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TUAC BACKGROUND PAPER: THE ROLE OF COLLECTIVE BARGAINING AS PART OF A COMPREHENSIVE STRATEGY TO REDUCE INCOME INEQUALITY

20/05/2015

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  • TUAC Background Paper on Inequality_2015pdf

The OECD is releasing its new report on inequlity, " In It Together - Why Less Inequality Benefits All", on May 21. It has been at the forefront of presenting evidence on income inequality since the publication in 2008 of “ Growing Unequal?”, and “ Divided We Stand” in 2011. Most OECD countries have experienced rising income inequality and in-work poverty for several decades and now, as shown by the 2014 OECD Employment Outlook, falling or stagnant real wages.

Rising income inequality is no longer just an ethical or normative issue – it has economic costs and restrains a broad-based and sustainable recovery. There are also serious long-term consequences. High inequality leads to low inter-generational mobility. The capture of the policy agenda by top income earners through their excessive domination of political funding in some countries is leading to a serious distortion of public policy and builds inequity into economic growth models. As the OECD has stated the rise of inequality “can affect economic growth, weaken social cohesion and sap trust in markets and institutions”.

TUAC has called on the OECD to move forward on a comprehensive strategy to change policies and institutions so as to reverse the rise in income inequality. It is essential to take action to reverse the decline of the share of wages for low and middle incomes across OECD countries towards injecting purchasing power into the real economy by strengthening collective bargaining systems and raising minimum living wages.

Part II of this discussion paper sets out the evidence on causes and effects of rising income inequality. Part III sets out policy options to reverse this trend. Part IV sums up the direction of policy that is needed to reverse the increase and the contribution that collective bargaining and social dialogue can make.