Tuesday, January 31, 2012

How to reduce income inequality

The last time there was such severe income inequality in Canada and the US was the 1920's. Political pundits of all stripes lament this fact, and point to the heady days of the post-war era as the high point in social and economic equality. But they fail to address a key question: How did that come about and how did we get there?

The most recent report from the OECD (Organization of Economic and Cooperative Development) says this about Canadian inequality:

Two factors explain Canada’s growing gap: a widening disparity in labour earnings between high- and low-paid workers, and less redistribution. 'Taxes and benefits reduce inequality less in Canada than in most OECD countries

What is the way forward to address these two issues?

How did workers react to the Great Depression? They organized. In the US, workers went from one of the lowest rates of unionization in the 20's, to one of the highest (around 50%) by the end of world war two. The 1930's was the decade of sit down strikes and incredible labour militancy. It was the decade that saw the historic rifts between skilled/unskilled and black/white workers overcome. It was the era that converted many blue collar unskilled work into well paid middle class jobs with decent wages and benefits.

It was unionization that led to wage increases and the development and expansion of many social programs. It was unionization that pushed governments to deal with joblessness (through the New Deal) and provide social supports for periods of unemployment.

Through the early post war years (50s and 60s), well established unions were able to consolidate gains and push for some benefits to be extended to all citizens through social programs. For example, it was the Canadian Union of Postal Workers that first bargained for paid maternity leave. These benefits are now extended to all workers through the Employment Insurance program. Through political bodies like the Federations of Labour and Canadian Labour Congress, unions have used their power to improve life for working people beyond their own individual unions.

The attack on unions that began in the Reagan/Thatcher era has led to the long and slow erosion of the labour movement. This erosion has been accompanied by a long and slow degradation of incomes and progressive tax schemes. With a weakened union movement, wages stagnated. With a weakened labour movement, government's repealed progressive taxes (income taxes scaled to tax high incomes more) and replaced them with regressive taxes like the GST, the HST, and user-fee premiums such as MSP.

Unionization in BC has gone from 50% to closer to 30%. This is good for no-one but the 1%. Not only does the 1% use this to put downward pressure on wages and benefits, but they pretend that they are not the problem by blaming middle income workers who still have some of the benefits of unionized jobs.

The teachers strike is a classic example. When Gordon Brown writes in the Province that teachers should stop "whining" because ...

"All the other hard-working British Columbians have to pay your salaries and you're wearing them out with your complaints and wage and benefit demands that are well beyond what other B.C. workers have received or the government can afford."

we need to look closely at his argument. He is saying that because other workers have not successfully fought for better wages and benefits, no one should get them (and in particular, not public sector workers). So Gordon Brown wants teachers to accept no wage increase and fall behind, in line with other workers. This is a race to the bottom.

To improve the quality of life for ordinary working people (the 99%), we need to support all workers in their struggle to improve pay and benefits. We need to support Caterpillar workers who earn $33 / hour. A general rise in wages will impact wages throughout the economy. And successful labour struggles will motivate others to look to unions and organize to improve their own wages and benefits.

This is how we will close the gap on income inequality.

1 comment: