Industrial relations and inequality: the many conditions of a crucial relationship

Abstract

German

French

This article develops an analytical framework for exploring the complex (and sometimes contradictory) relationship between industrial relations and inequality. It discusses whether, under what conditions and to what extent the often-made claim that industrial relations can contribute to reducing inequality is warranted, by focusing on the two dimensions of intra- and inter-class inequality. Following the main lines of the proposed analytical framework, the article then presents a selective review of the empirical literature and how the contributions in this issue can help to refine and integrate the proposed analytical framework. The conclusions present some reflections on how the role of industrial relations in addressing inequality can be enhanced.

Keywords

Industrial relations trade unions collective bargaining inequality

Introduction

The issue of inequality is central to industrial relations. Trade unions are often expected to promote better employment and working conditions, as well as equality. Certainly, a significant degree of their legitimacy rests on this. Evidence must be produced to test these claims, however. Indeed, some scholars believe that trade unions may increase inequality by segmenting the labour market and producing a protection gap in favour of represented insiders, to the detriment of non-represented outsiders. Or at least they maintain that the ability of trade unions and industrial relations to reduce inequality has decreased in recent years, for a number of reasons (Baccaro, 2014). In this article we set out an analytical framework to help identify why and under what conditions trade unions and industrial relations might be expected to foster equality and hinder inequality effectively. We believe that, although there are solid theoretical grounds for claiming that industrial relations may indeed promote more equality – and probably usually do – the presence and degree of such an impact depends strongly on the circumstances. Indeed, in certain contexts it may easily be the case that industrial relations do not reduce inequality and may even increase it. Following the main lines of the proposed analytical framework, Section 2 is devoted to presenting an overview of contributions that have tried to solve the puzzle, which essentially remains an empirical question.

Industrial relations and equality

Industrial relations and trade unions do not necessarily have a generalised and equalising impact on wages and terms of employment. This depends mainly on the particular characteristics of trade unions and industrial relations systems, as well as on the collective bargaining structure in which they are embedded. For instance, craft unionism in the early phases of the trade union movement included the preservation of intra-class differentials between craft workers and labourers, and similar attitudes can be found today among occupational unions. Moreover, trade union capacity to reduce inequalities by obtaining for workers a larger share of value added and raising average employment standards depends on the changing balance of the bargaining power between labour and employers. This includes trade union organisational strength, but also contextual factors, such as the business cycle and the existence of a supportive legal and policy framework.

The relationship between industrial relations and work-related equality/inequality is therefore essentially an empirical question, which depends on and varies according to the circumstances. Indeed, the specific forms of industrial relations in most market democracies – amidst a number of other developments – did promote equality in the 20th century, but this should be treated as the result of particularly favourable circumstances. Mapping these circumstances analytically is our intent in this first section.

There are two elements of industrial relations, trade unions and collective bargaining that have a mitigating effect on inequalities. The first constitutive element of industrial relations that promotes equality is the collective nature of trade union representation and its regulatory effects. The collective dimension of industrial relations means that they tend to reduce, if not eliminate, differences in the terms of employment and working conditions among the workers represented. By setting the standards and minimum protections applicable to all covered workers, they establish a floor and reduce variations in treatment between individuals. We can call this the ‘intra-class’ equalising effect of labour relations, or the reduction in the differences of employment terms among workers.

The second constitutive element follows from the first and concerns the relationship with the employer. By organising labour collectively, trade unions gain a bargaining edge and are capable of obtaining better conditions than individual workers would otherwise obtain, on average. In this, industrial relations perform a key redistributive role between employers and labour. This represents an ‘inter-class’ impact on inequality, compressing profits in favour of wages, while containing managerial prerogatives and unilateralism. This also involves a reduction in the difference of rewards between workers and employers, although this is somewhat imprecise (because we are talking essentially about the functional distribution of income between labour and capital).

The combination of these two inherent effects produces the result which has been long attributed to industrial relations: to take labour and wages out of the market. Their overall impact on inequality then depends on contingencies that are both internal and external to industrial relations. If we start from the basic elements of labour relations, a key aspect is the type of union representation: more inclusive representation entails a broader range of interests to be represented. Classic contributions to the literature have shown that comprehensive interest representation produces collective goods (Olson, 1982). Here we want to stress that such a representation aims to pursue common objectives and typically involves general demands, which entail similar if not equal treatment for all represented workers, with limited scope for variation. The same would not be possible if special interest organisations prevailed (Olson, 1982). The broad identities that support encompassing trade unions are based on trust and solidarity across workers, helping to overcome the individualistic threat to collective action. Therefore, it is possible to say that the thrust for equality, which we can recognise in industrial relations, has its origins in the input phase: the levelling of demands turns into terms and rules of employment that apply to whole groups of workers. The output is made up of standard regulations and the outcome is more equality. We usually call it ‘solidarity’, as it involves a sense of justice and fairness among workers, in the face of their possibly divergent interests, arising from their distinct jobs and skills, or even diverse individual circumstances. Indeed, here we essentially focus on inclusiveness in terms of occupations (jobs, skill levels, industries), but it should be clear that the capacity to represent diversity in the workforce in the broad sense (gender, age, ethnic origin, sexual orientation, etc.) and mobilise it for the benefit of union action and organisation would significantly contribute to enhance the scope on equality.

We must be aware, however, that this ‘equality on the demand side’ may operate through different and segmented channels. For instance, there might be a single national union that negotiates only at local level. In that case, even if all union branches start with the same demands, the final result may still be diversified. For this reason, it is the process of regulation that proves to be crucial, if collective representation is to be converted into ‘equalisation’. Clearly, as mentioned above, such general levelling of demands would not be present if unions with a narrow representational focus prevail, as in the case of occupational unions.

As we move from representation to regulation, distributive conflicts over wages and profits, and normative disputes over managerial prerogatives between labour and employers become relevant. We can therefore maintain that the overall impact on equality/inequality derives from both the ‘intra-class’ solidarity carried by the type of representation – be it narrow or broad – and the ‘inter-class’ distributive conflict aimed at establishing fairness and justice in the employment relationship between workers and employers, which together shape union action as ‘the sword of justice’ (Flanders, 1970).

Again, the degree of inclusiveness of regulation is key to understanding the potential impact on equality. For the sake of simplicity, we consider comprehensive representation (as opposed to fragmented representation around sectional or occupational interests) and focus on collective bargaining. Collective bargaining is the main regulatory instrument of industrial relations and it has an inherent equalising effect, because it aims to introduce common standards to be applied to all relevant workers or to certain (relatively broad) categories, usually distinguished in terms of ‘objective’ factors, such as job classification or tasks, sometimes seniority – according to the principle of equal treatment for equal situations. The collective bargaining structure is particularly important for equality across workers. The most important element is the (prevailing) level of bargaining. The degree of centralisation represents the best indicator of the capacity of industrial relations to reduce inequality. Cross-industry, national standards provide general minimum floors for all workers. In that case, the inclusiveness of regulation and its equalising potential reach the upper limit. Any downward shifts to the sectoral, regional or local and workplace levels introduce some degree of segmentation, which progressively contribute to inequality, the farther we move from the peak level.

Coordination, regardless of its sources (Visser, 2013: 54–61), remains important, as it involves a moderating effect on the increase in inequality that moving from central regulation entails structurally. While centralisation can be regarded as a specific type of coordination, when considering the impact on inequality, coordination takes second place to centralisation and a clear distinction should be drawn between the two. Vertical coordination can contain the impact of decentralisation on inequality by maintaining a general framework and controlling the extent and duration of local variations. Horizontal coordination across bargaining units at the same level can reduce the differences between sectors, occupations, territories and workplaces.

Collective bargaining coverage is also important, and it becomes particularly relevant as we depart from a centralised system, which, by definition, tends to cover the entire economy. However, coverage rates do not provide a clear clue concerning equality among workers, because they can be the additive result of separate bargaining units, which produce variations within the covered workforce. In this context, coverage should be seen more as a factor that can contribute to shape the effects on equality of the industrial relations system, which mostly depend on the nature and structure of both representation and regulation. While encompassing unions engaged in central bargaining could be expected to promote a level protection framework, which would contain intra-class inequality, high bargaining coverage does not in itself necessarily do the same. It does, however, indicate the pervasive reach of joint regulation and negotiations promoting inter-class equality. Therefore, it provides an essential indicator of the second, and arguably more important, dimension of industrial relations’ equality-enhancing effects.

Table 1 summarises the discussion so far with a stylised ‘input-process-output’ scheme. The degree of variation of the output of the regulatory process (that is, its equality/inequality content) depends on the nature of representation in the input phase, as well as the structure of collective bargaining, which here represents the only regulatory process taken into consideration here, and the coverage of bargaining. These dimensions (or variables) influence the inequality between workers and between workers and employers. In this simplified depiction, together they constitute the overall inequality (leaving aside the variations within employers).

Table 1.

Representation, collective bargaining, inequality.

		Process (regulation)
		Collective bargaining
		Structure		Coverage
	Input	Level	Coordination	Rate	Output
Representation	Inclusive	Centralised		High	Less inequality
		Intermediate	Organised
	Fragmented	Decentralised	Disorganised	Low	More inequality
Type of equality	Intra-class (within)	Intra-class and inter-class (within and between)		Inter-class (between)

It should be clear that this interpretative framework does not say much about the degree of redistribution (or level of ‘equalisation’) produced by industrial relations. It identifies some hypotheses/expectations about the influence of certain industrial relations variables on equality. The degree of redistribution depends on the gains industrial relations produce for workers collectively. In other words, the key variable in that respect is the level of inter-class equalisation, or the bargaining output between labour and employers. In fact, the capacity to obtain ‘more’ from the employers is probably crucial also for the sustainability of solidarity on the demand side. A higher labour share means that workers’ solidarity is not a zero-sum game, but more a matter of distribution of those gains.

Another important issue is that intra-class and inter-class inequality are not necessarily linked. We can imagine a weak and highly inclusive and solidaristic union movement that equalises wages (and working conditions) among workers, with only limited redistributive impact between workers and employers. Conversely, very fragmented, conflict-based and organisationally strong unions may succeed in compressing profits without reducing differences in the wage distribution. In our analysis, we focus on both. As already mentioned, if inter-class equality is a key element in equalisation, the intra-class distribution of gains among workers is fundamental to reducing inequalities effectively.

Indeed, Table 1 depicts only certain links between some basic features of industrial relations and inequality. It does not intend to be exhaustive and it requires some qualifications. Equalisation among workers is crucial to supporting and reinforcing collective action; it embodies solidarity, helps building and confirming collective identities and enables the formulation of collective and shared demands. But we can assume that equalisation among workers would be sustainable in the long run, only if it yields better pay-offs than individual (or subgroup) action. We can thus say that solidarity among workers, although relevant, is incidental or instrumental, whereas the main objective of industrial relations is to compress inter-class inequality. This is the source of what we can consider the ‘real’ equalising effect of industrial relations.¹ If we focus on income inequality, while intra-class solidarity compresses the differences in the lower-to-medium sections of the income distribution, inter-class redistribution can raise the floor and possibly lower the ceiling of the overall distribution of rewards including workers and employers. This would decrease the ratio between the higher and the lower deciles, and have a positive effect on the labour share.

But which variables can reduce inter-class inequality? Essentially those that increase workers’ and trade unions’ bargaining power. In this perspective, we can build on traditional theories about workers’ mobilisation. First, trade unions’ organisational resources can be important and we can use membership and density as a proxy. In this way, we can include in our framework the remaining key indicator of industrial relations. Second, we can expect the economic cycle to influence trade union bargaining power in a pro-cyclical manner. This traditional and well-established empirical link might have been weakened, to some extent, by recent changes in the structure and organisation of the economy (the growing importance of services), production (the diffusion of outsourcing and the emergence of global value chains) and markets (the globalisation of production and competition). In relative terms, however, upward cycles should remain more favourable for labour than downward ones, although they represent short-term variations in the balance of power between the two sides of industry. With a view to grasping longer-term trends – and possibly considering the changes in the organisation and regulation of production and markets – it might be useful to identify medium-term phases. It would be possible to contrast the ‘Keynesian’ trente glorieuses, with the stagflation decades of the 1970s and 1980s, the globalisation of the 1990s and 2000s, and the crises of the 2010s. This might prove significant, but it would probably represent a spurious variable, as it combines economic and political factors and is based on generalised trends whose differential impacts among distinct countries are difficult to identify.

Indeed, a third and more consistent factor in influencing trade union bargaining power can be traced in state and government action. It can be directly promotional, by granting trade union prerogatives or workers’ rights, such as legal rights to establish workplace structures or elect works councils. It can also extend collective agreements or establish a centralised joint regulation system. Furthermore, it can support labour indirectly by granting legal and welfare protections. It can also operate in the opposite direction by constraining representation and collective bargaining and commodifying labour. Besides legislative regulation, government action may also support or hinder trade union action, for instance by performing a conciliation role in industrial disputes, introducing incentives for collective bargaining, or entrusting social partners with regulatory or administrative roles. Conversely, it might restrict the scope of social dialogue or disregard requests to act to resolve conflicts. Here, it would probably be relatively easy to classify specific institutions, reforms or measures, but it might be difficult to assess the overall impact of the regulatory and policy framework, as the individual elements might be contradictory. It might be even more difficult to identify a reversal in the overall impact of state and government actions, from supportive to hindering, or vice versa.

In sum, we have a simplified but fairly well articulated ‘model’ of the potential impact of industrial relations on inequality. We can use it to derive some hypotheses that could be tested or compared with existing analyses. We can also use it to interpret the traditional association between industrial relations and less inequality. The association between inclusive or ‘class’ trade unionism (general, industrial and confederal unions), relatively centralised collective bargaining systems, high coverage rates, growing union density, a long expansionary economic cycle coupled with ‘Keynesian’ policies, an expanding welfare state and – often – pro-labour policies provided a perfect combination to compress the intra- and the inter-class dimensions of inequality in the aftermath of the Second World War. By contrast, trends in union density, collective bargaining structure and coverage, as well as economic and political developments in recent decades suggest that the ability of industrial relations to contain inequality is declining.

Table 2 presents the key variables that influence the two dimensions of inequality, according to our arguments. It expressly tries to differentiate between intra-class and inter-class inequality, with a view to guiding empirical analyses or their assessment. Of course, some variables could influence both solidarity among workers and redistribution between labour and employers. In particular, as shown in Table 1, the structure of collective bargaining influences both. Thus centralised bargaining would produce more equality among workers and also amplify the results of redistribution. But this second effect would be present only if collective bargaining leads to redistribution. Centralisation alone does not warrant it (as stressed above, it could equally enable wage compression). Redistribution between workers and employers would rather be the effect of the variables highlighted in Table 2: a union movement focused on distributive conflict, with strong organisational resources, and favourable economic and political conditions, particularly if the bargaining coverage rate is high.

Table 2.

Industrial relations and equality: key respective variables.

	Intra-class equality	Inter-class equality
Representation	InclusiveClass-basedConfederal	Conflict-based – –
Collective bargaining	Centralised	–
Coverage	–	High
Union density	–	High
Economic cycle	–	Expansionary
Legislative framework	–	Supportive/promotional
Government/policies	–	Pro-union

We should underline some of the limitations of our interpretative framework. This tentative analysis refers mostly to the scope of bipartite industrial relations and work-related inequalities. It assumes that industrial relations, because of their constitutive collective nature, would tend to reduce inequality, although the actual impact may vary widely, depending on the structural and contextual variables mentioned above. It does not rule out that industrial relations may contribute to producing inequalities, however. First of all, the benefits gained through industrial relations by represented workers may lead to worse terms of employment or even unemployment for those who are not represented. This insiders/outsiders scenario can emerge in the face of declining union density and collective bargaining coverage. It is hard to assess whether it would be a zero-sum game among workers, with insiders shifting the full cost of their protection on outsiders, or a situation whereby industrial relations can still reduce inequality, but only for represented workers. Moreover, we must remember that, for instance, industrial relations systems characterised by narrow and segmented representational domains may not reduce inequality, because they lack the structural equalising effect of encompassing representation. In any case, these simple examples remind us that the relationship between industrial relations and inequality cannot be taken for granted.

The second fairly important area not fully covered by our current framework is social concertation, i.e, the social partners’ action in the field of policy-making. Because we are focused on bipartite collective bargaining, we do not consider explicitly how trade unions contribute to shaping social, economic and employment policies. Would they promote equality? In what ways? A first hypothesis would follow from our schematic analysis: inclusive trade unions would tend to promote equality-enhancing policies and reforms, both in the sense of equal treatment among workers (intra-class equality) and better rewards for workers (inter-class equality). Other types of union might not do the same. Moreover, we should remember that governments maintain a prevalent role in policy-making and that, in certain circumstances, the range of available options may be quite narrow. This could have been the case in the wave of ‘competitive corporatism’ that emerged between the 1990s and the early 2000s, when the mostly market-enhancing reforms introduced or accompanied by social pacts may in fact have increased the scope of inequality. Clearly, we do not have a counter-factual: we do not know how reforms without social pacts would have affected equality. This aspect of the potential impact of industrial relations on inequality remains outside our framework. This also helps to underline that we should not confuse centralised collective bargaining (which is included in our framework) with corporatism and social pacts (which are not covered).

The analysis of the existing literature, to which we now turn, can provide some relevant examples of the relations that we tried to systematise and offers suggestions for future research and further refinement of our framework. This may include the integration of the political dimension of industrial relations in the equality nexus.

Inter-class inequality

Contributions focusing on the relationship between industrial relations and inter-class inequalities fall mainly into two groups: (i) those concerning the distribution of economic resources between classes, and (ii) those focusing on the distribution of power and control, mostly at the workplace level. Many studies of the evolution of the wage – or labour – share (that is, the share of national income going to labour as opposed to capital) include industrial relations variables, and particularly union density, as explanatory variables (for example, Stockhammer, 2009; Kristal, 2010). According to the underlying interpretation, industrial relations institutions strengthen workers’ bargaining power relative to capital and make them more able to increase their share of resources at the expense of profits (Bengtsson, 2014). The apparent salience of this relationship has been reinforced by the parallel weakening of labour’s bargaining power and the decline in the wage share in recent decades. The relationship between the two variables is more complex and far from straightforward, however, as shown by differences in this effect between countries and over time. For example, Kerr (1954) highlighted that the wage share in the United States did not increase more in unionised industries, tracing this back to the scarce use of political action by US trade unions. More recently, Stockhammer (2009) showed that union density was not associated with a higher labour share in those countries in which unions administered unemployment benefits. He referred these findings to a neo-corporatist argument according to which ‘encompassing’ unions moderate their wage demands and therefore may not have such a strong influence on the wage share, despite their strong ‘organisational’ resources (Bengtsson, 2014). These differences are connected with the different modus operandi of trade unions in different countries and therefore to their different wage demands. Scholars have shown a variation over time in the (positive) association of union density and the wage share, which was stronger in the 1960s and 1970s than in later decades (Bengtsson, 2014; Kristal, 2010). This might suggest that particular attention should be paid to union culture, too, so that it is important to include ‘antagonism’, distributive conflict-orientation or (wage) militancy – as opposed to moderation – in the overall interpretative framework. As mentioned in the first section, however, economic and political variables may also explain why similar organisational resources may produce different outcomes in terms of inter-class equality through time and in different countries.

Other empirical studies have looked at the relationship between union density and top income shares, that is, at the share of income going to people in the higher segments of the wage distribution, highlighting how trade unions can moderate it (Hager, 2020; Volshko and Kelly, 2012). Jaumotte and Osorio-Buitron (2015) show the existence of a strong negative relationship between unionisation and top earners’ income shares. In particular, they show that the decline in union density is associated with a rise in the income share of the top 10 per cent of earners. Similarly, in a review of eight cross-country studies on top incomes, Hager found that ‘the rate of unionisation is one of the few variables that is consistently reported to have a meaningful impact on top incomes’ (2020: 1189). In this sense, unions seem to affect the income distribution not only at the bottom (as we will see below), but also at the top.

This might seem counterintuitive, as trade unions generally do not directly affect the incomes of top earners, whose remuneration is usually set unilaterally by companies or in individual negotiations. According to the literature, however, unions influence top earners’ income through several mechanisms.

First, this is related to the systemic effect of bargaining: unions can reduce top income shares by strengthening the bargaining power of average wage-earners and their capacity to increase their share. This reduces the company’s financial resources for management and capital owners. The second mechanism is connected to workers having a say on corporate decisions. According to Jaumotte and Osorio-Buitron (2015: 8), ‘where unions are strong, firms are more likely to engage in consultations with worker representatives, allowing them to have some influence over the size and structure of top executive compensation’ (Sjöberg, 2009). For example, DiNardo et al. showed that unionisation correlates negatively with both the number of top managers and their pay (2000), while Gomez and Tzioumis (2006) point out the role of unions in restricting the use of stock options in CEOs’ pay. The presence of works councils and their prerogatives have also been found to play a role in compressing top incomes (Huber et al., 2019). All these things point to a combination of organisational and institutional resources (supportive and promotional legislation at all levels, including the workplace), which increase the capacity to influence wage setting across the economy. The last channel is political: unions can change the political equilibrium in favour of weaker groups, influencing redistributive decisions by pushing for more egalitarian policies (for example, on taxes – Hager, 2020; Brady et al., 2013), but also by instituting fairness norms that frame employment relations and wage formation (Western and Rosenfeld, 2011).

The impact of industrial relations has also been widely studied for other inter-class distributional aspects beyond economic gains, for example, the distribution of risks and power within workplaces or in a society. Comparative industrial relations research has shown that inclusive collective bargaining institutions and the presence of trade unions and other forms of workers’ representation with strong participation rights give workers more control over workplace dynamics, and favour forms of work organisation ensuring higher worker discretion (Doellgast, 2012; Gallie, 2009; Turner, 1991).

Intra-class inequality

A further aspect – and in recent times a much debated issue – of the impact of industrial relations on inequalities is its intra-class dimension, namely the capacity to reduce the differences in rewards across different workforce groups (notably wages and income, but also access to jobs with good working conditions).

A large number of empirical analyses since the 1980s have highlighted the association of several industrial relations elements with predistribution inequalities, that is, with the market distribution of incomes before taxes and transfers (Bradley et al., 2003). One of the most consistent empirical findings in the literature is that unionisation is associated across countries and over time with the compression of earnings differentials. As argued by Rueda and Pontusson, ‘union density emerges as the single most important factor influencing wage inequality across institutional contexts; its effects are consistently egalitarian and they are greater than those of any other independent variable within the country clusters’ (2000: 352).

Union intervention on wage setting has two key equalising mechanisms. First, unions standardise pay setting based on criteria such as job description and seniority, thus limiting managerial discretion and their capacity to differentiate compensation on the basis of individual merit and performance (the diffusion of performance-based pay has been highlighted as an inequality trigger also by organisation scholars, see Cobb 2016), or favouritism and discrimination. This standardisation effect has been found to be particularly important for ensuring gender and racial equality (Blau and Kahn, 1992). Second, union-negotiated pay scales tend to be more compressed than those set unilaterally by employers (Card et al., 2004). As highlighted by Visser and Checchi (2011), unions aim to strengthen the bargaining power of low-wage workers and therefore to reduce wages in the middle and top of the distribution compared with market prices (for example, between skilled and unskilled, higher and lower occupations). Hence, the presence of unions and their capacity to influence wage setting may be related to a lower incidence of low-wage work (Gautiè and Schmidt, 2010) and of in-work poverty (Brady et al., 2013). There are two main reasons why trade unions should aim to compress the wage distribution. The first, particularly relevant in current debates, is connected with trade unions’ membership dynamics and their membership composition, actual or potential. Historically, general unions have supported wage-levelling policies in order to expand their membership towards semi- or un-skilled workers (Visser and Checchi, 2011). Traditionally, the literature connected this union attitude to the preferences of the median union member. The idea is that, because the wage of the median union member is lower than the average wage, they will favour solidaristic wage policies (Baccaro, 2014). The second is connected to trade union identity: ‘equal pay for equal work’ is a central credo of the trade union movement.

Other authors have highlighted other institutional characteristics of industrial relations regimes as the most significant factors explaining wage inequality. As explored in greater detail by Keune (2021), the characteristics of collective bargaining exert an effect on wage distribution. Most of the empirical studies of the impact of bargaining on pay differentials confirm that growing degrees of bargaining centralisation and bargaining coverage have a wage-levelling impact (Blau and Kahn, 1996; Wallerstein, 1999). For example, Wallerstein (1999) identified the level of wage setting as the most important variable explaining wage inequality. The more wages are set in a centralised manner, the more egalitarian their distribution. Centralisation reduces interfirm and intersectoral wage differentials.

We now turn to the evolution of this relationship over time. Several contributions have shown that the reduction in union density rates, the erosion of collective bargaining coverage, and the decentralisation of collective bargaining have all contributed to growing inequality (see Pontusson, 2013 for a review). Some have also highlighted a reduction in trade unions’ capacity to affect wage inequality, however. This observation sparked a debate on the reasons for it. Some authors highlighted the role of external factors, such as transformations in the environment in which they operate. Baccaro (2014), for example, highlighted the fact that trade unions are now operating under tougher structural conditions – due to globalisation and growing capital mobility – that significantly constrain their scope of action and the type of wage demands they can make. Others, instead, have stressed how this is connected not so much with the environment in which they act as to their demands. According to Pontusson (2013), for example, the changing composition of trade union membership – which, after the decline in unionisation rates is made up of people with higher than median incomes – affects trade union redistributive demands and their interest in egalitarian wage policies. This brought to the surface a debate on the role of trade unions in promoting, rather than reducing inequality, which has been particularly embraced by the so-called insider/outsider literature (Lindbeck and Snower, 1986).

For some scholars, this reduction in coverage is connected with inward-looking attitudes among stronger segments of the working class, which aim to pursue cross-class alliances with employers (Rueda, 2007). Others, by contrast, argue that this is simply due to an incapacity to extend to new areas, and to the overall weakening of trade union power (Pontusson, 2013). While these different interpretations have significant theoretical implications, particularly evident in the comparative political economy literature (for example, concerning the trajectories of institutional change between dualisation – Thelen, 2014 – and liberalisation theories – Streeck, 2009; Baccaro and Howell, 2017), both approaches point to the importance of the inclusiveness and coverage of industrial relations institutions and, in particular, of trade unions (Vlandas, 2018).

While often not framed around the issue of inequality, this discussion has resonated also among scholars looking at different dimensions of intra-class inequality. Examples include differences in employment and working conditions across different groups of workers, such as those between high- and low-skilled workers, standard and non-standard workers, and in-house and outsourced, as examined by several of the articles in this special issue.

Some authors have highlighted the increased importance of the ‘vested interests’ aspect of trade unionism. In these accounts unions are increasingly focused on the defence of their members, most often concentrated among medium-skilled workers in manufacturing and export-oriented industries, even at the expense of other, usually weaker, workers in low-wage service sectors and precarious employment (Hassel, 2014; Palier and Thelen, 2010). This has often taken the shape of insider-focused cross-class coalitions at both sectoral and company level (Pulignano and Doerflinger, 2013). Other studies have shown that industrial relations and labour market institutions continue to play an important role in reducing labour market segmentation, influencing both employers’ decisions (for example, reducing their incentives to rely on non-standard forms of employment or outsourcing – Gautiè and Schmidt, 2010) and the negative effects of these decisions on workers (for example, by defining a level playing field). Furthermore, numerous trade union initiatives have been documented that strengthen protection of peripheral employees and reduce inequalities (see Doellgast et al., 2018 for an extensive review).

This literature highlights several factors influencing relations between unions and inequality. They include the importance of trade union characteristics, such as their organisational structure and the existence of divisions (Benassi et al., 2019; Marino, 2015; Oliver, 2011), their ideologies (Benassi and Vlandas, 2016; Carver and Doellgast, 2020; Dorigatti, 2017; Durazzi, 2017), and membership composition (Hassel, 2014; Thelen, 2014). Others, however, have pointed to external factors, such as the attitudes of the counterparts and the avenues through which they obtain recognition and resources (Davidsson and Emmenegger, 2013; Frege and Kelly, 2004).

In order to integrate the insights from these two contrasting interpretations, Doellgast et al. developed a framework based on two ideal-typical sets of conditions fostering higher or lower inequalities, named virtuous or vicious circles (Doellgast et al., 2018). These circles link institutions (inclusive versus fragmented welfare state, labour market and collective bargaining institutions), employer strategies (voice-oriented versus exit-oriented), union strategies (inclusive versus exclusive), and worker identification and identity (solidaristic versus particularistic) and are self-reinforcing in positive or negative feedback. The framework proposed by Doellgast et al. highlights the importance of the interconnections between institutions and trade union action. Inclusive institutions, for example, provide unions with a framework that allows them to bargain and enforce agreements for a broad workforce domain. This makes it more difficult for employers to exit agreements or to employ workers on sub-standard terms, for example, through subcontracting and non-standard work arrangements. Unions, in other words, have more power to act, but also foster solidarity across different workforce groups and reduce the risks of inward-looking behaviour. Moreover, such a framework identifies different paths to solidarity and dualisation, helping to strengthen the capacity of comparative employment relations to contribute to theory building (Carver and Doellgast, 2020).

Alongside their impact in the economic arena and in predistributive outcomes, industrial relations institutions also influence inequality through political mechanisms (Ahlquist, 2017). Famously, power resource theory (Korpi, 1983) assigns a major role to trade unions in redistributive policies and in the construction of modern welfare states, through their support for and interaction with left-wing parties. While most of the literature in the power resource tradition has traditionally focused on welfare spending (for example, Esping-Andersen, 1990), more recently social scientists have used power resource theory to explain redistribution and economic inequality directly. For example, Bradley et al. (2003) show that one of the key factors explaining variation across advanced industrial societies in governmental redistribution is trade union density.

This political influence exerted by trade unions – with an indirect impact on inequality – has been shown to happen through a number of mechanisms. First, trade unions influence redistribution preferences at the individual level. Several contributions have, in fact, highlighted how, controlling for income, union members are more supportive of redistribution and egalitarian policies than other citizens. For example, Mosimann and Pontusson (2017) argued that not all unions are the same in their capacity to foster support for redistribution, as some emphasise wage solidarity more than others. In their argument, it is the inclusiveness of trade unions that matters, and particularly whether or not unions organise low-wage workers. More inclusive unions are better able to influence wage-earners’ orientations towards support for redistribution than unions that are less inclusive of low-wage workers (Mosimann and Pontusson, 2017). Gordon (2015), on the other hand, pointed to the importance of union centralisation or unity to produce more generous and widely available systems of social insurance, including unemployment protection.

A second mechanism is connected with electoral policies. A substantial body of literature has highlighted that unions are key players in electoral politics and influence the democratic representation of workers’ interests. Being a union member fosters the individual propensity to be politically engaged, take part in elections, and vote for pro-labour parties (see Ahlquist, 2017 and Hadziabdic and Baccaro, 2020 for an extensive review of the literature). However, the effects of union membership across countries are variable and heterogeneous, depending on the structure of the trade union movement, and in particular the strength of peak-level confederations and the absence of fragmentation (Arndt and Rennwald, 2016). Moreover, unions influence politics as organisations, affecting parties’ platforms, forming coalitions with them, and influencing governments in various ways. Among the latter, traditional links with the left-wing parties (Korpi, 1983), and mobilisation and strikes (Hamann et al., 2013) can play an important role. In this perspective, research highlights that not only union density, but also the unity – in fact the lack of segmentation – of the labour movement increases the positive impact of trade unions on equality.

Also concerning trade unions’ political action, there is a broad debate on the distributive impact of industrial relations institutions – particularly trade unions – on welfare policies across different workforce groups (Bosch et al., 2010; Rueda, 2007; Palier and Thelen, 2010). Scholars have argued that a new conflict concerning social policy preferences has emerged among key constituent groups of both unions and left-wing parties as a consequence of changes in post-industrial occupational structures. Several scholars have argued that trade unions are increasingly focused on insiders’ preferences, supporting insider-focused political reforms (related to the labour market and the welfare system) that reinforce economic inequalities (Emmenegger et al., 2012; Rueda, 2007). Others have focused on the conditions under which inclusive policies might be fostered, highlighting the importance of high union density and broad union membership (Swank, 2020), and of union centralisation (Gordon, 2015).

Finally, industrial relations research has extensively explored the mechanisms through which trade unions have a direct say on policies through corporatist institutions and macro-level concertation. The neo-corporatist literature shows that corporatism is associated with economic and social policies that mitigate socio-economic inequality. Still, some scholars argue that the inter-class distributive effects of corporatism have waned over recent decades. According to Baccaro, for example, social pacts in the 1990s and 2000s have little of the redistributive character they showed in the 1970s and are instead much more focused on competitiveness (Baccaro, 2014; Rhodes, 2001). Moreover, several contributions have shown how trade unions have increasingly been excluded from policy-making, in particular under harsh pressures for financial austerity (Culpepper and Regan, 2014). This significantly limits their capacity to influence redistributive dynamics.

This issue

The articles which follow in this issue contribute to the debate on the link between industrial relations and inequality and provide insights on some possible extensions and refinement of the analytical framework presented here. Keune (2021) explores in detail the impact of collective bargaining on inequality, with a special focus on the interactions between the collective bargaining structure, coverage and union density. Campos Lima et al. (2021), by looking at the recent Portuguese experience with internal devaluation policies, highlight the interplay of industrial relations institutions and economic policies. Martišková et al. (2021) extend the perspective to consider the political role of trade unions in the definition of legal minimum wages as a way to compensate for the weakness of collective bargaining in Czechia and Slovakia. Riva and Rizza (2021) include occupational welfare in the picture and test whether and to what extent it contributes to intra-class inequality, as well as investigating the role of the different industrial relations systems. Finally, Barton et al. (2021) shift the focus to the workplace level and explore the variables that can influence the impact of decentralised bargaining on inequality between different groups of employees.

Taken together, we believe that this issue shows that there are good analytical reasons and significant empirical evidence to support the view that trade unions and industrial relations help to reduce inequality through solidarity among workers and redistribution between labour and capital. Certainly, they are not alone in this endeavour and redistribution through the tax and the welfare systems can be more relevant and effective, especially at a time when labour’s bargaining power is declining, despite the parallel retrenchment of both state intervention in the economy and welfare provisions (Baccaro, 2014). Moreover, the presence of such an equalising effect must not be taken for granted and its extent is variable.

The legitimacy that trade unions and industrial relations can acquire in the public and political spheres from acting as the ‘sword of justice’ in employment relations is linked to their capacity to represent more and new categories of workers and to cover them through collective bargaining. In the reduction of inequality, solidarity and redistribution are two sides of the same coin. As we have underlined, they depend on the nature of representation and the collective bargaining structure. While the former is principally a matter for the trade union movement, the latter calls into question the organisation of employers and the role of governments. In other words, the role of the state and government action can be crucial (Bordogna and Cella, 1999). Promotional measures to support trade union representation, collective bargaining coordination – if not centralisation – and the establishment of social concertation of policies can help to strengthen all the dimensions that, as we have seen, can foster equality through the participatory and democratic processes that constitute industrial relations. Given the increasing importance of equality as a policy objective in recent years – which has become even more relevant because of the socio-economic impacts of the Sars-Cov-2 pandemic – we believe that a renewed agenda could be launched to support industrial relations (OECD, 2019) and replace the recent interventionism, which seems to point in the opposite direction (Marginson, 2014).

Footnotes

Notes

Funding

This work was funded by the Università degli Studi di Milano, Research support plan – Line 2, 2019 project on Industrial relations and inequalities.

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