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Unions and the widening gap between rich and poor

Publish date: 11 July 2018
Issue Number: 244
Diary: Legalbrief Workplace
Category: General

New evidence shows that unions played a major role in reducing income inequality in the US in the decades when organised labour was strong. But it also demonstrates that the decline in union power since the 1960s – which may be exacerbated as a result of a recent US Supreme Court decision – has contributed to the widening gap between rich and poor. The New York Times reports that the new insights come four economists: Henry Farber, Daniel Herbst and Ilyana Kusiemko of Princeton and Suresh Naidu of Columbia. They establish that unions have constrained income inequality far beyond their own membership ranks. The report says while the scholars can’t pinpoint the precise mechanism at work, they speculate that unions have indirectly increased pay at firms nervous that their own employees might organise. Unions have also lobbied for higher minimum wages and pushed to hold down executive salaries. They have also advocated for broader access to health care, countering a key channel through which income inequality can harm all of society.

Full report in The New York Times