an important effect on the labour market. It reduces the demand for
labour, puts downward pressure on domestic wages, and thus likely
contributes to growing income inequality in Canada or the United States.
(At the same time, however, these same decisions are likely reducing
income inequality on a global level since they are raising incomes in the
low-wage countries in which these firms now operate.)
Other Contributing Causes
Other changes in the nature of work and pay have occurred in recent
decades, and these are likely contributing to rising income inequality.
Decline of Labour Unions
Union membership has declined gradually since the mid-1970s and today
represents about 25 percent of the Canadian labour force. As we saw
earlier in the chapter, unions are generally able to secure a wage
premium for their members, currently between 10 and 15 percent above
the wages earned by non-union members with similar skills. As labour
unions have declined in importance in the overall economy, which has
been especially marked in the United States and the United Kingdom, a
smaller fraction of the labour force will receive these wage and other
union-negotiated benefits. Since unions are most important in
representing workers whose income places them roughly in the “middle”
of the income distribution, this gradual weakening of union influence,
and the associated reduction in the benefits of being a union member,
offers a partial explanation for rising income inequality.