Nobel prize winning economist Joseph Stiglitz has backed unions on penalty rates, saying cuts to Sunday rates in Australia are an indication that workers’ power has been eroded.

"The economy is supposed to be helping increase people's living standards - and part of living standards is enjoying leisure," Professor Stiglitz said.

"If you have to work on a Sunday, you should get compensated ... And the background of this [is that] the bargaining power of workers has been eviscerated. They would want to say 'I don't want to work on a Sunday' - but they can't say that."

Joseph Stiglitz, economics professor at Columbia University, says governments must act to address inequality. Credit:James Brickwood

The respected American economist and Columbia University professor, who is in Australia to accept the Sydney Peace Prize, also supports the Australian Council of Trade Unions' demand for industry-wide bargaining, which he sees as necessary to address weak wage growth.