Labour, Globalization and Inequality: Are Industrial Relations Institutions Still Redistributive?
Sociology University of Geneva Geneva, Switzerland
Based on a newly-developed dataset combining information on industrial relations and labour law (freedom of association and collective bargining), various dimensions of globalization, both trade- and finance-related, and controls for demand and supply of skills, this paper engages in an econometric analysis of trends in income inequality in 51 Advanced, Central and Eastern European, Latin American and Asian countries between the late 1980s and the early 2000s, followed by a more in-depth analysis of 16 Advanced countries over a longer time frame (from the late 1970s to the early 2000s). The main purpose of the analysis is to ascertain the extent to which the generalized decline in union density, as well as the erosion in centralized bargaining structures, has contributed to rising within-country inequality in the current globalization era, controlling for various economic determinants. The paper finds that differences in labour institutions are the most robust predictors of cross-sectional (i.e. long-term) differences in inequality: on average, an institutionally-dense labour market is associated with a more egalitarian society. In contrast with previous research, however, the paper finds that recent trends in trade unionism and collective bargaining structure (late 1980s-early 2000s) are no longer significantly associated with the within-country evolution of inequality, except in the Central and Eastern European countries where the collapse of unions after the fall of the Berlin Wall seems to have contributed to a dramatic increase in economic inequality. The paper concludes that industrial relations institutions currently operate under more stringent structural constraints than in the past (partly as a result of globalization trends), which reduce the space for earnings compression: they face more elastic labour demand curves, particularly for the low skilled, and greater wage premia demanded by the high-skilled as a result of skill-biased technical change. The paper also finds that despite much talk about welfare state crisis, large welfare states (historically the result of labour?s power and mobilization capacity) still play an important redistributive role, at least in advanced countries.