Support for reducing income inequality comes from unlikely source

“The IMF makes it clear that inequality can hurt society by allowing the wealthy to manipulate the economic and political systems in their favour, and this is where government action is required." — James Clancy, NUPGE National President

Ottawa (26 March 2015) — For decades, the gap between the wealthy and the middle- and low-income earners has been growing. The gap in assets between the richest 1% and the rest of us has become even worse since the economic collapse in 2008. Many studies have been done to consider why income inequality continues to grow, but now an unlikely organization has looked at the issue with a new focus. 

IMF links growing inequality to decline in unions

A recent study released by the International Monetary Fund (IMF) argues there is a direct connection between the rise of income inequality and the decline in union density.

The IMF realized that, while a lot of research had already been done on how things like financial deregulation and tax cuts to the upper income earners increased income inequality, very little had been done on how changes in labour market institutions have affected income inequality.

The research highlights how the decline in unionized workers' bargaining power increases the gap between the wealthy and the rest of us. “If deunionization weakens earnings to middle- and low-income workers, this necessarily increases the income share of corporate managers’ pay and shareholder returns,” the study says.

The report goes on to say that “weaker unions can reduce workers’ influence on corporate decisions that benefit top earners, such as the size and structure of top executive compensation.”

IMF has a long history of supporting policies that increase income inequality

For the IMF to release a report suggesting that stronger unions are good for society is a shock for anyone familiar with the history of the organization. In the past, the IMF has been a leading advocate for measures that have increased income inequality and weakened the labour movement. Time after time, the IMF has forced governments to adopt brutal austerity measures than helped the rich get richer and hurt low- and middle- income earners.

That an organization like the IMF is producing a report recognizing the damage done by inequality and the need for a stronger labour movement is a clear sign of how bad income inequality has become. 

Inequality allows wealthy to manipulate political and economic systems

“We have been saying for years that workers’ wages and rights have suffered across the board due to the decline of union membership,” says James Clancy, National President of the National Union of Public and General Employees (NUPGE). “Now, even the IMF is agreeing with us!”

“The IMF makes it clear that inequality can hurt society by allowing the wealthy to manipulate the economic and political systems in their favour, and that government action is required to deal with this problem,” Clancy continued.

The IMF suggests some key reforms to corporate governance that would provide more input into such things as executive compensation structures, at the same time as suggesting that employers and governments reaffirm labour standards that allow for workers to bargain collectively.

“The scales have been tipped for too long in favour of the wealthy and powerful,” concludes Clancy. “Having a healthy labour environment where workers can freely bargain their working conditions and wages will ultimately reduce income inequality and be fairer for everyone."


The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE

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