tag:theconversation.com,2011:/nz/topics/wage-inequality-49520/articlesWage inequality – The Conversation2021-08-08T21:04:29Ztag:theconversation.com,2011:article/1656152021-08-08T21:04:29Z2021-08-08T21:04:29ZWhy is New Zealand’s Labour government trying to push through a two-tier benefit system?<figure><img src="https://images.theconversation.com/files/414916/original/file-20210805-307-11kkok0.jpg?ixlib=rb-1.1.0&rect=16%2C0%2C5335%2C3540&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Finance Minister Grant Robertson delivering the 2021 budget, which included the proposed social insurance policy.</span> <span class="attribution"><span class="source">GettyImages</span></span></figcaption></figure><p>If it goes ahead, the <a href="https://www.stuff.co.nz/national/politics/300312866/budget-2021-government-announces-plan-to-create-unemployment-insurance-but-isnt-funding-it-yet?">social insurance scheme</a> currently being discussed behind closed doors would be the biggest change to New Zealand’s welfare system since the introduction of the <a href="https://www.newzealandnow.govt.nz/resources/acc-helping-to-meet-the-costs-of-personal-injury">accident compensation scheme</a> in 1974.</p>
<p>That change took a royal commission, seven years’ debate and hard, considered work to prepare the ground.</p>
<p>This time, a small group of trade union officials, business representatives and public servants is busy developing a scheme that would introduce a two-tier benefit structure into the welfare system. </p>
<p>And it appears the government is only promising a discussion document once the shape of such a scheme is formulated. It’s expected this will present a single preferred social insurance policy option, no non-insurance alternatives, and a plan to have legislation passed before the next election.</p>
<p>Not much is known about what this might look like, beyond it being an “<a href="https://www.beehive.govt.nz/speech/finance-ministers-budget-2021-speech">ACC-style</a>” scheme. It would pay eligible people who meet the work history criteria and lose their jobs 80% of their previous earnings up to a cap for a period of six months or more (the ACC cap is currently NZ$130,911 per year).</p>
<p>What is clear, however, is a social insurance scheme (sometimes being referred to as a social unemployment insurance scheme) will almost certainly favour those with higher long-term incomes at the expense of those on the lowest incomes. Others, like many school leavers, sole parents and people with disabilities, won’t qualify at all. </p>
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<h2>Alternatives need to be considered</h2>
<p>It also seems clear other solutions that avoid such inequities are not being seriously considered. This means the public will not be given an opportunity to ask basic questions, such as: </p>
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<li><p>what problems are intended to be solved by social unemployment insurance? </p></li>
<li><p>what are the alternative options — including non-insurance options — for addressing these problems? </p></li>
<li><p>what perverse incentives might the scheme create? </p></li>
<li><p>would the money to be raised for the scheme be better spent on alleviating poverty and unfair outcomes in the current welfare system rather than a new, more generous, middle-class insurance system on top of the current one?</p></li>
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Read more:
<a href="https://theconversation.com/why-new-zealands-government-cannot-ignore-major-welfare-reform-report-116895">Why New Zealand's government cannot ignore major welfare reform report</a>
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<h2>The ‘wage scarring’ argument</h2>
<p>Among the problems social insurance is claimed to solve is so-called “wage scarring”, where people who are made redundant find they experience a long-term drop in earnings once they return to work. </p>
<p>There is indeed <a href="https://www.motu.nz/our-research/population-and-labour/individual-and-group-outcomes/the-longer-term-impacts-of-job-displacement-on-labour-market-outcomes/">evidence</a> wage scarring occurs in New Zealand, and on average it may be higher here than in other OECD countries. </p>
<p>But wage scarring can occur for a number of reasons. There is also little evidence it is happening here due to unemployed workers having no unemployment insurance and therefore having to take low-paid jobs rather than spend more time looking for better paid work. </p>
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Read more:
<a href="https://theconversation.com/why-reducing-unemployment-should-have-been-a-focus-for-nzs-well-being-budget-118061">Why reducing unemployment should have been a focus for NZ's well-being budget</a>
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<p>Moreover, if wage scarring is the issue, other more equitable solutions should also be considered. </p>
<p>For example, higher base benefit rates, combined with some individual entitlement — so a partner’s earnings are less likely to disqualify someone from receiving a benefit — would also go a long way to allowing laid-off workers to manage incomes while they look for jobs. This would also help other beneficiaries, including those currently penalised heavily for entering a relationship. </p>
<p>Compulsory redundancy paid by employers is another option.</p>
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<h2>The future of work</h2>
<p>Another rationale offered relates to economic changes and the changing nature of work. There are two dimensions to this, and it is far from clear unemployment insurance is the best policy response to either. </p>
<p>The first involves structural economic change, including deliberate policy decisions to quit certain industries for environmental and climate-change reasons. </p>
<p>Such “<a href="https://www.mbie.govt.nz/business-and-employment/economic-development/just-transition/">just transitions</a>” — out of harmful or declining industries towards a low emissions economy — are crucial. But they require far more than simply an insurance payout, even a generous one. </p>
<p>Just transitions need bespoke industry-wide packages that include support for multi-year trades and university training, assistance with the relocation costs and new housing — as well as income support. </p>
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Read more:
<a href="https://theconversation.com/if-new-zealand-can-radically-reform-its-health-system-why-not-do-the-same-for-welfare-160247">If New Zealand can radically reform its health system, why not do the same for welfare?</a>
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<p>It would be highly inefficient and wasteful to provide an expensive, economy-wide social insurance scheme to meet the needs of specific industry transitions.</p>
<p>The second dimension is the commonly cited rise of insecure, temporary and gig-economy work. However, precarious and low-earning workers would almost certainly be better served by a well-functioning and generous benefit system than through insurance. </p>
<p>Many of the most insecure workers won’t even meet the eligibility requirement for insurance. Most of those who do will receive payouts considerably less than better paid workers, because payouts are linked to past wages.</p>
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<h2>Coping with economic shocks</h2>
<p>Another argument used to justify the proposed scheme is the frequency of economic shocks and the fact many New Zealand workers are poorly safeguarded against them. </p>
<p>Protection against poverty and hardship caused by economic recessions was one of the driving motivations for the establishment of our welfare system in the 1930s. For many years, it proved largely effective in those aims. It could do so again.</p>
<p>Given economic downturns affect many who would not be covered by insurance, it’s far from obvious social unemployment insurance is a better policy solution than improved welfare for all who need it. </p>
<p>What’s more, as we learned from the COVID-19 experience, a very large economic shock requires a tailored response. </p>
<p>With COVID, the government — quite rightly — protected people with its wage subsidy scheme, which ensured most people retained their jobs post-lockdown. An insurance scheme may have provided some with more money in the short term — but only once they had been laid off.</p>
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Read more:
<a href="https://theconversation.com/covid-19-is-predicted-to-make-child-poverty-worse-should-nzs-next-government-make-temporary-safety-nets-permanent-147177">COVID-19 is predicted to make child poverty worse. Should NZ's next government make temporary safety nets permanent?</a>
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<h2>Full discussion of all options needed</h2>
<p>Social unemployment insurance would undoubtedly benefit some people. But a lot of the gains are likely to go to those with less need. Meanwhile others — including young new job entrants, insecure self-employed workers, sole parents and people with reduced work capacity due to disability — will gain much less, or even nothing. </p>
<p>Even after the government’s recent welfare increases, a large number of beneficiaries remain below the poverty line. </p>
<p>To forge ahead with developing an expensive insurance scheme before addressing those issues raises serious questions about the government’s commitment to equity and well-being.</p>
<p>Such a large and fundamental change should not happen without a full, transparent and open discussion of all the issues and all the alternatives.</p><img src="https://counter.theconversation.com/content/165615/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Fletcher does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s potentially the biggest change to welfare since ACC and would favour those on higher pay – so why does the public know so little about it?Michael Fletcher, Senior Research Fellow, Institute for Governance and Policy Studies, Te Herenga Waka — Victoria University of WellingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1364722020-05-26T12:20:42Z2020-05-26T12:20:42ZClap all you like now, but workers with meaningful jobs deserve to be valued in a post-coronavirus economy too<figure><img src="https://images.theconversation.com/files/337042/original/file-20200522-124840-1lrlsvn.jpg?ixlib=rb-1.1.0&rect=8%2C107%2C5982%2C3880&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Grocery workers have been essential during the pandemic. so should we be paying them more?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/fresh-direct-worker-in-protective-face-mask-and-gloves-news-photo/1226288895?adppopup=true">Rob Kim/Getty Images)</a></span></figcaption></figure><p>The coronavirus recession has laid bare how illogically the U.S. labor market values work that matters.</p>
<p>In the United States, as elsewhere, citizens have been extolling the role of essential workers – such as nurses, grocery suppliers and delivery drivers – by, for example, <a href="https://abc7ny.com/health/quarantined-new-yorkers-clap-for-essential-workers-%7C-video/6060936/">rewarding them with nightly claps</a>. Yet many of these employees <a href="https://www.washingtonpost.com/business/2020/04/06/why-do-so-many-essential-workers-get-paid-so-little-heres-what-economists-have-say/">receive low pay</a> and <a href="https://theconversation.com/coronavirus-shows-key-workers-need-better-pay-and-protection-heres-what-has-to-change-137037">few protections</a>, suggesting a different appreciation of their worth in the market.</p>
<p>But in highlighting this disconnect, perhaps the crisis has also provided an opportunity to reimagine an economy that values jobs for something more than just wealth creation: meaningfulness.</p>
<h2>A moral market?</h2>
<p><a href="https://doi.org/10.1007/s10551-019-04389-0">Meaningfulness</a> has to do with how much one’s work matters in a moral sense, which is not always signified by how much money a job pays. It often relates to personal fulfillment from work but may also concern the social contribution work makes and what, morally, we ought to value. Contemporary social scientists and philosophers cite historical thinkers as diverse as <a href="https://hbr.org/2011/12/adam-smith-was-not-a-schizophr">Adam Smith</a> and <a href="https://www.theschooloflife.com/thebookoflife/the-great-philosophers-karl-marx/">Karl Marx</a> as recognizing the potential for meaningless work to detract from human well-being.</p>
<p>Unfortunately, our labor market tends not to account adequately for morality. For example, it often assigns less tangible value, such as money, to meaningful work that is intangibly valuable. A high school teacher may have a harder time accounting for her share in the success of a former student’s business venture than does the investment banker who helped fund the startup. </p>
<p>Workers who risk their well-being to clean bedpans at hospitals and stock shelves at grocery stores may have only the reassurance that their work is essential to augment their relatively meager compensation.</p>
<p>To suggest that moral values should be more integral to the free market is neither anti-capitalist nor partisan. As an <a href="https://business.stthomas.edu/faculty-research/faculty-bios/michaelson-christopher/">ethics professor and business adviser</a>, I know it is widely accepted that markets are imperfect and require mediation to balance out inequities.</p>
<p>Even a celebrated market economist like <a href="https://www.goodreads.com/book/show/51877.Capitalism_and_Freedom">Milton Friedman recognized</a> that the free market undervalues some things. Accordingly, disruptions from events like the current pandemic warrant public and private sector coordination to ensure an adequate supply of essential goods and services. </p>
<h2>Checks and bank balances</h2>
<p>The recently passed <a href="https://www.wsj.com/articles/house-lawmakers-race-to-washington-to-ensure-coronavirus-stimulus-passes-11585318472">bipartisan stimulus</a> package that offers proportionately more to people who have less is consistent with this view that markets warrant intervention when it can stave off human suffering.</p>
<p>Similarly, wealthy individuals often <a href="https://www.businessinsider.com/billionaires-spending-hundreds-of-millions-on-coronavirus-research-2020-3">act generously</a> when they perceive distress that may be caused by unfairness in market mechanisms – for example, by <a href="https://www.si.com/nba/2020/03/14/nba-teams-players-help-pay-workers">donating money to make up for lost wages</a>. But this only highlights a system that rewards some people with so much wealth that they can cover the missed paychecks of hundreds or thousands of others.</p>
<p>But I would argue that bailout checks and individual acts of kindness are not nearly enough. They may even have the <a href="https://hbr.org/2016/10/praising-customers-for-ethical-purchases-can-backfire">unintended consequence of moral licensing</a> – creating the false impression among individuals that they have fully done their part to mitigate the problem. </p>
<p>Laid-off workers having to look for new work in what could be a <a href="https://www.bloomberg.com/news/articles/2020-05-19/global-downturn-risks-becoming-prolonged-recession-wef-says">prolonged, post-pandemic recession</a> will not find long-term stability in temporary infusions of cash and charity. Economic and social recovery will require the creation of <a href="https://www.nytimes.com/2020/05/14/business/economy/coronavirus-unemployment-claims.html">tens of millions of jobs for those who have filed unemployment claims</a>. But we should also be looking to promote meaningful work in a post-pandemic economy through the rewarding of pay that is proportional to a work’s meaningfulness.</p>
<p><a href="https://fortune.com/2020/03/20/essential-workers-government-list-employees-coronavirus/">Work deemed essential</a> in the pandemic has taken on more meaning because it is urgent to people now. However, even after this crisis has passed, much of this work will continue to be essential to our society.</p>
<p>Meaningfulness can also apply to work that seems less urgent but nonetheless important, such as the concerts and performances that we are now missing. Unfortunately, funding for the <a href="https://www.forbes.com/sites/leeseymour/2020/04/16/de-blasios-new-budget-would-decimate-new-york-theaters-already-reeling-from-pandemic/#662456d41b40">arts</a> and <a href="https://timesofsandiego.com/education/2020/05/16/california-teachers-face-layoffs-as-pandemic-forces-big-state-budget-cuts/">public education</a> is an easy target when budgets are strapped.</p>
<p>In times of disaster, those who are most vulnerable are often those who are harmed the most, a phenomenon called <a href="https://www.goodreads.com/book/show/1376863.At_Risk">differential exposure</a>. For example, during the pandemic, the lower an employee ranks in an organizational hierarchy, the <a href="https://time.com/5795651/coronavirus-workers-economy-inequality/">more likely they are to encounter frontline hazards</a>.</p>
<p>Similarly, when we emerge from the economic aspect of this disaster, as after the <a href="https://www.epi.org/publication/the-new-gilded-age-income-inequality-in-the-u-s-by-state-metropolitan-area-and-county/">Great Recession</a>, those who already had the greatest financial means are likely to be the most prepared to <a href="https://www.reuters.com/article/us-wealthreport/worlds-rich-got-richer-amid-09-recession-report-idUSTRE65L36T20100622">increase their wealth</a>.</p>
<h2>More than applause</h2>
<p>If we allow that return to economic normalcy, ordinary workers who have suffered greater losses in the downturn will also be in the most uncertain position to benefit from the recovery. Americans could redress this by reprioritizing the place of meaningfulness in how they measure and remunerate work that matters.</p>
<p>Of course, restructuring the economy to recognize meaningfulness is complex and some would say fanciful. But I believe the moral values of our markets are a reflection of our individual and social values. And there are things that can be done to move in that direction: Prospective employees can pursue work that makes a moral contribution to society, companies can adopt more socially conscious statements of purpose and policymakers can look at ways to better acknowledge the nonmonetary contribution of work to society. </p>
<p>After this pandemic is over, health care workers should still be <a href="https://www.timeout.com/newyork/news/watch-videos-of-tonights-massive-citywide-clap-for-essential-workers-040320/">greeted with nightly applause</a>, grocery store workers <a href="https://www.latimes.com/california/story/2020-03-25/supermarket-clerks-heroes-new-first-responders-coronavirus">should still be treated as heroes</a> and delivery drivers should still be <a href="https://www.goodmorningamerica.com/living/video/man-left-hand-sanitizer-toilet-paper-doorstep-delivery-69924269">surprised with gifts</a>. It would be nice if they were paid accordingly too. </p>
<p>[<em>Insight, in your inbox each day.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=insight">You can get it with The Conversation’s email newsletter</a>.]</p><img src="https://counter.theconversation.com/content/136472/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Michaelson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After the pandemic is over, grocery workers and nurses will still be essential. But will they be paid any better?Christopher Michaelson, Professor of Ethics and Business Law, University of St. ThomasLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1289502020-01-06T11:58:12Z2020-01-06T11:58:12ZCEOs make more in first week of January than average salary – pay ratios are the solution<figure><img src="https://images.theconversation.com/files/308432/original/file-20200103-11904-48uxre.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/business-people-success-fortune-concept-happy-309411233">Shutterstock</a></span></figcaption></figure><p>The typical FTSE 100 CEO will have earned as much as the average UK worker earns in a year by 5pm on January 6 2020 – £29,559 for 33 hours of work, according to data <a href="http://highpaycentre.org/blog/high-pay-day-2020-scope-for-fairer-pay-and-lower-inequality-remains-conside">compiled by the High Pay Centre think tank</a>. By the close of the year, the same CEO would have earned £3.46 million – roughly 117 times the average wage in the UK. This is a staggering differential. </p>
<p>If you believe that excessive executive pay is a problem, this statistic illustrates the point perfectly. These figures even represent a reduction from previous years, although this is due more to shrinkage in overall CEO pay than increases at the bottom. And UK CEO pay actually pales in comparison to their counterparts in the US, where levels topped US$14.5m (£11.5m), <a href="https://www.vox.com/policy-and-politics/2019/6/26/18744304/ceo-pay-ratio-disclosure-2018">representing a 287-1 differential</a> with the average worker.</p>
<p>Contrast this to just 40 years ago when the average CEO was paid <a href="http://highpaycentre.org/files/one_law_for_them_report.pdf">18 times the average salary</a>. Still a handsome amount – arguably more than enough to reflect their levels of responsibility, skills and status. With inequality <a href="https://theconversation.com/inequality-in-the-oecd-is-at-a-record-high-and-society-is-suffering-as-a-result-119962">a serious problem</a>, the government should seriously consider extending its pay ratio legislation and give average salaries a boost. </p>
<h2>How we got here</h2>
<p>In 1982 the chairmen of some of the largest UK companies got together to map out a way to ratchet up executive pay. They reasoned that this was necessary to make UK CEO positions more competitive internationally. Recognising the inherent barriers to such a bold move, the group suggested that the most acceptable way to achieve this would be a wholesale adoption of the “pay for performance” approach, <a href="https://www.epi.org/publication/pay-corporate-executives-financial-professionals/">which had already begun to take hold in the US</a>. </p>
<p><a href="https://www.industrydocuments.ucsf.edu/tobacco/docs/#id=fmfl0196">According to the minutes of their meeting</a>, it was suggested that “any higher remuneration would need to be visibly linked to performance and achievement, if it is to be socially and politically acceptable”. The group believed this approach would “persuade employees at large British firms to accept more moderate settlements” (lower pay).</p>
<p>What followed was a huge shift in the way British executives were compensated, with more and more aspects of pay becoming performance based. Instead of increasing salaries, companies <a href="https://hbr.org/1990/05/ceo-incentives-its-not-how-much-you-pay-but-how">used shares and bonuses</a> to reward CEOs. </p>
<p>Even more importantly, there was a <a href="https://theconversation.com/the-rise-fall-and-rise-again-of-businesses-serving-more-than-just-their-shareholders-124618">shift in focus to serve shareholders</a>, underpinned by the idea that this would benefit the company and “greed is good”. This led to a company’s share price becoming its primary measure of growth and success.</p>
<p>So, as firm productivity and profitability increased, executive pay grew. But nobody else, apart from CEOs, enjoyed a similar rise in their fortunes. In fact, ordinary wages have not only failed to mimic the growth in CEO pay, the three decades since have seen the differential between CEO and average pay <a href="http://highpaycentre.org/files/one_law_for_them_report.pdf">widen substantially</a>.</p>
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<span class="caption">The gap between CEO and average pay has considerably widened since the 1980s.</span>
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<p>In fact, figures show that ordinary wages have failed to keep pace with inflation and workers effectively earn less today, in real economic terms, <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/december2019">than they did before the financial crisis</a>. Wages have been reduced by globalisation, rapid automation <a href="https://www.oecd.org/els/emp/Globalisation-Jobs-and-Wages-2007.pdf">and the subsequent loss of worker bargaining power</a>. While this has enhanced the efficiency and profitability of big and successful firms, workers have not benefited in terms of what they are paid.</p>
<p>The vast difference between CEO and average pay touches on wider social concerns of growing inequality and the idea that modern companies enrich top executives at the expense of everyone else. CEOs of the largest public companies, <a href="https://www.epi.org/publication/ceo-compensation-2018/">usually fall within the top 1% of the income wealth and income scales</a>.</p>
<h2>Making executive pay fairer</h2>
<p>The British government introduced a law in 2018 <a href="https://www.gov.uk/government/news/new-executive-pay-transparency-measures-come-into-force">requiring listed companies to publish their ratio of CEO to median pay</a>. This is a <a href="https://theconversation.com/pay-ratios-could-curb-excessive-ceo-pay-and-counter-inequality-54496">step forward</a> in reducing the gap. As well as making the issue transparent, it can give rise to public outrage which encourages companies to increase how much they pay their employees.</p>
<p>A much further and more controversial step would be introducing upper limits for executive pay. Instead of targeting the amount executives are allowed to earn, these limits could focus on setting an appropriate gap between CEO pay and the lowest wage within the firm. So, for instance, a mandated pay limit of 50:1 would ensure the no CEO could not earn more than 50 times the lowest wage in the firm.</p>
<p>This is not without precedent. The Israeli government <a href="https://www.timesofisrael.com/knesset-ups-tax-penalties-for-extravagant-bank-ceo-pay/">passed a law in 2016</a> encouraging financial institutions to set CEO pay at no more than 35 times the salary of the lowest earner. Firms can pay their CEOs more than this but will be taxed doubly for the privilege. The move followed public outrage <a href="https://inequality.org/great-divide/israel-step-ceo-pay-cap/">over inequality and excessive CEO pay</a>. Switzerland has also considered pay ratios, although a referendum on setting them at 12:1 was <a href="https://www.theguardian.com/world/2013/nov/24/switzerland-votes-against-cap-executive-pay">rejected in 2013</a>.</p>
<p>The underpinning objective of any executive pay reform agenda should be less about reducing top pay levels, as it should be about making pay fairer. This could be achieved by indexing executive pay to the lower earnings within the firm. Just like the proverbial tide that lifts all boats, every rise in executive pay would trigger similar rises in the wages of the lowest paid. In this case, both the luxury yacht and the basic dinghy would rise higher.</p><img src="https://counter.theconversation.com/content/128950/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tobore Okah-Avae does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nobody else, apart from CEOs, has enjoyed a similar rise in their fortunes since the 1980s.Tobore Okah-Avae, University Teacher, University of BristolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1210982019-07-29T20:25:23Z2019-07-29T20:25:23ZThere’s a reason you’re feeling no better off than 10 years ago. Here’s what HILDA says about well-being<figure><img src="https://images.theconversation.com/files/286005/original/file-20190729-43140-1yg9ftl.png?ixlib=rb-1.1.0&rect=485%2C0%2C3461%2C1982&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Things were improving until 2009. HILDA finds there's been little improvement since.</span> <span class="attribution"><span class="source">Wes Mountain/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>During the election campaign then-opposition leader Bill Shorten repeatedly claimed that <a href="https://www.abc.net.au/news/2019-05-16/federal-election-fact-check-wages-first-debate-bill-shorten/11072026">everything was going up</a>. </p>
<p>“Childcare is up 28%, out of pockets to see the doctor up 20%, specialists … up nearly 40%,” he said. And then the punchline: “everything is going up, except your wages.”</p>
<p>Statistically, it wasn’t true. The official rate of inflation was just <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6401.0">1.3%</a>. The official rate of wage growth was <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/6345.0">2.3%</a>.</p>
<p>I haven’t asked him, but I wouldn’t be surprised if he kept saying it because his focus groups told him that’s what people felt.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=847&fit=crop&dpr=1 600w, https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=847&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=847&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1064&fit=crop&dpr=1 754w, https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1064&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/286191/original/file-20190730-43145-s34ul2.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1064&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://melbourneinstitute.unimelb.edu.au/hilda/publications/hilda-statistical-reports">Source: Melbourne Institute of Applied Economic and Social Research</a></span>
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<p>Today’s release of the 17th wave of <a href="https://melbourneinstitute.unimelb.edu.au/hilda">Australia’s Household, Income and Labour Dynamics Survey</a> (HILDA) tells us that despite the official statistics, people were right to feel they were going backwards.</p>
<p>Funded by the Australian government and managed by the Melbourne Institute of Applied Economic and Social Research, HILDA is one of the most valuable tools Australian social researchers have.</p>
<p>It examined the lives of 14,000 Australians in 2001 and then kept coming back to them each year to discover what had changed. By surveying their children as well, and in future surveying their children, it will be able to build up a long-term picture of how circumstances change over the course of lives and generations.</p>
<p>It can be thought of as Australia’s <a href="https://en.wikipedia.org/wiki/Up_(film_series)">Seven Up!</a>, the British TV series that keeps going back for updates on the lives of 14 children it first examined when they were seven. Except that HILDA’s results have statistical significance, and the questions are detailed, asking among other things about depression and anxiety, work-life stress, stress in relationships, and illicit drug use. </p>
<h2>We are right to feel no better off…</h2>
<p>The Australian Bureau of Statistics does indeed find that wages are climbing faster than prices, as they almost always have, but because it doesn’t examine what happens to a particular household over time it can tell us little about whether an individual’s experience of things is getting better or getting worse.</p>
<p>HILDA gets a handle on each household’s disposable income by asking each member of the household about their gross income from wages, benefits, investments and other sources and then deducting its estimate of taxes. It gets a handle on the real (inflation-adjusted) changes by adjusting its totals for changes in the consumer price index.</p>
<p>It finds that for the thousands of households it interviewed, real disposable income grew strongly during the first nine years of the survey, between 2001 and 2009. Then, after the global financial crisis, for the eight years between 2009 and the 2017 results released today, that growth stalled.</p>
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<img src="https://cdn.theconversation.com/static_files/files/672/median.gif?1564440647" width="100%">
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<p>Expressed in today’s dollars, the average annual real disposable income of those households climbed by A$19,773 between 2001 and 2009, about $2,472 per year. </p>
<p>But most of the growth was during the mining boom that stretched from 2003 to 2009 when the average annual real disposable household income climbed about $3,000 per year, as did the income of the more representative median (or middle) household.</p>
<p>Since 2009 and the global financial crisis, the average and the median have moved in different directions. </p>
<p>The average houshold’s annual real disposable income has climbed a further $3,156. The median (or typical) household’s income has fallen $542, although not steadily. The graph shows it falling between 2009 and 2011, climbing in 2012, and changing little thereafter.</p>
<h2>…and as if it’s harder to get ahead…</h2>
<p>It has also become harder to “<a href="https://www.smh.com.au/opinion/explosion-of-negative-gearing-alters-the-owneroccupier-v-investor-ratio-20160309-gne0yw.html">get ahead</a>”, in the phrase used often by the prime minister.</p>
<p>Between 2001 and 2005, 40% of the households in the bottom fifth of earners (the bottom qunitile) moved out of it into a higher one. In more recent years, between 2012 and 2016, a lower 38.5% moved up.</p>
<p>Between 2001 and 2005, 44% of the households in the top qunitile had to move down to let other households take their place. In more recent years, between 2012 and 2016, only 41.5% have moved down.</p>
<p>Getting a long way out of the income circumstances you were born in is a long-shot, according on HILDA’s early attempt at measuring intergenerational mobility.</p>
<p>People who were 32-34 years old in 2015-17 are highly likely to be in the same household income quintiles as those people found themselves in when they were 15-17 back in 2001-03.</p>
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<p><iframe id="tc-infographic-425" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/425/a91f9828e9adb0659bf56cacc2f85c5a00eb8118/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
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<p>There’s only a one in ten chance of moving from the bottom quintile as a teenager to the top quintile in your early thirties. There’s a 37% chance you’ll stay put.</p>
<p>Even among teenagers who grew up in the middle quintile, there’s only a 17% chance of making it to the top, along with a 19% chance of moving one rung up.</p>
<p>Interestingly, women turn out to be more tied to the income their families had when they were children than men, and both men and women tend to stay more closely tied to their mother’s income than their father’s.</p>
<h2>…yet we are less reliant on welfare, even pensions…</h2>
<p>When HILDA began in 2001, 39% of Australians aged 18 to 64 were living in a household that received government welfare of some kind. By 2017, that proportion had fallen to 31%, but almost all of the drop happened before the global financial crisis in 2009.</p>
<p>Most of us are still in households that have received something from the government over a 10-year period: 58% of working age Australians in 2017, down from 64% in 2010.</p>
<p>Among older Australians aged 65 and over, reliance on the age pension and other benefits for more than half of income needs has dropped from 60% to 51%. </p>
<p>Among new retirees aged 65 and over, the proportion receiving the age pension has fallen from 76% of men and 74% of women to just 60% of men and 55% of women.</p>
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<p>But while the growth of compulsory superannuation is likely to be part of the story, almost all of the decline happened before the financial crisis in 2009, suggesting that the destruction of wealth in the crisis kept people on the pension who otherwise might not have needed it.</p>
<h2>…and gender roles are changing</h2>
<p>Before the financial crisis, almost three quarters (73%) of men of traditional working age were employed full-time. After the crisis, the rate slipped to a much lower 67% and stayed there. </p>
<p>Female full-time employment was also hit by the crisis but has since almost totally recovered to be just a fraction below its pre-crisis peak of 39.6%.</p>
<p>Women’s hourly earnings are also climbing faster than men’s, up 24% between 2001 and 2017, compared to 21% for men’s. </p>
<p>While women have always been more likely than men to be employed casually, since the crisis male casual employment has climbed while female casual employment has declined. </p>
<p>The two are now as close as they have ever been, with women now only six percentage points more likely than men to be employed causally.</p>
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Read more:
<a href="https://theconversation.com/hilda-findings-on-australian-families-experience-of-childcare-should-be-a-call-to-arms-for-government-120417">HILDA findings on Australian families' experience of childcare should be a call-to-arms for government</a>
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<p>In dual-earner male-female couples, the proportion in which the woman earns more than the man has climbed from 22% to 25%. </p>
<p>The woman being the main breadwinner is more common in couples that aren’t legally married and don’t have children. It is also far more common in the regions than in cities and among couples in which the man doesn’t have a university degree.</p>
<p>Men in predominantly female breadwinner households are somewhat less happy with their lives and with their relationships, as (perhaps surprisingly) are women.</p>
<p>Fathers tend to agonise more about work-family conflict than mothers, notwithstanding the much greater amount of housework and childcare work performed by mothers. The men who worry the most work long hours, have irregular shifts and very young children. A mother working the same hours as a father will typically be more conflicted.</p>
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Read more:
<a href="https://theconversation.com/language-of-love-a-quarter-of-australians-are-in-inter-ethnic-relationships-120416">Language of love: a quarter of Australians are in inter-ethnic relationships</a>
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<p>Most parents suffering high work-family conflict get out of it within a year or two, often by managing things better and sometimes by changing jobs. Those suffering high work-family conflict are 50% more likely than others to separate the next year.</p>
<p>HILDA’s great strength is that it will be able to follow those parents and their children and all the other families it surveys and tell us what happens next. Rather than being an Australian version of Seven Up!, it might be better described as Australia’s never ending story. Its co-director Roger Wilkins says its design allows it to be “infinitely lived”.</p>
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<strong>
Read more:
<a href="https://theconversation.com/australian-city-workers-average-commute-has-blown-out-to-66-minutes-a-day-how-does-yours-compare-120598">Australian city workers' average commute has blown out to 66 minutes a day. How does yours compare?</a>
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<img src="https://counter.theconversation.com/content/121098/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The official figures show things are fine, but Australia’s most comprehensive tracking survey finds the typical household is worse off than ten years ago.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1117282019-03-07T19:05:09Z2019-03-07T19:05:09ZOverworked and underpaid: the revival of strikes in New Zealand<figure><img src="https://images.theconversation.com/files/261995/original/file-20190304-92286-1lbihqq.jpg?ixlib=rb-1.1.0&rect=92%2C400%2C3775%2C2366&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">In July 2018, public servants went on strike to demand fair wages.</span> <span class="attribution"><span class="source">from www.shutterstock.com</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Strikes were supposedly something of the alleged “<a href="http://werewolf.co.nz/2018/02/our-union-powered-past/">bad old days</a>” of the 1970s. But during the first year of Aotearoa New Zealand’s Labour-led government, a strike revival ensued. At least <a href="https://www.stuff.co.nz/business/109429845/in-2018-unions-took-to-the-streets-to-make-their-demands-heard-but-were-they">70,000 people</a>, if not more, walked out last year. Strikers included nurses, teachers, bus drivers, port workers, fast-food workers, retail workers, steel workers and public servants. </p>
<p>While official figures for 2018 have not been published yet, this represents the <a href="http://www.academia.edu/29794227/Merging_politics_with_economics_Non-industrial_and_political_work_stoppage_statistics_in_New_Zealand_during_the_long_1970s">highest number of people involved in strikes since the late 1980s</a>, and possibly the most working days not worked due to stoppages since 1992. For many strikers, it represents the first time they have participated in walkouts.</p>
<iframe title="Chart: Workers involved in strikes in Aotearoa/New Zealand " aria-describedby="between 1945 and 2017" src="https://datawrapper.dwcdn.net/E2GyS/2/" scrolling="no" frameborder="0" width="100%" height="452"></iframe>
<h2>An unexpected strike wave?</h2>
<p>According to some, this strike wave was not supposed to happen. Trade unions were thought to be <a href="https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11731947">too weak to strike</a>. </p>
<p>One <a href="http://www.pearsoned.co.nz/9781877371530">employment relations textbook</a> asserted in 2009 that “strike action is seen increasingly as an inefficient and outdated strategy”. The Public Service Association (<a href="https://www.psa.org.nz/">PSA</a>) secretary Erin Polaczuk recently argued that as unions today have become more <a href="https://www.noted.co.nz/currently/profiles/union-leader-erin-polaczuk-opens-up-about-the-future-of-the-movement/">feminised and mature</a>, they have increasingly avoided “stupid oppositional behaviour”. </p>
<p>Nevertheless, women have led the strike wave. Women made up the majority of participants in most strikes, and female union delegates were often at the forefront of disputes. Indeed, stoppages have mostly occurred in majority female occupations such as teaching, nursing and government sector work in general. </p>
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Read more:
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<p>It is as difficult to predict strike waves as it is to predict recessions. This is because both are the result of many complex causes, including the unpredictable nature of human agency. This wave is no exception. </p>
<h2>Political causes</h2>
<p>Political factors help to partly explain the stoppages, but cannot be blamed solely for causing the unrest. In their classic 1974 study, <a href="https://www.amazon.com/Strikes-France-1830-1968-Edward-Shorter/dp/0521202930">Strikes in France</a>, Edward Shorter and <a href="https://en.wikipedia.org/wiki/Charles_Tilly">Charles Tilly</a> argued somewhat controversially that greater political opportunities produce strike waves. This view concurs with the opposition National Party’s attempt to pin blame for the strikes on the new Labour-led government because that government has raised expectations that wages will increase. </p>
<p>But when compared to another political factor, rising expectations and greater political opportunities seem to be a minor cause. That variable is how successive Labour and National-led governments since 1984 have been <a href="https://www.jacobinmag.com/2017/03/new-zealand-neoliberalism-inequality-welfare-state-tax-haven/">wedded to a neoliberal practice of tight government spending</a>. Even if Labour has somewhat loosened the government purse strings recently, it still strongly adheres to “fiscal responsibility” through its <a href="https://www.newsroom.co.nz/2018/04/09/103825/labours-budget-rules-are-holding-it-back">budget responsibility rules</a>. </p>
<p>The level of government spending is a significant factor in causing the strikes simply because the government employs most workers who have gone on strike. Long-term neoliberal <a href="https://en.wikipedia.org/wiki/Austerity">austerity</a> has caused public sector workers’ wages to fall <a href="https://www.victoria.ac.nz/__data/assets/pdf_file/0009/1713564/CLEWd-In-article-on-strikes-FINAL.pdf">well behind those of most others</a>.</p>
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Read more:
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<h2>Economic causes</h2>
<p>Economic factors (or political-economic factors) other than neoliberal cutbacks are also crucial. <a href="https://www.victoria.ac.nz/__data/assets/pdf_file/0009/1713564/CLEWd-In-article-on-strikes-FINAL.pdf">Academic research</a> generally regards economic variables as pivotal. Economist <a href="https://berl.co.nz/team/dr-ganesh-nana">Ganesh Nana</a> has suggested that neoliberalism has suppressed wages for the vast majority of workers for a long time, leading to a <a href="https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12172282">low-wage economy</a>.</p>
<p>Studies have found neoliberal politics and economics have mostly <a href="https://www.bwb.co.nz/books/inequality">enriched those at the top</a> at the <a href="https://thespinoff.co.nz/society/31-07-2018/the-side-eye-inequality-tower-2018/">expense of the rest of the population</a>. According to <a href="https://www.union.org.nz/">Council of Trade Unions</a> economist Bill Rosenberg, labour’s <a href="https://www.researchgate.net/publication/317868928_A_brief_history_of_labour's_share_of_income_in_New_Zealand_1939-2016">share of national income has declined</a> from a peak of 71% in 1981 to 61% in 2016. At the same time living costs have risen, particularly in recent years due to <a href="https://www.odt.co.nz/opinion/govt%E2%80%99s-hands-tied-over-teachers%E2%80%99-pay-claims">rising accommodation costs</a>. Hence it seems this is a “catch-up” strike wave to reverse decades of stagnant or declining real wages. </p>
<p>This corresponds with <a href="https://www.cambridge.org/core/books/forces-of-labor/24F7A6E01DA0617159FCCC7A6F68FC40">theories</a> that strikes happen in “<a href="https://www.crcpress.com/Rethinking-Industrial-Relations-Mobilisation-Collectivism-and-Long-Waves/Kelly/p/book/9780415186735">long waves</a>”, with strike peaks emerging after periods of subdued activity. Scholars like <a href="https://soc.jhu.edu/directory/beverly-j-silver/">Beverly Silver</a> argue that increased exploitation and commodification of labour (such as under neoliberalism) can lead to a delayed, pendulum-swing counter-response. This rejoinder reflects shifting patterns of workplace bargaining power and class composition (such as the rise of white-collar labour and the “knowledge economy”). </p>
<h2>Subjective causes</h2>
<p>Political and economic factors, long term or short term, cannot explain all. The subjective side of strikes is also important. </p>
<p>If we listen to strikers, they commonly claim they are being underpaid and overworked. Working in underfunded and understaffed occupations produces unrelenting and unhealthy high-pressure jobs. Being lumbered with more work for less or stagnant pay (in real terms) has caused much underlying dissatisfaction over the long term. This discontent has finally bubbled to the surface in the form of strikes. </p>
<p><a href="https://prospect.org/article/return-strike">Research suggests</a> strike waves sometimes occur simply because people see others striking. Sociologist <a href="https://www.sociology.ox.ac.uk/academic-staff/michael-biggs.html">Michael Biggs</a> argues that “<a href="http://users.ox.ac.uk/%7Esfos0060/feedback.pdf">optimism escalates with participation</a>”, making the unthinkable achievable. In short, successful strikes breed more strikes. </p>
<p>Some fear that the strike wave of 2018, which looks set to continue into 2019 due to several recent junior doctors’ strikes, will mean a return to the strike-prone decades of the 1970s and 1980s. A major strike wave is probably unlikely given, among many other factors, the legal restrictions that outlaw most forms of strikes, including strikes outside bargaining periods between unions and employers, political strikes, solidarity strikes and wildcat strikes. Unions represented only <a href="http://www.societies.govt.nz/cms/registered-unions/annual-return-membership-reports/2017">17% of the waged workforce</a> in 2017 and are concentrated in predominantly white-collar public sector unions that lack traditions of striking. </p>
<p>Finally, most recent strikes have been short-lived and have generally not occurred in economically strategic or vital industries. The strike wave would probably have far greater economic and political impact, for better or worse, if it spread to those working in key economic sectors, such as in the tourism, dairy and meat-processing industries, and in logistics and the financial sector. Yet it seems at this stage workers in most of these sectors are unlikely to strike, despite indications of a similar underlying discontent with wages and conditions.</p><img src="https://counter.theconversation.com/content/111728/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Toby Boraman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Last year, more than 70,000 workers walked off their jobs in New Zealand – the highest number of people on strike since the late 1980s. The reasons for the strike wave are political and economic.Toby Boraman, Lecturer in Politics, Massey UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1100212019-01-22T04:40:50Z2019-01-22T04:40:50ZHow a default union membership could help reduce income inequality<figure><img src="https://images.theconversation.com/files/254441/original/file-20190118-100273-1ww0u36.jpg?ixlib=rb-1.1.0&rect=0%2C57%2C3812%2C2484&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As income inequality is growing in many countries, associated social problems are also getting worse. </span> <span class="attribution"><span class="source">from www.shutterstock.com</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>A more equal society with less income disparity is good for well-being.</p>
<p>In their <a href="https://www.penguin.co.uk/books/188/188607/the-inner-level/9781846147418.html">latest book</a>, epidemiologists <a href="https://www.theguardian.com/profile/richard-wilkinson">Richard Wilkinson</a> and <a href="https://www.york.ac.uk/healthsciences/our-staff/kate-pickett/">Kate Pickett</a> argue people living in more equal societies empathise more and worry less about income, possessions and social status. </p>
<p>But income inequalities have been increasing, <a href="https://www.bwb.co.nz/books/inequality">notably in New Zealand</a>, and research suggests this growing economic gap is associated with a range of <a href="https://journals.sagepub.com/doi/abs/10.1177/073401689301800203">social ills</a> and <a href="https://www.sciencedirect.com/science/article/pii/0014292195000305">political instability</a>. </p>
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<strong>
Read more:
<a href="https://theconversation.com/distress-status-wars-and-immoral-behaviour-the-psychological-impacts-of-inequality-75183">Distress, status wars and immoral behaviour: the psychological impacts of inequality</a>
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<p>In our <a href="https://academic.oup.com/ilj/advance-article-abstract/doi/10.1093/indlaw/dwy005/5040332">research</a>, we argue that making union membership the default option would help reduce inequality while protecting workers’ rights to opt out. </p>
<h2>Unions and inequality</h2>
<p>Unions have traditionally played a key role in reducing income disparities. They negotiate higher pay for virtually all workers, but especially the low waged. </p>
<p>In the United States, evidence suggests the union pay premium has been a <a href="https://www.nber.org/papers/w24587">consistent 10% to 20% since the 1930s</a>, and is <a href="https://www.jstor.org/stable/2696012?seq=1#page_scan_tab_contents">as high as 30% to 40% for the lowest paid</a>. Countries that have higher union membership levels and collective bargaining coverage usually have <a href="https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/Inequality-and-Labor-Market-Institutions-42987">lower income inequality</a>. Those that have declining membership and coverage usually have <a href="https://academic.oup.com/cje/article-abstract/42/4/1009/4621985?redirectedFrom=PDF">worsening inequality</a>. </p>
<p>In the US, research suggests the decline in union membership since the 1960s explains up to a <a href="http://www.asanet.org/sites/default/files/savvy/images/journals/docs/pdf/asr/WesternandRosenfeld.pdf">third of the growth in male wage inequality</a> since that time.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-income-inequality-looks-like-across-australia-80069">What income inequality looks like across Australia</a>
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<h2>Preferences for union membership</h2>
<p>Despite widespread de-unionisation, surveys show roughly half of all workers across richer Anglophone countries, such as Australia and New Zealand, <a href="https://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1035&context=books">want to be union members</a> but a majority cannot exercise their preference because they belong to a non-union workplace. </p>
<p>Recruitment of members was less of an issue in the past. Unions, once established, could negotiate closed-shop clauses in their collective agreement. Such a clause means an employer agrees to employ only workers who are already members of a particular union or agree to join once employed. </p>
<p>But more recently, governments in Australia, New Zealand, the UK and the US have increasingly <a href="https://www.jstor.org/stable/23747890?seq=1#page_scan_tab_contents">adopted a policy of voluntary unionism</a>, banning the closed-shop clause or declaring it unenforceable. In the European Union, the European Court of Human Rights, in the <a href="http://opil.ouplaw.com/view/10.1093/law:ihrl/2988echr06.case.1/law-ihrl-2988echr06">Sorensen and Rasmussen v. Denmark case</a>, declared the closed shop was a <a href="https://www.eurofound.europa.eu/publications/article/2006/echr-rules-against-danish-closed-shop-agreements">breach of the freedom not to associate</a>. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/unions-cant-just-rely-on-promises-of-favourable-laws-to-regain-lost-ground-91315">Unions can't just rely on promises of favourable laws to regain lost ground</a>
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<p>How, then, can employees retain the freedom to choose while reaping the benefits of union membership in reducing inequality? In our <a href="https://academic.oup.com/ilj/advance-article-abstract/doi/10.1093/indlaw/dwy005/5040332?redirectedFrom=fulltext">research</a> we propose an innovative solution, drawing on insights from behavioural economics, which involves defaulting employees to union membership in workplaces where unions already have some members or a collective agreement. Once employed, employees would be automatically enrolled in the on-site union, but retain the freedom to opt out at least after some time.</p>
<h2>Union default and increased membership</h2>
<p>Our work indicates a <a href="https://academic.oup.com/ilj/advance-article-abstract/doi/10.1093/indlaw/dwy005/5040332?redirectedFrom=fulltext">union default</a> would likely increase union membership in four main ways. It would lower the costs of joining, membership would become the norm, inertia would keep workers in the union and they would not want to lose the benefits of unions. </p>
<p>The cost of union membership would be significantly lower because, for the union, it would be solely associated with establishing an initial presence and collective agreement. The cost of recruiting additional members would be effectively zero. For members, enrolment would be automatic.</p>
<p>Once enrolled, employees would be more likely to remain members through inertia. Making decisions can be difficult, especially when the <a href="https://global.oup.com/academic/product/choosing-not-to-choose-9780190457297?cc=nz&lang=en&">choices are complex</a>. This is certainly true of unions, given the broad range of their services and the difficulties in forecasting whether these services will be needed (for example, in the case of a dismissal). If membership is the default, inertia means workers <a href="https://www.ncbi.nlm.nih.gov/pubmed/12555797">would stay with the status quo</a>.</p>
<p>A union default would also help to normalise union membership. It would send a clear signal to employees that the state approves of <a href="https://onlinelibrary.wiley.com/doi/full/10.1002/ejsp.2080">union membership as the right thing to do</a> and that it’s commonplace. Beyond that, a union default would set a reference point for employees’ assessments of gains and losses, with <a href="https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1000&context=penn_law_review">losses typically given more importance</a> in any decision to leave a union. </p>
<p>It’s difficult to predict how much union membership would rise with a union default, but the <a href="http://science.sciencemag.org/content/302/5649/1338">extensive</a> <a href="https://www.nejm.org/doi/full/10.1056/NEJMsb071595">empirical research</a> on default effects in various contexts would suggest a lot.</p><img src="https://counter.theconversation.com/content/110021/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Harcourt receives funding from the New Zealand Law Foundation. The Foundation has agreed to fund our research related to the union default. </span></em></p><p class="fine-print"><em><span>Gregor Gall is the director of the Jimmy Reid Foundation and editor of the Scottish Left Review.</span></em></p><p class="fine-print"><em><span>Margaret Wilson receives funding from NZ Law Foundation She is a non-active member of NZ Labour Party.
</span></em></p><p class="fine-print"><em><span>Nisha Novell received funding from the New Zealand Law Foundation.</span></em></p>Research suggests union membership by default could help reduce income inequality and its associated social ills.Mark Harcourt, Professor, University of WaikatoGregor Gall, Affiliate Research Associate, University of GlasgowMargaret Wilson, Professor, University of WaikatoNisha Novell, Law Student, Te Herenga Waka — Victoria University of WellingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1053732018-10-24T03:07:22Z2018-10-24T03:07:22ZThe fair go is a fading dream, but don’t write it off<p><em>This article is the first in the <a href="https://theconversation.com/au/topics/reclaiming-the-fair-go-61200">Reclaiming the Fair Go</a> series, a collaboration between The Conversation, the <a href="http://sydneydemocracynetwork.org/">Sydney Democracy Network</a> and the <a href="http://sydneypeacefoundation.org.au/">Sydney Peace Foundation</a> to mark the awarding of the <a href="http://sydneypeacefoundation.org.au/peace-prize-recipients/2018-joseph-stiglitz/">2018 Sydney Peace Prize</a> to Nobel laureate and economics professor Joseph Stiglitz. These articles reflect on the crisis caused by economic inequality and on how we can break the cycle of power and greed to enable all peoples and the planet to flourish. The Sydney Peace Prize will be presented on November 15 (tickets <a href="https://www.stickytickets.com.au/spp/events?page=1">here</a>).</em></p>
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<p>In June 2017, Australia achieved a world record of sorts – <a href="https://www.economist.com/the-economist-explains/2017/09/05/how-australia-broke-the-record-for-economic-growth">26 years of uninterrupted economic growth</a>. This was achieved with a mix of good luck and good management. The resources boom, prudent fiscal management and some difficult economic decisions guided Australia through the global financial crisis with an economy that continued to grow.</p>
<p>Throughout much of this period, Australia has experienced <a href="https://www.rba.gov.au/chart-pack/factors-prod-labour-mkt.html">declining unemployment</a> and <a href="https://tradingeconomics.com/australia/wage-growth">growing wages</a>. On the surface this might suggest Australia is a “Goldilocks economy”, avoiding the boom and bust cycle.</p>
<p>However, beneath the veneer it is clear not all have shared in the prosperity generated over the past 27 years. We have seen an enduring rise in economic inequality over the past four decades. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/dont-believe-what-they-say-about-inequality-some-of-us-are-worse-off-102332">Don't believe what they say about inequality. Some of us are worse off</a>
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<p>Since the late 1970s, there has been a clear and persistent increase in <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/1475-4932.12285">individual earnings</a> and <a href="https://onlinelibrary.wiley.com/doi/10.1111/1475-4932.12399">family income inequality</a>. Since the late 1980s, much of the gain in real income has been concentrated at the <a href="https://wid.world/country/australia/">very top of the distribution</a>. </p>
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<p>From an international perspective, Australia now ranks among the <a href="https://www.oecd.org/social/OECD2016-Income-Inequality-Update.pdf">more unequal of the OECD economies</a>.</p>
<h2>What has happened to pay packets?</h2>
<p>A good place to begin to understand how inequality has increased is by examining the labour market. Studies <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/1475-4932.12285">based on Australian Bureau of Statistics</a> and <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1475-4932.12263">other data</a> sources show a significant increase in wage inequality across workers since the late 1970s. </p>
<p>A range of forces have driven this increase. These include technological change such as computerisation and developments in IT that have fundamentally altered business practices and organisational forms. This has delivered substantial wage gains for some high-skilled workers, while minimal wage growth for low-skilled workers has led to increasing polarisation.</p>
<p>Of course, one of the defining features of the Australian economy over the past three decades has been its internationalisation. Globalisation has exposed more jobs and workers to international competition. This has left some workers, especially the low-skilled, with relatively smaller pay packets.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-rising-inequality-is-stalling-economies-by-crippling-demand-99075">How rising inequality is stalling economies by crippling demand</a>
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<p>Many institutions are no longer recognisable from those that shaped Australia from the beginning of the 20th century. Unions and centralised wage bargaining traditionally played a pivotal role in protecting the lowest-paid workers’ wages.</p>
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<p>Together these forces have contributed to greater wage volatility. The result is that much of the recent gains in real wages have been concentrated toward the very top of the wage distribution.</p>
<h2>Families matter</h2>
<p>Families can help limit the impacts of the market forces generating inequality. By coordinating work, caring, spending and saving decisions, families can dampen the effects of market-generated volatility and inequality on economic well-being.</p>
<p>Indeed, the rise in earnings and income inequality across families is less pronounced than the inequality across individuals. Nonetheless, “assortative matching”, whereby individuals tend to partner with a similarly educated and skilled individual, has led to a growing gap between the resources of the “haves” and “have-nots”.</p>
<h2>The state’s helping hand</h2>
<p>As in other countries, there has been a general trend of the Australian state providing less social protection and so acting less as an “equaliser”. For the unemployed, the safety net offered by the Newstart program has been progressively diminished. Access to the Disability Support Pension is increasingly restrictive, and delayed access to the Age Pension means these programs have become less generous over time.</p>
<p>Beyond the labour market, changes to the tax codes have reduced the progressivity of the system.</p>
<p>In total, the broad direction of changes to the tax-transfer system in recent decades has been to reduce the equalising influence of the state.</p>
<h2>Intergenerational mobility</h2>
<p>The high level of economic inequality at a point in time cannot be readily dismissed as an artefact of a dynamic and mobile economy. Research has shown that Australia’s high level of economic inequality is also associated with <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1475-4932.12274">lower intergenerational mobility</a>.</p>
<p>Recent evidence based on longitudinal data indicates children’s earnings are strongly related to their parents’. From an international perspective, Australia is relatively immobile. This means the economic advantages and disadvantages we see today may persist over future generations.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-inequality-you-cant-change-that-lasts-a-lifetime-82153">The inequality you can't change that lasts a lifetime</a>
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</em>
</p>
<hr>
<p>One may well ask: is Australia witnessing the end of the “fair go”?</p>
<h2>Is it all doom and gloom?</h2>
<p>Despite these developments, there is cause for some optimism. Sustained community pressure has led to policy reforms that improved equality. A <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1475-4932.12237">recent study</a> showed that the one-off 19.5% increase in the Age Pension for singles (7.9% for couples) recommended by the <a href="https://www.dss.gov.au/about-the-department/publications-articles/corporate-publications/budget-and-additional-estimates-statements/pension-review-report">Harmer Review</a> significantly reduced poverty and inequality among the elderly.</p>
<p>The <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201213/NDIS">introduction of the National Disability Insurance Scheme</a> in 2012 represents an important expansion of social protection, which may substantially reduce economic inequality.</p>
<p>Community reaction to the evidence presented at the ongoing <a href="https://financialservices.royalcommission.gov.au/Pages/default.aspx">Royal Commission</a> into Misconduct in the Banking, Superannuation and Financial Services Industry has led to a commitment to increase the funding and powers of corporate regulators. </p>
<p>Similarly, the <a href="https://www.abc.net.au/news/2012-08-27/whats-in-the-gonski-report/4219508">Gonski Report</a> of 2012 refocused policy debate on school funding toward needs-based models.</p>
<p>These developments have been driven in part by strong community concerns and a recognition that those most in need have missed out on the prosperity generated by over a quarter of a century of uninterrupted economic growth. Together, they provide hope the fair go has not gone forever.</p>
<hr>
<p><em>You can find other articles in the series <a href="https://theconversation.com/au/topics/reclaiming-the-fair-go-61200">here</a>.</em></p><img src="https://counter.theconversation.com/content/105373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Garry Barrett receives funding from the Australian Research Council and the Australian Housing and Urban Research Institute.</span></em></p><p class="fine-print"><em><span>Stephen Whelan has received funding from the Australian Research Council and the Australian Housing and Urban Research Institute.</span></em></p>This is the first article in a series, Reclaiming the Fair Go, to mark the awarding of the 2018 Sydney Peace Prize to Nobel laureate and economist Joseph Stiglitz.Garry Barrett, Professor and Head of School, School of Economics, University of SydneyStephen Whelan, Associate Professor of Economics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1037812018-10-05T13:24:45Z2018-10-05T13:24:45ZHow shareholder profits conquered capitalism – and how workers can win back its benefits for themselves<figure><img src="https://images.theconversation.com/files/239159/original/file-20181003-52684-1rd4r5c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wolves on Wall Street, but perhaps the time of shareholders' rule is drawing to an end.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/wall-street-sign-focus-on-blurred-306271739">robert cicchetti/Shutterstock</a></span></figcaption></figure><p>In the early days of industrial capitalism there were no protections for workers, and industrialists took their profits with little heed to anyone else. Following the growth of the labour movement, the establishment of trade unions and the founding of the welfare state in the first half of the 20th century, corporations in decades after World War II embraced a more open, stakeholder capitalism, where profits were shared between employees, managers and shareholders. This led to a flourishing middle class as workers and communities benefited from the success of the corporations of which they were part.</p>
<p>But since the 1970s the pendulum has swung back towards a system where profits are shared less widely, causing major upheavals in society and the fortunes of labour and the middle classes. </p>
<p><a href="https://www.nytimes.com/2018/07/13/business/economy/wages-workers-profits.html">In the US</a>, labour’s share of income had been close to 70% until the 1970s, but had shrunk by the beginning of the 1980s even as profits increased. In the 21st century this accelerated: in 2000, labour’s share of income in the US accounted for some 66%, whereas corporate profits accounted for a little over 8%. Today, labour’s share has fallen to 62% while profits have risen to 12%. The same trend <a href="https://www.ippr.org/files/2018-08/1535639099_prosperity-and-justice-ippr-2018.pdf">is repeated in the UK</a>, where labour’s share of income has reduced from almost 70% in the 1970s to around 55% percent today.</p>
<p>Where has the money gone? For decades, real incomes for workers have largely stagnated while those of top executives have skyrocketed. In 2017, the top executives of America’s largest companies enjoyed an <a href="https://www.theguardian.com/business/2018/aug/16/ceo-versus-worker-wage-american-companies-pay-gap-study-2018">average pay increase of 17.6%</a>, while workers’ pay in those companies rose barely 0.3%. In 1965, the chief executives of the top 350 US companies earned salaries 20 times that of their workers. By 1989 that had risen to 58 times, and in 2017 <a href="https://www.theguardian.com/business/2018/aug/16/ceo-versus-worker-wage-american-companies-pay-gap-study-2018">the ratio was 312 times that of workers</a>. </p>
<p>Not surprisingly, compared to the middle-class prosperity that followed 1945, recent decades have seen widening inequality in society. The status quo overturned, capitalism has been hijacked by a profiteering elite. The question is whether society can find an alternative approach that shares the wealth more widely.</p>
<h2>Shareholders uber alles</h2>
<p>This trend coincided with the emergence of shareholder value as the overwhelming corporate ethos, as the interests of shareholders take primacy over those of other stakeholders in the business. With executives incentivised to maximise profits, meet quarterly share price targets and ensure profits are returned to shareholders, they have been able to game the system to ensure they receive excessive remuneration, while at the same time cutting costs and squeezing wage growth in search of higher profits. British housebuilder Persimmon this year paid its chief executive <a href="https://www.theguardian.com/business/2018/jan/09/persimmon-profits-chief-bonus-scheme">a £110m bonus, decried by critics as “corporate looting”</a>.</p>
<p>Outsourcing and offshoring have been examples of such cost-cutting, profit-driving initiatives: outsourcing low-skilled work is thought to account for <a href="https://www.nytimes.com/2018/09/08/business/economy/harvard-living-wage.html%20link">one-third of the increase in wage inequality</a> since the 1980s in the US. The percentage of US workers associated with temporary help agencies, on-call workers, or contractors <a href="https://www.nytimes.com/2018/06/07/opinion/trump-labor-capital-class-struggle.html">increased from 10.7% in 2005 to 15.8% by 2015</a>.</p>
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<img alt="" src="https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Pressure to maintain share prices and ensure profits return to shareholders have shrunk the share of company profits received by labour.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sao-paulo-brazil-march-14-2016-391295644">Alf Ribeiro/Shutterstock</a></span>
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<p>Economists have been puzzled by stagnant wages and increased inequality. But as I highlighted <a href="https://www.ft.com/content/c269c3e6-c4c5-11e3-8dd4-00144feabdc0">as far back as 2007</a> and repeatedly since, the emphasis on shareholder value has contributed enormously. Management and leadership consultant and writer Steve Denning <a href="https://www.forbes.com/sites/stevedenning/2018/07/26/how-to-fix-stagnant-wages-dump-the-worlds-dumbest-idea/#2183fb441abc">wrote this year</a> that “shareholder value is the root cause of workers’ stagnant salaries”, with a corrosive effect on societal cohesion and stability – he believes the current rise of populism is one example of the fallout.</p>
<p>Demands for greater profits continue, as companies are pressured by share portfolio managers and activist investors to increase their profitability and share price. Private equity firms, which invest in companies in order to maximise returns, have expanded into many sectors of the economy. Most recently, this has seen the doctrine of maximising profits enter the <a href="https://www.nytimes.com/2015/09/29/business/dealbook/as-banks-retreat-private-equity-rushes-to-buy-troubled-home-mortgages.html">residential property and home mortgages</a> market.</p>
<h2>The pendulum swings back?</h2>
<p>Despite the stranglehold of shareholder value on corporate thinking, events suggest the pendulum may once more swing back to favour workers and other stakeholders. </p>
<p>In the US, the government’s Committee on Foreign Investment <a href="https://www.reuters.com/article/us-qualcomm-m-a-broadcom-cfius/qualcomm-takeover-battle-intervention-shows-u-s-security-panels-expanding-reach-idUSKBN1GI007">warned</a> that in its attempt to take over telecoms giant Qualcomm, Broadcomm’s private equity approach could compromise its target’s technological leading position in pursuit of value for Broadcomm shareholders. </p>
<p>In the UK, there was <a href="https://www.theguardian.com/business/2018/mar/15/airbus-warns-melrose-gkn-takeover">opposition to the takeover</a> of engineering conglomerate GKN by turnaround firm Melrose. Airbus, one of GKN’s major customers, argued that Melrose’s focus on shareholder value and short-term returns meant it might not be committed to long-term investment.</p>
<p>A chorus of voices has emerged advocating alternatives to the short-termist and shareholder-focused model of capitalism. The chief executives of investment and asset managers <a href="https://www.telegraph.co.uk/business/2018/01/28/larrys-letter-drives-charge-reimagining-global-capitalism/">Blackrock</a> (the world’s largest) and <a href="http://uk.businessinsider.com/vanguard-ceos-short-termism-bill-mcnabb-2018-3">Vanguard</a>, global engineering firm Siemens, and consumer goods giant Unilever have pursued a more stakeholder-centric model of capitalism. For example, Unilever by measuring its progress against <a href="https://www.unilever.com/sustainable-living/our-approach-to-reporting/our-metrics/">environmental and social</a> as well as financial targets, and Blackrock by investing in businesses that <a href="https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter">favour long-term investment over short-term profits</a>. Organisations such as the <a href="https://www.inc-cap.com/">Coalition for Inclusive Capitalism</a> and the <a href="http://pestakeholder.org/">Private Equity Stakeholder Project</a>, have emerged, seeking to ensure that all stakeholders in the business and their interests are included.</p>
<p>Prominent US senator Elizabeth Warren recently introduced the <a href="https://www.fastcompany.com/90223130/how-elizabeth-warrens-accountable-capitalism-act-works">Accountable Capitalism Act</a> to Congress. This would require company directors to consider the interests of all major corporate stakeholders, not just shareholders, in company decisions. It requires that workers are given a stronger voice in decision-making at large companies, such as electing 40% of company directors. As a way of addressing self-serving incentives, executives would have to retain company shares for at least five years after receiving them, or three years in the case of stock buybacks.</p>
<p>Finally, we cannot ignore that business schools played a critical role in how shareholder value emerged as the overwhelming corporate ethos – and they continue to indoctrinate new generations of students with the dogma of shareholder value today. Business school deans and faculty members should urgently revisit their curricula to ensure graduates understand the damaging impact of shareholder value on society and to emphasise alternative approaches.</p>
<p>Almost ten years ago, Jack Welch, who for many years championed shareholder value while at the helm of General Electric, <a href="https://www.ft.com/content/294ff1f2-0f27-11de-ba10-0000779fd2ac">pronounced</a> that: </p>
<blockquote>
<p>Shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy … your main constituencies are your employees, your customers and your products.</p>
</blockquote>
<p>It is past the time that business schools should smarten up, jettison this “dumb” shareholder dogma, and start teaching a version of capitalism less damaging to the interests of society.</p><img src="https://counter.theconversation.com/content/103781/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Louis Brennan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Over two centuries, capitalist ethos has swung from profit-taking for the few, to a distribution of wealth to the many, and back again. Is the pendulum poised to swing once more?Louis Brennan, Professor of Business Studies, Trinity College DublinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1010252018-08-17T04:50:20Z2018-08-17T04:50:20ZThis is what policymakers can and can’t do about low wage growth<figure><img src="https://images.theconversation.com/files/232208/original/file-20180816-2921-d4vzvn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Households feeling the pinch from frozen wages feeds into slower economic growth, and policymakers need to find a solution.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/man-woman-calculating-how-will-they-410400709?src=ACpzMQNBjz2BAIjw8MiF1w-1-4">Bacho/Shutterstock</a></span></figcaption></figure><blockquote>
<p><a href="https://www.smh.com.au/business/the-economy/rbas-philip-lowe-says-australians-fear-foreigners-and-robots-20170619-gwtr20.html">The crisis really is in real wage growth.</a> <strong>– Reserve Bank Governor Philip Lowe, 2017</strong></p>
</blockquote>
<p>Increased inequality and low wage growth are constraining economic growth. But why is wage growth so low? And how should policymakers respond?</p>
<p><a href="https://wir2018.wid.world/">Income inequality has increased significantly</a> in most advanced economies since the early 1980s. In particular, very low rates of wage increase are widely blamed for the weak growth in aggregate demand this century and <a href="http://larrysummers.com/2016/02/17/the-age-of-secular-stagnation/">secular stagnation</a> since the Global Financial Crisis. The GFC was itself brought on by the rise in consumer debt that was used at first to support demand in an attempt to offset the impact of weak wage growth.</p>
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Read more:
<a href="https://theconversation.com/how-rising-inequality-is-stalling-economies-by-crippling-demand-99075">How rising inequality is stalling economies by crippling demand</a>
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</em>
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<p>Fairfax columnist Ross Gittins recently <a href="https://www.smh.com.au/business/the-economy/with-wage-growth-on-the-blink-it-s-time-to-restore-union-bargaining-power-20180727-p4ztym.html">noted</a> that “many economists were disappointed by this week’s news … that consumer prices rose only 2.1%”. That was because low inflation is “usually a symptom of weak growth in economic activity and, in particular, of weak growth in wages”.</p>
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<p>Thus, today it is widely agreed that wages need to increase faster. The <a href="http://www.oecd.org/social/in-it-together-why-less-inequality-benefits-all-9789264235120-en.htm">OECD</a>, the <a href="http://www.imf.org/external/pubs/ft/weo/2015/02/">IMF</a>, leading US scholars, former US Treasury Secretary <a href="https://www.foreignaffairs.com/articles/united-states/2016-02-15/age-secular-stagnation">Larry Summers</a>, Nobel prize winner <a href="http://evonomics.com/joseph-stiglitz-inequality-unearned-income/">Joseph Stiglitz</a> and most recently Stephen Bell and I in our book, <a href="https://www.mup.com.au/books/9780522872279-fair-share">Fair Share</a>, have all argued that increasing inequality is bad for economic growth. </p>
<p>To solve this problem, the critical issue for policymakers is what is causing this rising inequality and weak wage growth? Unless we better understand the causes, we are unlikely to achieve an effective policy solution.</p>
<p>First, we can quickly dismiss the <a href="http://www.abc.net.au/radio/programs/am/treasurer-says-tax-cuts-for-big-business-will-boost-wages/9399324">explanation offered</a> by federal Treasurer Scott Morrison, whose so-called “economic plan” assumes present low wage growth will respond positively to higher company profits. According to Morrison, a company tax cut will lead to more investment and thus more jobs, so eventually the benefits will trickle down and increase wages. </p>
<p>Unfortunately, this logic is the reverse of reality. It ignores the evidence that slow wage growth across all the developed economies has been a problem over a couple of decades now. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=857&fit=crop&dpr=1 600w, https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=857&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=857&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1077&fit=crop&dpr=1 754w, https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1077&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/232195/original/file-20180816-2924-1yqkxof.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1077&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Slow wage growth is a continuing long-term problem in the developed economies.</span>
<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>In fact, the evidence strongly suggests higher profits will not drive higher wages. The benefits of a company tax cut will largely be returned to shareholders, while the only wages that increase will be those of senior management.</p>
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Read more:
<a href="https://theconversation.com/why-shareholder-value-drives-income-inequality-100324">Why shareholder value drives income inequality</a>
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</p>
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<p>Instead, higher investment will require increased consumer demand. And that in turn depends on stronger wage growth. In short, aggregate demand in a flat economy, like ours, is wages-led. Wages drive investment, not the other way around.</p>
<p>Broadly speaking, there are two serious schools of thought about what is causing weak wage growth and rising inequality. </p>
<p>One explanation puts most of the blame on a weakening of trade-union power. </p>
<p>The other explanation emphasises the impacts of technological change and, to a lesser extent, globalisation on the labour market. Together technology and globalisation are said to have changed job structures and demands for skills. They have reduced the share of middle-level jobs, which has directly increased income inequality, and they can depress the demand for labour more generally and thus wages in developed countries, but especially for less skilled labour.</p>
<p>These two explanations are not mutually exclusive – both may have played a role. However, I want to consider their relative significance as the basis for arguing which policy responses should be given priority.</p>
<h2>Trade union power in Australia and its impact</h2>
<p>A very distinguished professor of labour economics and former Industrial Relations Commission deputy president, Joe Isaac, <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1467-8462.12270">recently argued</a> persuasively that an important explanation of slow wage growth is “to be found in the change in the balance of power in favour of employers and against workers and unions”.</p>
<p>Isaac starts by noting that union membership in Australia has fallen from about 50% of all employees in the 1970s to the present 15%. This is one of the lowest rates in the OECD. </p>
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<p>Isaac also finds some correlation between income inequality (measured by the Gini coefficient) and trade union density for 11 OECD countries. More relevant, though, would be the change in inequality relative to the change in union membership, especially as Australia has always had a relatively high Gini coefficient. </p>
<p>Isaac argues that this loss of membership and the reduced authority of the Fair Work Commission has weakened the bargaining power of organised labour in Australia. Employers are now able “to determine no wage increase or an increase less than their profits would warrant, with less resistance from workers and unions”. Although Isaac admits that “this conclusion is based on the association over time of union power decline and slow wages growth”, he concludes that “it seems reasonable to claim, at least prima facie, a causal connection between them”.</p>
<p>I am more sceptical. While I wouldn’t rule out any impact on wages and employee conditions from a decline in trade union membership and the possibly associated changes in the power of the Fair Work Commission, I question Isaac’s analysis for the following reasons.</p>
<p>First, it is uncertain how much trade union power has declined as a result of loss of membership. Another test of trade union power is the proportion of wages determined by awards and collective agreements – as Isaac shows, this proportion has largely remained the same in Australia. Indeed, in some countries, such as France, trade union membership has always been very low, but they have a highly centralised system of wage determination, which allows the unions a lot of influence.</p>
<p>Second, other countries have also experienced increases in inequality – much greater than in Australia in most cases – but don’t seem to have experienced any notable loss of union power. For example, some of the biggest increases in inequality over the last 30 years, as measured by the Gini coefficient for final disposable income, have <a href="https://data.oecd.org/inequality/income-inequality.htm">occurred in countries like Sweden, Finland and Germany</a>, which are not associated with any loss of trade union power.</p>
<p>Third, Isaac’s analysis of wage inequality focuses entirely on a decline in the wage share of total <a href="https://www.investopedia.com/terms/f/factor-income.asp">factor income</a>. This ignores changes within the distribution of earnings. These latter changes are more important in many countries, and certainly for Australia.</p>
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<p>While the wage share in Australia has declined since the 1970s and early 1980s, this was at least partly a result of deliberate policy under the Hawke/Keating governments’ Accord with the trade unions, when it was accepted that the wage share had been too high. Even today the <a href="http://ace2017.org.au/wp-content/uploads/2017/07/Declan-Trott-Full-Paper.pdf">wage share is still higher than in 1960</a>, when the economy was generally considered to be performing exceptionally well.</p>
<p>Fourth, the changes in the distribution of earnings largely reflect changes in the structure of occupations rather than changes in relative wage rates. But trade unions seek to influence wage rates, and it is difficult to see how they can exert much direct influence over the structure of jobs.</p>
<p>For these various reasons, I don’t think the loss, if any, of trade union power can explain much of the increase in inequality in most countries over the last 30 years. It is necessary to look elsewhere for the explanation, and the main driver seems to have been the impact of technological change.</p>
<h2>Impacts of technology and globalisation</h2>
<p>In <a href="https://www.mup.com.au/books/9780522872279-fair-share">Fair Share</a>, Stephen Bell and I examine the causes of increased inequality over the last 30 years in most of the advanced economies. A critical starting point is to distinguish between changes in the job structure and changes in relative wage rates. As we <a href="https://books.google.com.au/books?id=CwtNDwAAQBAJ&pg=PT135&dq=%22no+change+in+relative+wage+rates,+but+employment+increased+faster%22&hl=en&sa=X&ved=0ahUKEwjo7u3o7evcAhUI7bwKHTz_AO4Q6AEIJzAA#v=onepage&q=%22no%20change%20in%20relative%20wage%20rates%2C%20but%20employment%20increased%20faster%22&f=false">note</a>:</p>
<blockquote>
<p>Even if there were no change in relative wage rates, but employment increased faster for both high-paid and low-paid jobs, the earnings distribution would show up as more unequal. What would have happened is that the composition of the top and lowest deciles of earnings would have altered, which would increase the median income of the top decile and reduce the median income of the lowest decile, which would in turn be reported as an increase in the inequality of earnings.</p>
</blockquote>
<p>The consensus in the studies we reviewed is that increased inequality of earnings largely reflects the impact of technological change. Globalisation and increased participation in global value chains may also have played a role, but less so in Australia, which we attribute to Australia having a more flexible labour market than, say, America. </p>
<p>We also surmise that <a href="https://theconversation.com/finance-drives-everything-including-your-insecurity-at-work-101107">increased financialisation</a> and the capture of rents generated by technological change may help explain the very large increase in remuneration for the top 1%. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/who-owns-the-world-tracing-half-the-corporate-giants-shares-to-30-owners-59963">Who owns the world? Tracing half the corporate giants' shares to 30 owners</a>
</strong>
</em>
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<p>Interestingly, the OECD specifically rejected the hypothesis that regulatory changes have helped drive any significant increase in inequality. It <a href="http://www.oecd.org/els/soc/dividedwestandwhyinequalitykeepsrising.htm">found</a> that “the net effect of regulatory reforms on trends in ‘overall earnings inequality’ remains indeterminant in most cases”.</p>
<p>The principal impact of technological change, and globalisation to a lesser extent, has been to reduce the share of middle-level jobs. In particular, new <a href="https://www.oxfordmartin.ox.ac.uk/publications/view/1314">information</a> and <a href="http://ceda.com.au/Research-and-policy/All-CEDA-research/Research-catalogue/Australia-s-future-workforce">communications technology</a> has had its <a href="http://www.urbanvillageworld.com/resource_center/Offshoring%20Article%20-%20Foreign%20Affairs1.pdf">greatest impact</a> on <a href="http://www.imf.org/en/Publications/WEO/Issues/2017/04/04/world-economic-outlook-april-2017">relatively routine tasks</a> <a href="https://ideas.repec.org/p/mlb/wpaper/1192.html">involving middle-level jobs</a>, such as clerical occupations and the operation of basic machinery. </p>
<p>Technological change has also driven the fall in the relative price of capital goods. This has led to some substitution of capital for labour. Again, this is “particularly pronounced in industries with a high predominance of routine tasks”, as the <a href="http://www.oecd.org/els/oecd-employment-outlook-19991266.htm">OECD notes</a>. </p>
<p>These changes in job structure and the relative decline in the middle-level jobs have been the most important cause of increasing inequality in many countries, including Australia. Technological progress has also led to an increase in the demand for skills. In some countries that has increased the premium paid for skilled labour, but the extent of this depends upon the policy response affecting the supply of skills. </p>
<p>In Australia’s case, Bell and I <a href="https://www.mup.com.au/books/9780522872279-fair-share">find</a> that the premium for skills, and consequently relative wage rates, did not change much because of the increase in education and training effort. Accordingly, much of the increase in earnings inequality in Australia reflects changes in the job structure rather than changes in relative wage rates (see also <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-8462.2003.00296.x">Keating</a> and <a href="https://ideas.repec.org/p/mlb/wpaper/1192.html">Coelli & Borland</a>).</p>
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<h2>So what does this mean for policy?</h2>
<p>Consistent with his view that a weakening of trade union power has driven the increase in inequality, Isaac <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1467-8462.12270">recommends</a> changing the Fair Work Act to rectify “the unbalanced industrial power in the labour market”. I can support most of Isaac’s recommended changes, and especially greater rights of union entry, which should help better police adherence to awards and wage agreements. </p>
<p>I also agree that Isaac’s recommended legislative changes are unlikely to result in unions abusing their increased power. This is because, as he puts it, “there are now prevailing forces, such as global competition and structural changes, which will continue to keep union power in check”. </p>
<p>However, these “prevailing forces” are what really caused most of the increase in inequality, as discussed above. I therefore doubt that these legislative changes will do much to reverse the increase in earnings inequality.</p>
<p>Instead, the best way to respond to the impact of technological change on the job structure and possible associated changes in wage premiums is to improve education and training. Enhanced education, training and labour market policies will help workers adjust to the challenges posed by new technologies and will also spur the adoption of those technologies. </p>
<p>In addition, if the supply of skills thereby increases in line with the increase in their demand, there should not need to be any change in relative wage rates. Although these types of reforms take time, in the end they can boost both aggregate demand and potential output, with benefits all round.</p>
<p>In short, as Thomas Piketty, in his <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">major study on inequality</a>, <a href="https://books.google.com.au/books?id=T8zuAgAAQBAJ&pg=PA313&dq=%22the+best+way+to+increase+wages+and+reduce+wage+inequalities%22&hl=en&sa=X&ved=0ahUKEwiepIuH--vcAhVEVLwKHa5_D6EQ6AEIJzAA#v=onepage&q=%22the%20best%20way%20to%20increase%20wages%20and%20reduce%20wage%20inequalities%22&f=false">concluded</a>:</p>
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<p>To sum up: the best way to increase wages and reduce wage inequalities in the long run is to invest in education and skills.</p>
</blockquote><img src="https://counter.theconversation.com/content/101025/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Keating is the former Head of the Departments of Employment & Industrial Relations, Finance, and Prime Minister & Cabinet.</span></em></p>Governments can’t undo the technological changes behind frozen wages and rising inequality. The best policy is to invest in education and training to give workers skills of value in the new economy.Michael Keating, Visiting Fellow, College of Business & Economics, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/990752018-07-17T01:45:45Z2018-07-17T01:45:45ZHow rising inequality is stalling economies by crippling demand<figure><img src="https://images.theconversation.com/files/227530/original/file-20180713-27018-1kewy4g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Aggregate demand is being hit by the concentration of income growth among the top earners and is now a drag on economic growth.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/1113684434?src=8oXmAPGkSOA-CZRU1zjJ-w-1-60&size=huge_jpg">Shutterstock</a></span></figcaption></figure><p><em>Rising inequality is a concern across the developed economies, including Australia where top earners’ pay has soared to a 17-year high while ordinary workers’ wage growth has been the lowest on record. And that’s ultimately bad news for economic growth. This is longer than the usual Conversation article, so allow some time to read and enjoy.</em></p>
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<p>In the last decade or more, economic growth has slowed across the Western world, although a belated though weak recovery has been under way since around 2017. In the US, for example, growth in <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locations=US">gross output per capita averages around 1% a year</a> this century. That’s about half the average rate during the second half of the 20th century.</p>
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<a href="https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=897&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=897&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=897&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1127&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1127&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1127&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Captured Economy.</span>
<span class="attribution"><a class="source" href="https://global.oup.com/academic/product/the-captured-economy-9780190627768?cc=us&lang=en&">OUP</a></span>
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<p>American economist Arthur Okun famously <a href="https://www.brookings.edu/book/equality-and-efficiency-the-big-tradeoff/">argued there was a trade-off</a> between equality and economic efficiency, implying little chance of high inequality and sluggish economic growth occurring together. Yet this is exactly what is happening in the US. What has gone wrong?</p>
<p>In <a href="https://global.oup.com/academic/product/the-captured-economy-9780190627768?cc=us&lang=en&">The Captured Economy</a>, Brink Lindsey and Steven Teles explore US economic sectors such as finance, land use, occupational licensing and intellectual property rights. They argue powerful interests have captured these sectors and are using the state to distort markets to their advantage. This kind of <a href="https://www.investopedia.com/terms/r/rentseeking.asp">rent-seeking</a> is weakening growth and driving up inequality. As the authors put it:</p>
<blockquote>
<p>Across a number of sectors, the US economy has become less open to competition and more clogged by insider-protecting deals … Those deals make our economy less dynamic and innovative, leading to slower economic growth … At the same time, they redistribute income and wealth upwards to elites in a position to exploit the political system to their favour.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-businesses-want-the-ear-of-government-and-are-willing-to-pay-for-it-90688">Why businesses want the ear of government and are willing to pay for it</a>
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<p>This special dealing is but one facet of a much wider problem of competing claims for economic resources increasingly damaging Western economies. The arguments by Lindsey and Teles concern dysfunctions on the supply side of the economy. </p>
<p>In our recent book, <a href="https://www.mup.com.au/books/9780522872279-fair-share">Fair Share: Competing Claims and Australia’s Economic Future</a>, Michael Keating and I argue that even bigger competing claims and distributional problems are now affecting the demand side of Western economies. These problems are also producing weak economic growth and rising inequality.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/politics-podcast-michael-keating-on-a-fair-share-94503">Politics podcast: Michael Keating on a Fair Share</a>
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</em>
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<h2>Time to pay attention to demand</h2>
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<img alt="" src="https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=906&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=906&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=906&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1139&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1139&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1139&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="https://www.mup.com.au/books/9780522872279-fair-share">MUP</a></span>
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<p>But how are these two outcomes connected? In Fair Share, we argue that rising inequality is weakening economic growth across the advanced economies by reducing <a href="https://www.investopedia.com/terms/a/aggregatedemand.asp">aggregate demand</a>. Our account differs from mainstream economics, which argues that growth stems mainly from the supply side of the economy. </p>
<p>In recent decades many neoliberal, supply-side policies have been implemented. The recent sluggish pattern of growth calls the supply-side theory into question. Indeed, the gap between theory and reality has prompted former US treasury secretary <a href="http://www.piketty.pse.ens.fr/files/Summers2015.pdf">Lawrence Summers to argue</a> that “the events of the last decade should precipitate a crisis in the field of macroeconomics”.</p>
<p>Some salient facts on the demand side are increasingly hard to ignore. Most Western economies have been marked by <a href="https://wir2018.wid.world/">increased inequality since the 1980s</a>. <a href="https://en.wikipedia.org/wiki/Wage_share">Wage shares</a> have <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5260.0.55.002Feature%20Article32016-17?opendocument&tabname=Summary&prodno=5260.0.55.002&issue=2016-17&num=&view=">fallen</a>.</p>
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<p>Even more important has been the rise in income inequality. The wage increases that have occurred have been largely concentrated among the top income earners. These “winners” have a lower propensity to consume than those in the lower deciles of earnings distribution. As a result, too much income inequality and slow wages growth relative to productivity growth risk a continuing shortfall in demand and hence weaker economic growth.</p>
<p>Prior to the Global Financial Crisis (GFC), many economic policies sought to avoid this shortfall in aggregate demand. This did so either by maintaining a very competitive exchange rate to support export-led growth (e.g. China, Germany) or, more often, by increasing the availability of consumer credit to support consumer demand (e.g. the US, UK). </p>
<p>Neither of these strategies has proved viable in the longer run. First, not all countries can be net exporters at the same time. Second, the required growth in consumer credit became increasingly risky, and eventually helped fuel the GFC. </p>
<p>Since then, the advanced economies have experienced protracted stagnation and a weak recovery due to a shortfall in aggregate demand. The longer this shortfall continues, the greater the risk that the rate of increase in potential output will also slow. </p>
<p>The impact on economic output is due to lack of new investment, on which technological progress depends, and atrophying of workforce skills when labour is not fully employed. Indeed, the combination of low unemployment and slow economic growth suggests this slowdown in potential output growth is already occurring in the US.</p>
<p>More generally, however, competing economic claims can potentially deliver various combinations of inflation, wage stagnation, growing inequality, weak demand and slower economic growth. Our central proposition in Fair Share links income distribution and economic growth. </p>
<h2>Why growth depends on balanced distribution</h2>
<p>Western capitalism has always run on a fairly narrow distributional path. If the distributional balance gets too far out of kilter in either direction the threats of inadequate aggregate demand and weak growth are likely to emerge. </p>
<p>As we saw in the 1970s, pursuit of excessive wage increases risks <a href="https://www.investopedia.com/articles/economics/08/1970-stagflation.asp">stagflation</a>, resulting in inadequate investment and rising unemployment. On the other hand, and as is happening now, a significant shift towards wage stagnation and increased income inequality risks slower growth through inadequate demand and consumption.</p>
<p>Hence, it is the distributional shifts, in pursuit of higher wages in the 1970s and more recently in favour of capital and the highest-income groups, that have largely been responsible for the difficulties in both epochs in maintaining growth in the advanced capitalist economies. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=927&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=927&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=927&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1164&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1164&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1164&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Game of Mates.</span>
<span class="attribution"><a class="source" href="https://gameofmates.com/">gameofmates.com</a></span>
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<p>Our theory thus suggests that the problems of stagflation in the 1970s were not as far removed from today’s problems as one might think. The root cause of the problems across both eras has essentially been distributional changes.</p>
<p>Some analysts argue that regulatory and other changes have altered the relative power of those involved in competing claims, with workers and wage levels, in particular, losing out. Others, such as Lindsay and Teles, argue returns are skewed by oligopolistic competition, rent-seeking and other forms of market power and powerlessness (see also <a href="https://theconversation.com/profiles/cameron-murray-172480">Cameron Murray</a> and <a href="https://theconversation.com/profiles/paul-frijters-3277">Paul Frijters</a>’ <a href="https://gameofmates.com/">Games of Mates</a> on Australia). </p>
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Read more:
<a href="https://theconversation.com/speaking-with-cameron-murray-on-grey-corruption-and-the-game-of-mates-81085">Speaking with: Cameron Murray on grey corruption and the 'Game of Mates'</a>
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<p>We acknowledge both of these changes but argue that the biggest changes in income distribution have come from technological changes that have hollowed out middle-income jobs, while any relative labour shortages have tended to be skill-biased. These two factors are the main drivers of increased income polarisation.</p>
<p>Furthermore, to the extent that trade-union power matters, we think changes in the industrial and occupational structure of the workforce, in response to technological change, have largely been responsible for reduced trade union membership and the loss of bargaining power.</p>
<h2>What should governments do about this?</h2>
<p>In response, governments should aim to boost wages and redress growing income inequality. Any such strategy will be most effective if it focuses on responding to the technological changes that are the prime cause of rising inequality. As <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">Thomas Piketty concluded</a> in the most <a href="https://www.economist.com/the-economist-explains/2014/05/04/thomas-pikettys-capital-summarised-in-four-paragraphs">significant analysis of inequality</a> published this century:</p>
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<p>To sum up: the best way to increase wages and reduce wage inequalities in the long run is to invest in education and skills. </p>
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<p>We argue therefore that education and training need to be boosted to help workers cope with changing markets and job opportunities. This approach can be expected to boost both aggregate demand and supply. Direct measures to boost lower incomes may also be needed to improve the social safety net for those who miss out.</p>
<p>More generally, the successful continuation of the open-economy model, and indeed the sustainability of capitalist democracy, will depend upon the successful resolution of competing claims. In particular, this requires a fair sharing of the gains from increased economic production and a tight link between wages and productivity growth.</p>
<p>It is certainly clear that the supply-side, neoliberal policies of recent decades have largely run their course in many advanced economies. Too often the starting premise of the supply-side agenda is that the role of government should be minimised through further deregulation and tax cuts. However, the nature of many of today’s problems requires government to be more interventionist rather than less, while still maintaining the key strengths of an open, liberal, market economy.</p>
<p>The new focus of policy must be on the demand side. The failure to reasonably share income and educational opportunities is creating a highly volatile mix of unhappy “losers”. Hence, we see a growing political backlash, the rise of right-wing populism and extremism, Brexit, Trump etc. </p>
<p>The backlash against globalisation and economic restructuring is real and growing. It poses a threat to economic development and to liberal democratic capitalism.</p>
<p>All this has led commentators such as German sociologist Wolfgang Streeck to refer to “<a href="https://newleftreview.org/II/71/wolfgang-streeck-the-crises-of-democratic-capitalism">the crises of democratic capitalism</a>”, featuring “an endemic and essentially irreconcilable conflict between capitalist markets and democratic politics”. Perhaps so, yet capitalist democracies have managed to do much better in the past, especially during the post-war golden age of the 1950s and 1960s. </p>
<h2>What does this mean for Australia?</h2>
<p>Even today some countries are handling the situation better than others, suggesting politics and policies can make a difference. </p>
<p>Australia is a case in point. In recent decades reforms to improve market flexibility in Australia have underpinned one of the <a href="https://theconversation.com/therell-be-no-records-set-this-week-by-australian-economic-growth-figures-78830">longest expansions in capitalist history</a>. At the same time the <a href="https://en.wikipedia.org/wiki/Wage_share">wage share</a> in Australia in 2015 was about the same as in 1990 and a bit higher than in 1960. </p>
<p>In addition, Australia has possibly the most <a href="https://theconversation.com/who-gets-what-who-pays-for-it-how-incomes-taxes-and-benefits-work-out-for-australians-98627">efficient redistributive system</a> of all the advanced economies. Under the Hawke and Keating Labor governments’ <a href="https://theconversation.com/australian-politics-explainer-the-prices-and-incomes-accord-75622">Accord</a> with the trade unions, the social wage increased substantially faster than other incomes. </p>
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Read more:
<a href="https://theconversation.com/who-gets-what-who-pays-for-it-how-incomes-taxes-and-benefits-work-out-for-australians-98627">Who gets what? Who pays for it? How incomes, taxes and benefits work out for Australians</a>
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<p>Nevertheless, although income inequality has risen less in Australia than in many overseas countries, it has risen here too. In the last few years there are clear signs that <a href="https://theconversation.com/vital-signs-poor-wage-growth-means-interest-rates-could-be-low-for-a-long-time-98240">wages are stagnating</a> and <a href="http://www.abc.net.au/news/2018-06-25/household-debt-in-australia-has-risen-since-the-gfc/9905588">household debt levels are now very high</a>.</p>
<p>Thus, it is imperative for Australia that it adopts a more growth-oriented income distribution. Key elements include wage-supporting measures and ensuring people are better equipped to change the organisation of existing jobs and, in many cases, move to the higher-skilled and well-paid jobs that technology is often creating.</p>
<p>A new agenda is needed. We have to recognise that economic growth inevitably involves economic transformation, based on innovation and technological change. Thus, contrary to the assumptions many economists make, it is highly probable that economic growth will impact on the distribution of incomes. This of itself can create future problems for the sustainability of that growth. </p>
<p>The bottom line, economically and politically, is that governments need to be prepared to promote demand as well as supply. Increasingly, we can no longer escape the distributional issues at hand. The winners will need to help the losers through more effective support and a degree of redistribution – especially if things get worse through ongoing wage stagnation and rising resistance to the perceived inequities of the present economic system.</p><img src="https://counter.theconversation.com/content/99075/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Bell receives funding from Australian Research Council. </span></em></p>News that Australian CEO pay has soared to a 17-year high at a time when ordinary workers’ wages are flatlining is ultimately bad news for economic growth and prosperity.Stephen Bell, Professor of Political Economy, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/929392018-03-07T20:18:26Z2018-03-07T20:18:26ZIs a basic income the solution to persistent inequalities faced by women?<figure><img src="https://images.theconversation.com/files/209186/original/file-20180306-146694-1ny8mlj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Basic income: a step forward for women?</span> <span class="attribution"><span class="source">Russell Higgs/Flickr</span></span></figcaption></figure><p>March 8 is <a href="https://www.internationalwomensday.com/">International Women’s Day</a>, and despite a range of laws and policy measures, many gender inequalities seem firmly entrenched. Given the persistence of such discrimination, what can be done? One innovative policy measure that came to the fore in the 2017 French presidential election is the <a href="http://www.independent.co.uk/news/world/europe/universal-basic-income-ubi-france-presidential-candidates-socialist-monthly-all-french-citizens-a7530771.html">basic income</a>. A recent <a href="http://basicincome.org/news/2018/02/europe-council-europe-adopts-resolution-basic-income/">Council of Europe resolution</a> confirmed the continuing interest, as do <a href="https://www.thersa.org/discover/publications-and-articles/reports/pathways-to-universal-basic-income-the-case-for-a-universal-basic-opportunity-fund">feasibility studies</a> and new local-level experiments in <a href="https://www.theguardian.com/uk-news/2017/dec/25/scotland-universal-basic-income-councils-pilot-scheme">Scotland</a>, <a href="https://www.theguardian.com/inequality/2018/jan/12/money-for-nothing-is-finlands-universal-basic-income-trial-too-good-to-be-true">Finland</a> and elsewhere in the world.</p>
<p>Yet is this the policy solution for women and persistent gender inequalities?</p>
<h2>Women already at risk</h2>
<p>There are a number of reasons why a basic income might seem like a good idea for women. They’re already disproportionately represented among those in <a href="http://beijing20.unwomen.org/fr/in-focus/poverty">poverty worldwide</a>. It has also been found that the link between current welfare systems and paid work <a href="http://journals.sagepub.com/doi/abs/10.1177/1468018116686503">systematically disadvantages women</a>: women are more likely to take time out of the workforce to care for others, they have lower access to income transfers, they tend to be paid less for the same work and they continue to face barriers to access high-paid occupations.</p>
<p>A position of financial weakness can also lead to other disadvantages, including the risk of domestic violence that results from <a href="https://www.forbes.com/2010/09/02/women-money-domestic-violence-forbes-woman-net-worth-personal-finance.html">financial dependence</a>. Given that a basic income would break the link between earnings and welfare payments and would be paid to individuals rather than households, it could provide some women with more financial stability, predictability and independence.</p>
<h2>A top-up for underpaid women?</h2>
<p>A basic income also has the <a href="https://www.forbes.com/sites/timworstall/2015/09/18/the-real-value-of-a-universal-basic-income-is-that-it-raises-the-reservation-wage/">potential to protect those in low-paid jobs</a> that <a href="https://www.inegalites.fr/Les-inegalites-de-salaires-entre-les-femmes-et-les-hommes-etat-des-lieux">women tend to dominate</a>. With a modest and reliable income, workers would not be pushed into the first job that comes along. They could seek a better match with their skills and experiences as well as higher wages and improved conditions.</p>
<p>Many sectors where women dominate the workforce are low-paid. Indeed there is an implicit expectation that workers in <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1564-913X.2010.00095.x/epdf%20https://www.researchgate.net/publication/259694576_Wages_of_Virtue_The_Relative_Pay_of_Care_Work">health, education and care</a> do what they do because the job is important, not for the money. So there is a risk that a basic income might be used to subsidise <a href="http://www.bath.ac.uk/publications/assessing-the-case-for-a-universal-basic-income-in-the-uk/attachments/basic_income_policy_brief.pdf">poorly-paid work</a> for women without addressing the undervaluation of female-dominated occupations in care and services.</p>
<h2>Hidden risks</h2>
<p>The unequal division of labour in the home is perhaps the <a href="http://ec.europa.eu/eurostat/documents/2995521/7202382/3-07032016-AP-FR.pdf/b6e922f7-c1b8-42b2-afdc-ffa947a1d260">root cause</a> of much gendered inequality. An unconditional basic income means there is no requirement that the recipient perform any care work, meaning that men who do very little at home would <a href="https://www.inegalites.fr/L-inegale-repartition-des-taches-domestiques-entre-les-femmes-et-les-hommes">still get the same payment</a>. On the one hand, those who work more, relying on others to do the care work, would effectively contribute to carers receiving basic income via their taxes. As <a href="http://www.scottsantens.com/unconditional-basic-income-is-a-pigovian-subsidy-for-unpaid-work">basic-income advocates highlight</a>, _everyone _relies on the unpaid care work disproportionately performed by women – basic income might thus be a way to address the freeriding of those who fail to do their fair share.</p>
<p>On the other hand, a basic income might serve to entrench the gendered division of unpaid labour, encouraging those with home-care responsibilities to further withdraw from the labour market. This concern is not limited to basic income: in Sweden, a subsidy to support parents caring for their own child at home faced strong opposition as a <a href="https://www.cambridge.org/core/journals/journal-of-social-policy/article/trap-for-women-or-freedom-to-choose-the-struggle-over-cash-for-child-care-schemes-in-finland-and-sweden/42D05606B2489CF451C4C4EFAB2C5425">“trap for women”</a>. A decision for the lowest-paid workers – often woman – to withdraw might seem rational at the household level and in the short term. However, this apparently autonomous choice then combines with pay inequality, gendered disadvantages and cultural biases, leading to problematic outcomes for the woman in the medium to long term and at the <a href="https://www.academia.edu/621286/An_emancipation_fee_or_hush_money_The_advantages_and_disadvantages_of_a_basic_income_for_womens_emancipation_and_well-being">societal level</a>.</p>
<h2>The value unpaid work for society</h2>
<p>A basic income could be regarded as one that <a href="https://www.degruyter.com/view/j/bis.2008.3.3/bis.2008.3.3.1129/bis.2008.3.3.1129.xml">truly values unpaid care work</a> by recognising the non-market nature of the activity and its interaction with cultural and ideological influences. Indeed even sceptics recognise that such a payment would be more transparent than disguised subsidies for carers in receipt of unemployment benefits as a source of income. A basic income could also be a way to free up the <a href="https://www.degruyter.com/view/j/bis.2008.3.3/bis.2008.3.3.1133/bis.2008.3.3.1133.xml">gendered division of labour</a> in the home for a more equal society. However, those same cultural and ideological influences are also a “force” that leads to women – even the well-paid ones in full-time work – doing more of the unpaid work in the home.</p>
<p>Proponents of gender equality argue that real change requires a rebalancing of the distribution of labour both inside and outside the home, but so far progress on the latter has outstripped the former. This leaves women with a “double shift”. So a basic income, even for proponents, should perhaps only understood as <a href="https://www.degruyter.com/view/j/bis.2008.3.3/bis.2008.3.3.1136/bis.2008.3.3.1136.xml">one element</a> of a wider package of policies aimed at reducing inequalities whether by age, class, education or gender.</p>
<h2>Part of the solution or a risk?</h2>
<p>Ultimately, a basic income might be an effective way to treat some of the symptoms of wage inequality and unequal access to the labour market. However, it does not deal with the underlying causes. Indeed, a <a href="https://www.academia.edu/621286/An_emancipation_fee_or_hush_money_The_advantages_and_disadvantages_of_a_basic_income_for_womens_emancipation_and_well-being">range of policies</a> are required to break persistent gender inequalities.</p>
<p>Some of these policies need to target men and their behaviour in paid and unpaid work. Such policies might be aimed at shifting the culture of society toward one where all workers – men and women – can be caregivers, and incentivise role-sharing within households through equal access to leave. On its own, a basic income is unlikely to encourage a fairer distribution of care work and may indeed render the current unequal role sharing economically viable with unintended consequences for equality goals.</p><img src="https://counter.theconversation.com/content/92939/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>Despite a range of laws and policy measures, many gender inequities seem firmly entrenched. One innovative policy measure that could make a difference is basic income.Mark Smith, Dean of Faculty & Professor of Human Resource Management, Grenoble École de Management (GEM)Genevieve Shanahan, Etudiante PhD, Grenoble École de Management (GEM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/920672018-02-20T10:25:02Z2018-02-20T10:25:02ZKenyan study sheds new light on gap between refugees and host communities<figure><img src="https://images.theconversation.com/files/207000/original/file-20180219-116351-1yrl77v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A Turkana woman buys food from a refugee woman in Kakuma camp in north western Kenya. </span> <span class="attribution"><span class="source">Refugee Studies Centre</span></span></figcaption></figure><p>Refugees are increasingly regarded as a development issue, rather than simply a focus for humanitarian aid. This reflects the fact that 84% of the world’s refugees are in <a href="http://www.unhcr.org/globaltrends2016">low and middle-income countries</a>, <a href="http://www.urban-refugees.org">more than half live in urban areas</a> alongside host country nationals, and that indefinite dependency on humanitarian aid is now regarded as <a href="https://sustainabledevelopment.un.org/partnership/?p=23569">undesirable and unsustainable</a>. </p>
<p><a href="https://www.penguin.co.uk/books/300094/refuge">Helping refugees to help themselves</a> through jobs, education, and other forms of economic inclusion is now mainstream refugee policy. And development actors like the World Bank are <a href="https://openknowledge.worldbank.org/handle/10986/25855">part of the institutional landscape</a>.</p>
<p>But this leads to an important question: how different are refugees and local host communities in development terms? To what extent do refugees require distinctive development policies or can they simply be included within existing national development plans? If indeed the objective of the Sustainable Development Goals is to <a href="https://sustainabledevelopment.un.org/sdgs">“leave no one behind”</a>, we need to understand whether refugees are being left behind – and if so, how.</p>
<p>This is the focus of a newly-published <a href="https://www.refugee-economies.org/assets/downloads/Refugee-Economies-Kenya-Report-web.pdf">report</a>, the first study to systematically compare socio-economic outcomes for refugees and local host communities. The research, by Oxford University’s <a href="http://www.rsc.ox.ac.uk/">Refugee Studies Centre</a>, focuses on Kenya. It’s a country typical of many low-income host countries in that it formally limits refugees’ right to work and freedom of movement. </p>
<p>Kenya’s nearly 500,000 refugees are mainly <a href="http://reporting.unhcr.org/node/2537">distributed across three sites</a>: the Dadaab and Kakuma camps, and the capital city Nairobi. The last two are the focus of the new report, which draws on research that will eventually form part of a broader multi-country, multi-year dataset. In addition to Kenya, the study will also focus on Uganda and Ethiopia, and will <a href="http://www.refugee-economies.org/">follow refugees and host communities over time</a>.</p>
<p>Based on interviews with more than 4,300 refugees and host community members, our new report reveals a complex picture. Neither refugees nor hosts inevitably do better; the “development gap” and the reasons behind it are more nuanced. The report compares and explains refugees’ and host communities’ welfare outcomes in three areas: livelihoods, living standards, and subjective well-being.</p>
<h2>Gaps between refugees and hosts</h2>
<p>In Kakuma camp, refugees are actually better off than the surrounding host population. For example, even though they have comparable employment levels, working refugees’ self-reported median income is higher than for the local Turkana (around $55 per month compared to under $25 per month). Refugees also have better diets, higher consumption and more assets. </p>
<p>Despite the gap, the Turkana hosts benefit immensely from the refugee presence; they rely on refugees as customers for their meat, firewood, and charcoal and are sometimes offered work with relief organisations. </p>
<p>In Nairobi, although refugees are better off than they would be in camps, they are worse off than the local host population across almost all metrics. For example, comparing Somali refugees with local hosts, the employment levels are 44% and 60% and the income gap is $150 per month compared to $200 per month. Refugees do worse across all other living standards indicators.</p>
<p>The picture that emerges from Kenya is that in camps refugees may sometimes be better off than surrounding hosts. This is partly because of the socio-economic base offered by international support. In the city, refugees find informal economic activity and do better than they would in camps, but they are still likely to be worse off than local citizens.</p>
<p>Four sets of factors seem to explain these gaps between refugees and hosts: regulation (how you are governed), networks (who you know), capital (what you have), and identity (who you are). In some cases these factors may advantage refugees. In other cases they may disadvantage refugees relative to hosts. These are the factors that distinguish the socio-economic lives of refugees from those of host communities.</p>
<h2>The four factors unpacked</h2>
<p><strong>Regulation:</strong> Refugees are often disadvantaged, and we show the cost to refugees of these restrictions. In Kakuma, refugee entrepreneurs are disproportionately likely to incur a formal “business tax”. This is paid by 30% of Somali businesses compared to 10% of local Turkana businesses. In addition, only 10% of the Turkana pay police bribes compared to 54% of South Sudanese, 43% of Congolese, and 23% of Somalis.</p>
<p><strong>Networks:</strong> Having crossed borders, refugees often have better transnational links. Remittances are the most obvious manifestation. Although not all refugees benefit equally, Somalis receive the highest levels of remittances of any surveyed group in either Nairobi or Turkana County. At least 43% of Somali refugees in Nairobi receive remittances, at a level more than twice that of local hosts. These transfers are identified as an important source of start-up capital for businesses.</p>
<p><strong>Capital:</strong> Refugees are often unable to access loans and bank accounts, making business start-up reliant upon informal sources. But on human and physical capital, education and health, outcomes are better in the camp context for refugees than local hosts. For example, in Kakuma, refugees have an average of 6.4 years of education compared to just 2.4 years for the Turkana. In the city, refugees generally face worse outcomes than hosts across all three forms of capital.</p>
<p><strong>Identity</strong>. Refugees’ different ethnic and religious identities can be an economically mixed blessing. They can facilitate in-group trust. But the same differences may also lead to discrimination.</p>
<p>The key takeaway is that refugees are economically distinctive compared to host communities – but not always just in negative ways. </p>
<h2>Improvements for both groups</h2>
<p>Our research identifies the factors that may lead to development gaps between refugees and hosts. Expanding opportunities, reducing constraints, and levelling the playing field in these four areas may offer a way to make both groups better off, and improve relations between them. </p>
<p>Three practical insights stand out. </p>
<p>First, even in a country with restricted regulations, refugees are economically active. Second, an important and neglected source of social protection for refugees come from refugees’ own activities and networks. Third, refugees’ and hosts’ economic lives are interdependent: a good refugee policy must also be a good host community policy. </p>
<p>To ensure that no one is left behind, every major refugee-hosting context should have an economic policy and strategy specifically for refugees and the immediate host community, based on robust analysis and consultation. Refugee policy may well be a humanitarian issue but it is also a development issue.</p><img src="https://counter.theconversation.com/content/92067/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Refugee Economies Programme, at the University of Oxford, is supported by the IKEA Foundation</span></em></p>Refugee policy may well be a humanitarian issue. But it is also a development issue.Alexander Betts, Professor of Forced Migration and International Affairs, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/913152018-02-08T00:50:18Z2018-02-08T00:50:18ZUnions can’t just rely on promises of favourable laws to regain lost ground<figure><img src="https://images.theconversation.com/files/205248/original/file-20180207-74512-1dtdlq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As ACTU secretary, Sally McManus has proven effective at elevating the debate over workplace reform. </span> <span class="attribution"><span class="source">AAP/Alex Murray</span></span></figcaption></figure><p>This year has begun with an intensification of <a href="https://theconversation.com/vital-signs-jobs-may-be-increasing-but-the-real-test-is-whether-we-get-a-pay-rise-this-year-90110">the debate</a> about wage stagnation and wage inequality in Australia.</p>
<p>Research papers published this year have <a href="http://www.futurework.org.au/decline_in_strike_frequency">linked</a> the stalling of wage increases to drastically reduced levels of industrial action (and therefore unions’ collective bargaining power), and <a href="https://percapita.org.au/research/work-australia-working/">highlighted</a> the current system of workplace regulation’s focus on outdated notions of work and the workplace.</p>
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Read more:
<a href="https://theconversation.com/vital-signs-jobs-may-be-increasing-but-the-real-test-is-whether-we-get-a-pay-rise-this-year-90110">Vital Signs: jobs may be increasing but the real test is whether we get a pay rise this year</a>
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<p>The Labor Party’s national president, Mark Butler, <a href="https://markbutler.net.au/news/speeches/the-future-of-unions-in-australia-and-the-implications-for-labor/">recently urged</a> the labour movement “to have a no-holds-barred debate about the place of unions in Australia”. He pointed to the problems unions faced in terms of employer hostility and unhelpful laws, but also argued:</p>
<blockquote>
<p>Most people still imagine union organising against a backdrop of relatively large workplaces with a stable workforce – traditional factory organising … [However a] modern workplace is far more likely to be small and difficult to access, with a workforce that has high levels of turnover.</p>
</blockquote>
<p>Unions have to persuade people of the wisdom of having a collective voice in the workplace, and find a new version of solidarity for the digital age.</p>
<h2>State of play</h2>
<p>Sally McManus has been secretary of the Australian Council of Trade Unions (ACTU) for just under a year. In that time, she has <a href="http://www.afr.com/brand/afr-magazine/actu-chief-sally-mcmanus-parlays-online-support-into-power-20170814-gxvuo2">proven effective</a> at elevating the debate over workplace reform. The <a href="https://www.australianunions.org.au/change_the_rules">union movement’s mantra</a> – “the rules are broken”, “we need to #changetherules” – is biting in the community.</p>
<p>McManus recently effectively called time on the 25-year process of enterprise bargaining. <a href="https://www.workplaceexpress.com.au/nl06_news_selected.php?act=2&selkey=56458">She argued</a> unions are confronted with “a labyrinth of regulations”, and workers now have “little to trade off”.</p>
<p>The <a href="https://www.legislation.gov.au/Details/C2017C00323">Fair Work Act</a> is a legacy of the last Labor government; it’s been the subject of minimal change by the Coalition to date. </p>
<p>Unions had significant input into drafting the act when Julia Gillard was workplace relations minister in 2007-08. They ensured it included various mechanisms to support collective bargaining, in a shift from the individualised focus of the WorkChoices era.</p>
<p>However, in the decade since then, employers have found various ways to side-step many of the Fair Work Act’s requirements. And other union or employee rights have been read down by the courts and the Fair Work Commission.</p>
<h2>Finding new ways to connect</h2>
<p>Clearly, there are changes to the law that would, <a href="https://www.actu.org.au/actu-media/speeches-and-opinion/sally-mcmanus-address-to-nexgen-2017">as McManus argues</a>, help unions in their efforts to organise and represent workers. These include:</p>
<ul>
<li><p>tackling the “free-rider” issue (where non-unionists gain the benefit of union-negotiated enterprise agreements)</p></li>
<li><p>enabling unions to bargain not just with the direct employer of their members, but across franchise networks and supply chains</p></li>
<li><p>closing down the use of outsourcing, labour hire and other business entities to avoid the application of enterprise agreements, and employers making inferior agreements with small employees that are later applied to a much larger workforce (known as “no-stake” bargaining)</p></li>
<li><p>limiting employers’ ability to seek termination of expired agreements (taking workers back to the award safety net).</p></li>
</ul>
<p>Labor has <a href="http://brendanoconnor.ml.net.au/en-au/News/Brendan-OConnor-Latest-News/Post/16230/WORK-WAGES-AND-DIVISION-CREATING-A-FAIR-AND-PRODUCTIVE-LABOUR-MARKET-NATIONAL-PRESS-CLUB-CANBERRA">already committed</a> to implement many elements of the union agenda if it wins the next election. </p>
<p>But even with the most favourable laws, unions will still need to confront the reality of a dramatic transformation in the world of work: automation, the expanding “gig economy”, and what US academic David Weil calls the <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674975446&content=reviews">“fissuring” of work</a> – where business functions are split off to new entities that are forced to engage in intense competition, thus driving down labour costs. </p>
<p>Former ACTU assistant secretary Tim Lyons <a href="https://meanjin.com.au/essays/the-labour-movement-my-part-in-its-downfall/">puts it this way</a>: </p>
<blockquote>
<p>The workplaces and communities in which we organised politically and industrially have disappeared underneath us … Unions have to transform to catch up to the world as it is.</p>
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<p>These developments, combined with the disinclination of young workers to join unions, mean new forms of engagement have to be found outside the conventional notion of the workplace. Unions must connect with people in their communities and speak to them using technology they are familiar with.</p>
<p>Some Australian unions are taking on this challenge. They are attempting to organise workers in their homes, places of religious observance, and other focal points for community activity. For example:</p>
<ul>
<li><p>Victorian Trades Hall Council’s <a href="http://www.youngworkers.org.au/">Young Workers Centre</a> harnesses the power of social media in an effort to reach a new generation of workers in disparate, disconnected work environments. </p></li>
<li><p>The National Union of Workers has run a very effective campaign targeting exploitation of farm workers in the fresh food supply chain. It has also offered a <a href="https://www.nuw.org.au/your-fair-go-0">“FairGo” category</a> of membership, enabling non-members to participate in a class action to recover underpayments.</p></li>
</ul>
<p>However, not all union leaders are embracing these kinds of innovation. They may be at risk of placing too much faith in the capacity of legal changes to deliver a revival in membership numbers. </p>
<p>Given record-low wage increases and widespread exploitation of vulnerable workers, the value proposition of a collective voice in the workplace has rarely been stronger.</p><img src="https://counter.theconversation.com/content/91315/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anthony Forsyth has received research funding from organisations including the BCA, CFMEU, Fair Work Commission and Victorian Government. He is a Consultant with Corrs Chambers Westgarth. The views expressed in this article are his own.</span></em></p>Even with the most favourable laws, unions will still need to confront the reality of a dramatic transformation in the world of work.Anthony Forsyth, Professor of Workplace Law, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.