Why unions are key to fighting inequality between generations

04 Jan 2017, by Silkie Cragg in Labour market

Young people are on the sharp end of many worrying labour market trends.

Workers in their 20s have taken the biggest hit to wages since the financial crisis. They are most likely to be working on zero-hours contract or in agency or casual work. And they are much less likely to own a home compared to previous generations.

Young people’s housing challenges quite rightly get a lot of attention too. But the Resolution Foundation has shown that 18-34 year olds feel that work-related issues are a bigger concern. Many feel their lives will be harder than those of their parents’ generation.

Red herrings

Poor prospects for many of today’s young people are sometimes seen as the result of older workers, in particular the retired, receiving too many of society’s resources.

But there is little evidence to support this account. In fact, TUC research has found that factors like your job and where you live are better markers of wealth than age.

Arguments about pensions feed into this story too. An overly simplistic idea says that the pensioner generation is benefiting from generous defined benefit workplace pensions and a state pension rising ahead of inflation. Meanwhile young people are on risky and underfunded defined contribution schemes. Causal links are drawn between the two: the expense of funding pensions for older people is weighing on the pensions, and perhaps pay, of the young. This story is also very flawed – my colleague Tim Sharp explains why in this blog post.

And it is simply wrong to assume all older people are wealthy. Pitting generations against each other overlooks inequality within generations, too. For example, some 1.5 million pensioners, 14 per cent, are in poverty.

…but young people are getting a raw deal

Nevertheless, many young people are definitely getting a raw deal. The TUC has identified a number of challenges people aged 21-30 are facing. These include:

low pay

poor quality jobs

lack of training opportunities

weak opportunities for progression

underemployment

pressure on working parents

a lack of voice at work

Why unions are part of the answer

The Resolution Foundation says lower levels of union membership – not older people’s pension provision – is a big part of the problem. Just 9.3 per cent of the 21-30 cohort we’ve studied are trade union members, compared to 24.7 per cent of all UK employees.

The graph below measures the ratio between the top (D9) and bottom (D1) 10 per cent of workers in relation to collective bargaining coverage. It shows income equality is highest in countries where collective bargaining is lowest, and vice versa:

Even in those countries where collective bargaining is limited to bargaining units, rather than entire industries, it has a ‘spill over’ effect, positively impacting equality across the labour market.[1] This means that UK unions are playing a part in levelling our playing field, but things would be much better if unionisation was more widespread.

Low levels of unionisation provide an obstacle for young workers in labour markets where there is a higher proportion of people in low wage jobs, as in the UK. It means they are less likely to advance in pay, skill level or responsibilities. This can have a scarring effect on living standards that can be carried throughout life. The reverse is true in countries with stronger collective bargaining. Where collective bargaining is stronger, there are higher shares of school leavers in quality apprenticeships and vocational training and much lower labour market inequality between generations. In these cases unions have a greater role in developing skills policy and programmes.[2]

If you want to tackle inequality whether between or within generations, unions are an essential part of the solution.

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[1] Hayter, S. ‘Unions and collective bargaining’, in Berg, J (ed) Labour markets, institutions and inequality: building just societies in the 21st century, Cheltenham: Edward Elgar, 2015 p. 106.

[2] Reinecke, G and Grimshaw, D. Labour market inequality between youth and adults: a special case? In Labour markets, institutions and inequality: building just societies in the 21st century, edited by Berg, J, 2015, pp. 29-30, 378.