Economic Bulletin 131 - Inequality, unions and wage-led growth

January 2012

A graph showing the share of income that the richest 1% of people in New Zealand have received over the last 90 years together with union membership over that period gives a clear picture. Income inequality has risen when union membership has been falling, and inequality has fallen when union membership has been strong.

Our experience is not unique: all OECD countries have had rising inequality and falling unionisation. There is also a growing number of academic studies that tell the same story. One estimates that the decline of organised labour explains a fifth to a third of the growth in inequality in the US. Another shows how increased inequality could have been the underlying cause of the financial crisis, and can only be fixed by increasing the bargaining power of workers. In Europe, research indicates that globalisation in production and finance and changes in bargaining power between working people and employers have been the drivers of increasing inequality. Higher wages can both generate the demand for goods and services which is necessary for a healthy economy and stimulate higher productivity.

Download a complete version of the CTU Economic Bulletin for January 2012 (PDF 310k)