UNIONIZATION & INEQUALITY: TRENDS IN CANADA

Lars OsbergEconomics Department, Dalhousie University

• Does Unionization reduce Inequality ?• Always or just Sometimes ?• Why and How ?

• What’s been happening in Canada ?• Inequality• Union density

• Conclusion

• Does Unionization reduce Inequality ?• Always or just Sometimes ?• Why and How ?

• What’s been happening in Canada ?• Inequality• Union density

• Conclusion

• Usually • Economic

• Wage compression BUT• Union/non-union differential

• Political Economy• Min Wages, Regulation, Norms

• Rapid rise of Top 1%: + nil income growth for rest

- Small decline union density

- Political Voice – crucial

Different Trends in Different Countries

Union Density varies enormously - 80%+ to <10%

=> Union/Non-union wage gap

=> % affected by wage compression => Political Voice

Þ Visser & Checchi Ch. 10 Oxford Handbook of Economic Inequality

Greater Union Density:Highly Correlated with more Equality

• Solidarity & reduction of wage differentials – a basic value• Wage compression (more equality) within bargaining units

• Sectoral / Industrial bargaining implies bigger impact on national inequality than with establishment bargaining units

• Union / non-union differentials do increase inequality but are smaller where union density greater• Biggest % wage gains for low-paid – “threat effect” also benefits non-union

• USA: decline union density estimated => 1/5th to 1/3rd of increase wage inequality

• POLITICAL VOICE: Union impact on the “Social Wage”• Minimum Wages, Social Insurance & Quality Public Services • Macro-economic Priorities – how important is ‘Full Employment’?• The Moral Economy of Norm Formation – Consistent Voice for Equity

Hourly wages: stagnant for 20+ yearsThe Evolution of Canadian Wages over the Last Three Decades: René Morissette, Garnett Picot and Yuqian Lu Statistics Canada March 2013 Analytical Studies Research Paper Series No:. 347

Inequality – the price ‘we’ pay for growth? 1980 + ‘New Normal’ in CanadaSources: (1914-1960: Urquhart, MC and K. Buckley (eds) "Historical Statistics of Canada"; 1961-2000 CANSIM I series I603501 (matrix 9467) CANSIM II series V717706 (table no. 3830003), CPI - CANSIM I series P100000 matrix 9940, CANSIM II series V735319 table no. 3260001)

Real (2000 $) Hourly Wage in Canada1914-2000

0

5

10

15

20

25

year

hour

ly w

age

(200

0 $)

Little growth in real income for most families

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

0

20000

40000

60000

80000

100000

120000

Total Income of Canadian Family Units:1976-2009

20th percentile 40th percentile median 60th percentile 80th percentile

2009

Dol

lars

Taxes & Transfers offset Rising Market Income Inequality until 1995After-tax & transfer Income Inequality rose 1996-2010

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0.25

0.3

0.35

0.4

0.45

0.5

f(x) = 0.00239271708683473 x + 0.371559663865546R² = 0.819504766207336

Gini Index of Inequality of Equivalent Individual IncomeCanada: 1976-2010

CANSIM V46442259, V46442295, V46442331

MARKET INCOME Linear (MARKET INCOME)MARKET + TRANSFERS AFTER TAX

BUT Rapid Real Income Growth @ Top

P20 P40 P50 P60 P80 P90 P95 P99 P99.5 P99.9 P99.990.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Real Income: Compound Annual Growth Rate 1987 - 2007

Percentile Points of Income Distribution

Top 1% takes Increasing Share in Canada & USATop Income Shares in Canada: recent trends and policy implications Mike Veall, Canadian Journal of Economics November 2012

Decline in Union Density since 1991

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

30

31

32

33

34

35

36

37

UNION DENSITY: CANADA CALURA:1976-1995

CANSIM: Table 279-0025

% unionizedSep

-98

Aug-99

Jul-0

0

Jun-0

1

May-02

Apr-03

Mar-04

Feb-05

Jan-0

6

Dec-06

Nov-07

Oct-08

Sep-09

Aug-10

Jul-1

1

Jun-1

20.3000.3050.3100.3150.3200.3250.3300.335

UNION DENSITY: CANADA LFS 1997-2013

CANSIM Table 282-0077

% UNIONIZED

1981-1998: ↓ union density age 25-34

Union Density – impacts on Top 1% share?

• Direct Economic effects on top 1% ?• Limited impact

• BUT for the other 99%:

• Can collective bargaining at the workplace get a greater share of the gains from growth?

• Who gets the rents from developing Canada’s natural resources ?

Labour’s Share of GDP: Trending Down CANSIM Table 380-0001 - Gross Domestic Product (GDP), income-based, quarterly

1961/03 1964/06 1967/09 1970/12 1974/03 1977/06 1980/09 1983/12 1987/03 1990/06 1993/09 1996/12 2000/03 2003/06 Q3 2006Q4 20090.46

0.48

0.5

0.52

0.54

0.56

0.58

f(x) = − 2.86319383210334E-06 x² + 0.000506263895100266 x + 0.51652055697734R² = 0.402647344176147

Employee Compensation as Share of GDP: Canada 1961 - 2012

Series1 Polynomial (Series1)

The Political Economy of Unionism • The ‘Social Wage’ = transfers + value of public services• Key to effective equality of:

• real income • security • opportunity

• Strong Union Movements play crucial public role• Minimum Wage, Quality Public Services & Labour Regulation• Distributional Impact of Taxation and Regulation of Environment,

Financial Markets & Consumer Protection• Union Voice & Corporate Governance affect CEO compensation• Macro-economic priorities – relative importance of ‘full employment’• “Moral Economy” of Norm Formation – e.g. top pay in public sector?

• Useful Sources• The Evolution of Canadian Wages over the Last Three Decades: (2013)

René Morissette, Garnett Picot and Yuqian Lu Statistics Canada March 2013 Analytical Studies Research Paper Series No. 347

• Inequality and the Labor Market: Unions (2009) Jelle Visser and Daniele Checchi – Chapter 10, Pp 230-256 in The Oxford Handbook of Economic Inequality, edited by Wiemer Salverda, Brian Nolan, and Tim Smeeding, Oxford University Press, Oxford, 2009

• Unions, Norms, and the Rise in U.S. Wage Inequality Bruce Western and Jake Rosenfeld (2011) American Sociological Review 2011 76: 513

• UNIONIZATION AND WAGE INEQUALITY:A COMPARATIVE STUDY OFTHE U.S., THE U.K., AND CANADA (2003) David Card, Thomas Lemieux, and W. Craig Riddell Working Paper 9473 National Bureau of Economic Research http://www.nber.org/papers/w9473 January 2003