TUAC has today published a new paper warning that growing inequality is actively undermining economic growth across OECD countries, while proposing stronger collective bargaining as a crucial tool for closing the productivity-wage gap and building more sustainable economies.
The paper, “Growth for whom? Addressing income inequality and the role of collective bargaining”, shows that despite heightened awareness following the 2008 Global Financial Crisis, policy responses have been insufficient to reverse the long-term rise in inequality that began in the 1980s.
TUAC highlights the alarming gap between productivity and wage growth, with labour productivity increasing by 28% over the past two decades while real median wages grew by just 8%. This disconnect represents an estimated annual transfer of USD 2.4 trillion from labour to capital – equivalent to Spain’s entire GDP – shifting away from workers each year.
The impact on economic growth is substantial. The new paper points to OECD findings that rising inequality reduced economic growth by 4.7% between 1990 and 2010. Beyond just slower growth, inequality creates economic instability and hinders recovery from financial shocks.
High inequality is not inevitable, nor the result of efficient markets rewarding those who work hard. Instead, it comes from policies that allow powerful actors to hoard wealth rather than contribute to economic growth.
The paper reflects on how the OECD’s recommendations on structural reforms and labour market policy have evolved over time. It acknowledges some positive developments over the years, but notes the limitations in overcoming old concepts of labour market flexibility and supply-side economics. It argues that sustainable economic growth requires strong consumer demand, which depends on policies supporting adequate household incomes.
The research identifies collective bargaining as crucial for addressing these issues, with OECD evidence showing that more centralised bargaining at sectoral level correlates with lower wage inequality and higher employment.
The analysis builds on TUAC’s longstanding position that addressing inequality requires stronger labour market regulation and macroeconomic policies that boost demand and ensure productivity gains are fairly shared between capital and labour, not just equal access to education and anti-discrimination measures.
Read the full paper here.
Photo credit: Marcel Crozet / ILO
