ChainWhat it assumes · how to break it
Start
Trade unions become stronger and cover more workers, especially in lower and middle-paid occupations.
1
As a result, more workers have their pay set by collective bargaining instead of individual negotiation.
collective bargaining
collective bargaining
Assumes: Union coverage spreads to lower-paid workers.
But: UK union membership is concentrated in the public sector and among older workers, so many of the lowest paid in private services stay uncovered.
2
This means pay scales are compressed, as unions push for flat-rate rises or larger rises for lower grades.
pay differentials · wage compression
pay differentials · wage compression
Best link to attack
Assumes: Unions prioritise their lower-paid members.
Assumes: Unions prioritise their lower-paid members.
But: Professional and craft unions, such as those for doctors or train drivers, may push mainly for higher pay for already well-paid members, widening some gaps.
3
Consequently, labour's share of national income rises relative to the share going to profits and top pay.
functional distribution of income · labour share
functional distribution of income · labour share
Assumes: Firms pay for higher wages out of profits.
But: If firms pass the higher costs on in prices, real wages rise less and labour's share changes little.
4
Therefore, wage and income inequality fall, shown by a Lorenz curve closer to the line of equality and a lower Gini coefficient.
Gini coefficient · Lorenz curve
Gini coefficient · Lorenz curve
Assumes: Higher union wages do not cost jobs.
But: If union wages cut employment, workers who lose their jobs fall into lower income groups, widening the gap between insiders and outsiders.
End
Income inequality narrows as pay differentials are compressed and labour's share of income rises.
Evaluation chain
- E1However, the effect on inequality depends on which workers the unions represent and what they bargain for.
- E2Because UK union members are concentrated in the public sector and in professional jobs, many of the lowest-paid private-sector workers are not members.
- E3As a result, stronger unions may raise the pay of middle-income workers such as teachers and nurses, while the lowest paid in hospitality and retail gain little.
- E4So stronger unions narrow inequality only if they reach low-paid sectors and press for compressed pay scales; otherwise the minimum wage does more for the bottom of the distribution.
Another way to attack it: Inequality is also driven by technology raising the pay of skilled workers, globalisation and the tax and benefit system, so union strength alone may change it little.
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Questions this answers
- Assess the role of trade unions in reducing income inequality.
- Explain why the decline of trade unions may have contributed to rising income inequality in the UK.
- Discuss the causes of rising income inequality in developed economies.
Diagram
Lorenz curve: the curve moves closer to the line of equality and the Gini coefficient falls. Evidence: UK union membership has fallen a long way since its peak in 1979, and income inequality rose sharply during the 1980s.
Reverse and related
Weaker trade unions → pay differentials widen and labour's share of income falls, raising inequality.