To reduce inequality, we need stronger trade unions

By boosting pay, and reducing the gap between rich and poor, trade unions can help build fairer econ

British politicians of all stripes are fond of bemoaning the widening gap between rich and poor. When David Cameron delivered the Hugo Young memorial lecture in November 2009, he praised The Spirit Level, the book that has become a bible for egalitarians, and noted its key finding that "among the richest countries, it's the more unequal ones that do worse according to almost every quality of life indicator." More significantly, Ed Miliband has spoken of his "deep regret" that the last Labour government failed to reduce inequality and has denounced the "arms race" in footballers' salaries.

It would be extraordinary if they were not concerned. A study published last month by the Resolution Foundation (Missing Out: Why ordinary workers are experiencing growth without gain) found that the share of GDP paid as wages to the bottom half of earners had fallen by more than a quarter over the last 30 years. In 1977, workers in this group received £16 of every £100 of value generated by the British economy; by 2010 that figure had fallen to £12. Over the same period, the share of national income held by the top 10 per cent of earners increased from £12 per £100 of GDP to £14. Even these figures mask the full extent of the problem. When bonus payments are included, the share of GDP going to the bottom half falls from £12 to £10, while the share going to the top 10 per cent increases from £14 to £16.

Strong unions, equal societies

But while mainstream politicians are comfortable discussing the symptoms of inequality, they are much less willing to examine the causes. One factor that goes almost unmentioned is the dramatic decline in trade union membership over the past 30 years. In 1981, 50 per cent of UK employees belonged to a union but now just 26.6 per cent do. As the accompanying graph shows, the sharp drop in union membership has been matched by a ­similarly sharp drop in the share of the ­nation's income going to the middle and working classes. The decline in union density - the percentage of employees belonging to a union - has eroded workers' collective bargaining power and wages have stagnated as a result. Since 2003, long before the recession, 11 million low-to-middle earners have seen no rise in their incomes.

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It is therefore notable, as of 2009, that the most equal countries in the world, with the exception of Japan (where just 18.5 per cent of workers are unionised), are those where union membership is highest. In Finland 69.2 per cent of workers belong to a union, in Sweden 68.4 per cent do, in Denmark 66.6 per cent do, and in Norway 54.4 per cent do. By rights our political leaders should be doing all they can to promote British trade unions. Strong unions are an essential guarantor not just of social justice but also of economic efficiency.

A recent IMF report, for instance, noted that the inevitable result of stagnant real wages is that "loans keep growing, and therefore so does . . . the probability of a major crisis that . . . also has severe implications for the real economy."

There was a time when Cameron sought cooperation, not confrontation with the unions. He became the first Conservative leader in more than decade to meet the TUC general secretary and appointed a union emissary, the former Labour MEP Richard Balfe, who spoke glowingly of unions as "great, voluntary organisations". But he has since reverted to Thatcherite type, refusing to rule out making Britain's anti-strike laws - already some of the most restrictive in the western world - even tougher. The government is still considering Boris Johnson's demand for the introduction of a 50 per cent turnout threshold for strikes if unions take further action against cuts to jobs, pensions and services.

Squeezing the middle

What of Ed Miliband? The Labour leader would not have defeated his brother without the support of the unions but he has since said little about their role in building a more equal society. To reduce inequality, Miliband has merely suggested that "we should debate" whether companies should be legally obliged to include an employee on their remuneration committees. Speech after speech has been devoted to "the squeezed middle" without any acknowledgment of the fact that this phenomenon cannot be discussed in isolation from the decline in union membership. For fear of being branded "Red Ed", Miliband has distanced himself from "the brothers" at every available opportunity. But until he and the rest of the political class recognise the importance of unions to a fair economy and society, their promises to reduce inequality will remain stillborn.

George Eaton is a staff writer for the New Statesman.