Post-union inequality

Why has a new report by the International Monetary Fund (1) gone mostly unremarked, given current concern about the widening inequality gap? The report, by Florence Jaumotte and Carolina Osorio Buitron, economists from this temple of neoliberalism, finds that “lower unionisation is associated with an increase in top income shares in advanced economies” between 1980 and 2010. They explain this correlation: “Weaker unions can reduce workers’ influence on corporate decisions that benefit top earners” and “increase the income share of corporate managers’ pay and shareholder returns.”

According to the report, “around a half” of the inequality gap, which neoliberals prefer to attribute to factors such as globalisation and technology, might result from the decline in labour organisations. It’s hard to be surprised. Unions have historically played a key part in the achievement of most freedoms, so their weakening can only sharpen the appetite of those who hold capital. And their disappearance creates a void quickly filled by the far right and religious fundamentalism, which divides social groups with interests that need solidarity.

The disappearance of unions is not chance or fate. In 1947, as the West was on the verge of 30 years of more evenly distributed prosperity, the neoliberal thinker Friedrich Hayek, who profoundly marked his century, drew up a guide for his political allies: “If we wish to entertain the smallest hope of a return to a free economy, restricting union power is one of the most important issues.” Hayek was then a lonely voice in the wilderness, but 50 years later, thanks to the brutal direct intervention of his admirers Ronald Reagan and Margaret Thatcher during major labour disputes (US air traffic controllers in 1981 and British miners in 1984-5), “union power” gave up the ghost. Between 1979 and 1999, the number of strikes in the US involving at least 1,000 workers declined from 235 to 17, and the number of working days “lost” from 20 million to 2 million (2). Wages declined as a proportion of national income. In 2007, soon after being elected president, Nicolas Sarkozy passed a law restricting public sector workers’ right to strike and, in 2008, boasted like a giddy child: “Now when there’s a strike in France, no one notices.”

Logically, the IMF report should have concluded that strengthening the unions was urgent, socially and politically. Instead, it said: “Whether the rise of inequality brought about by the weakening of unions is good or bad for society remains unclear.” Those who already have some idea of the answer will have little trouble drawing the necessary conclusion.