STTK report: Trade union movement levels income differences in the OECD countries

Palkka

Helsinki (31.08.2021 – Heikki Jokinen) The share of people under the poverty line drops when trade union density grows. The work and efforts of the trade union movement narrows income differences. And the coverage and extensiveness of the collective agreements has an even stronger impact in levelling income differences than the organising level of employees.

These are some of the findings of Ari-Matti Näätänen, a doctoral student, summarised in a new report on trade union movement impact on income differences and competitiveness in OECD countries.

The report was commissioned by STTK, the Finnish Confederation of Professionals.

According to the report, when the coverage of the collective agreements rises in OECD countries by one per cent, income differences diminish by 0.3 per cent.

If both trade union density and collective agreement coverage is high, income differences diminish even more. This suggests that trade union movement involvement in collective agreements covers all people regardless of their membership status.

Näätänen has compared union density with the income of those in the top ten per cent of incomes in the OECD countries between 1980 and 2017. During this period, the top ten per cent raised their share of income and capital income from 28 to 33 per cent. At the same time union density dropped from 49 to 31 per cent.

When looking at the level of poverty, it is lowest in the countries with strong trade union movements, like the five Nordic countries and Belgium. By contrast, if you look at countries like Estonia, Latvia, Lithuania, South-Korea and Turkey with far fewer union members, there are more poor people.

There are also countries with low union density but also with a relatively small number of poor people. One of the explanations for such differences is the coverage of the collective agreements.

If these agreements are comprehensive, poverty tends to be kept at bay. The correlation between union density and poverty, however, is statistically significant.

Näätänen notes that the trade union movement will also have a positive impact on the openness of an economy. High trade union density has a connection for opening up a national economy for global markets.

“One explanation could be that trade union movement brings security in the structural changes caused by globalisation”, says STTK Chief Economist Patrizio Lainà when commenting the report.

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