Labour Studies Index

Inequality and Labor Market Institutions

Document type Report
Author Osorio, Carolina
Author Jaumotte, Florence
Date 2015 07 15
Pages 30
URL http://www.imf.org/external/pubs/cat/longres.aspx?sk=42987

Abstract

[E]xamines the role of labor market institutions in the rise of income inequality in advanced economies, alongside other determinants. The evidence strongly indicates that de-unionization is associated with rising top earners’ income shares and less redistribution, while eroding minimum wages are related to increases in overall income inequality. The results, however, also suggest that a lack of representativeness of unions may be associated with higher inequality. These findings do not necessarily constitute a blanket recommendation for higher unionization and minimum wages, as country-specific circumstances and potential trade-offs with other policy objectives need to be considered. Addressing inequality also requires a multipronged approach, which should include taxation reform and curbing excesses associated with financial deregulation.