edwards’ two-year lecture series Capitalism on the Edge – the answer to the title question is a resounding “yes”.

While the idea that labour rights are a factor in reducing income inequality is not new, what has emerged in recent years, says O’Grady, is the evidence to back it.

“There is now a shedload of evidence from the UK and around the world produced by organisations as diverse as the Resolution Foundation and the IMF (International Monetary Fund) that shows a clear correlation between the strength of union membership and collective bargaining coverage on the one hand, and the degree of pay solidarity and fairness on the other.”

Income and power go hand in hand

Given that evidence base, says O’Grady, the more interesting question to ask is: “Why are those in power so reluctant to draw the obvious conclusion that the best way to reduce income inequality would be to see union membership and influence grow?”

Part of the answer, she says, lies in the fact that inequality of income goes hand in hand with inequality of power.

O’Grady suggests that an embodiment of the alliance between income and power is the annual World Economic Forum; the backdrop against which Oxfam chose to launch its annual report on inequality. Citing this year’s report (2016), O’Grady points out that a tiny elite – small enough in number to fit into a double decker bus – now own as much wealth as the poorer half of the world population.

However, the trouble with this statistic is that it can blur the distinctions between inequality and poverty. “Tackling poverty and tackling inequality are not the same thing.” insists O’Grady. Her focus is on the latter.

Reframing the crisis

Today's challenge is framed by the events of recent years. The collapse of the financial services firm, Lehman Brothers, in 2008 was a dramatic shock to those who thought the good times were set to roll. Others, on the left, thought the crisis could mark the start of a new era; the end of neoliberal ideology that had held sway since the 1970s.

Eight years on, and it doesn’t feel like a new era, says O’Grady. On the contrary: “What began as a crisis in the private sector has been reframed, quite deliberately, into a crisis of the public sector.”

“Never mind the tens of billions of taxpayers’ money that propped up the banks, or the hundreds of billions provided in various liquidity schemes from the Bank of England, the problem was redefined as too much government spending on public services and welfare.”

O’Grady is adamant that as real wages and tax receipts fell, the consequent deficit became an excuse to shrink the state and catapult us into a decade of austerity where ordinary people – notably the young and women – are suffering the consequences.

“The resilience of neoliberalism, the political cult of austerity, the rapid growth of temporary jobs; all add fuel to the inequality fire.” She says.

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