Social Europe

politics, economy and employment & labour

  • Themes
    • Global cities
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter
  • Membership

A better deal for the world’s workers

Dani Rodrik 14th December 2021

Boosting earnings and the dignity of work requires strengthening bargaining power and supplying good jobs to those who most need them.

workers,labour,labor
Left behind—a former coalmine in Germany’s Ruhrgebiet (Tupungato/shutterstock.com)

The last four decades of globalisation and technological innovation have been a boon for those with the skills, wealth and connections to take advantage of new markets and opportunities. But ordinary workers have had much less to cheer.

In advanced economies, earnings for those with less education often stagnated despite gains in overall labour productivity. Since 1979, for example, production workers’ compensation in the United States has risen by less than a third of the rate of productivity growth. Labour-market insecurity and inequality rose, and many communities were left behind as factories closed and jobs migrated elsewhere.

In developing countries, where standard economic theory predicted that workers would be the main beneficiary of the expanding global division of labour, corporations and capital again reaped the biggest gains. A forthcoming book by Adam Dean of George Washington University shows that even where democratic governments prevailed trade liberalisation went hand in hand with repression of labour rights.

Labour-market ills create broader social and political strains. In his pathbreaking 1996 book, When Work Disappears, the sociologist William Julius Wilson described how the decline in blue-collar jobs had fuelled an increase in family breakdown, drug abuse and crime. More recently, the economists Anne Case and Angus Deaton have documented the rise in ‘deaths of despair’ among less-educated American men. And a growing empirical literature has linked the rise of authoritarian, right-wing populism in advanced economies to the disappearance of good jobs for ordinary workers.

As a result of the global pandemic, labour problems are receiving renewed attention—and rightly so. But how can workers not only get their fair share but also have access to decent jobs that enable meaningful lives?

Countervailing power

One approach is to rely on the enlightened self-interest of large corporations. Happy, fulfilled workers are more productive, less likely to quit and more likely to provide good customer service. Zeynep Ton of the Massachusetts Institute of Technology has shown that retail establishments can cut costs and boost profits by paying good wages, investing in their workers and responding to employees’ needs.


Become a Social Europe Member


Support independent publishing and progressive ideas by becoming a Social Europe member for less than 5 Euro per month. Your support makes all the difference!


Click here to become a member

But many firms that claim to take the high road in labour standards are also vehemently anti-union; taking the low road by minimising workers’ pay and say is too often a profitable corporate strategy. Historically, it is the countervailing power of labour—through collective action and union organisation—that has brought about the most significant gains for workers.

So, a second strategy to help workers consists of increasing the organisational power of labour vis-à-vis employers. The US president, Joe Biden, has explicitly endorsed this approach, arguing that the shrinking of the American ‘middle class’ is a consequence of the decline in union power, and has vowed to strengthen organised labour and collective bargaining.

In countries such as the US, where unions have become significantly weaker, this strategy is indispensable to redress imbalances in bargaining power. But experience in many European countries, where labour organisation and collective bargaining remain strong, suggests that it may not be the full remedy.

The trouble is that strong worker rights can also create dualistic labour markets, where the benefits accrue to ‘insiders’ while many less experienced workers struggle to find jobs. Extensive collective bargaining and robust labour regulations have generally served French workers well. But France has one of the highest youth unemployment rates among advanced economies.

Macroeconomic expansion

A third strategy, which aims to minimise unemployment, is to ensure adequate labour demand through expansionary macroeconomic policies. When fiscal policy keeps aggregate demand high, employers chase workers—rather than the other way around—and unemployment can remain low. Research by Larry Mishel and Josh Bivens of the Economic Policy Institute shows that macroeconomic austerity is a major reason why US wages have lagged behind productivity since the 1980s. By contrast, the Biden administration’s aggressive fiscal response to the Covid-19 crisis has ensured that wages have increased amid a sharp fall in unemployment.

But although tight labour markets can help workers, they can also pose an inflation risk. Moreover, macroeconomic policy cannot target the lowest-skilled workers or the regions where jobs are most needed.

A fourth strategy, then, is to shift the structure of demand in the economy to benefit less-educated workers and depressed regions in particular. The shortage of secure, ‘middle-class’ jobs is closely linked to the disappearance—as a result of globalisation and technological change—of blue-collar manufacturing work and service-sector sales and clerical jobs. Policy-makers must focus on expanding the supply of jobs in the middle of the skill distribution to reverse these polarising effects.

This entails revising industrial and business-development programmes so that incentives go to the firms most likely to generate decent jobs in the right places and are designed with these firms’ needs in mind. Conventional industrial policies that target skill- and capital-intensive manufacturing, and rely heavily on tax breaks, will not do much to spur the expansion of good jobs for those who most need them.

Labour-friendly path

In addition, we must explicitly consider how new technologies help or hurt workers, and rethink national innovation policies. The current narrative focuses almost exclusively on how workers should retrain to adapt to new technologies, and too little on how innovation should adapt to the workforce’s skills.

As economists such as Daron Acemoglu, Joseph Stiglitz and Anton Korinek have pointed out, the direction of technological change is flexible and depends on price incentives, taxes and the norms prevailing among innovators. Government policies can help guide automation and artificial-intelligence technologies along a more labour-friendly path that complements workers’ skills instead of replacing them. My Harvard colleague Stefanie Stantcheva and I discussed some preliminary ideas in a report we prepared for the French president, Emmanuel Macron.

Ultimately, boosting labour earnings and the dignity of work requires both strengthening workers’ bargaining power and increasing the supply of good jobs. That would give all workers a better deal and a fair share of future prosperity.

Republication forbidden—copyright 2021 Project Syndicate, ‘A better deal for the world’s workers’

Dani Rodrik
Dani Rodrik

Dani Rodrik, professor of international political economy at Harvard University’s John F Kennedy School of Government, is president of the International Economic Association and  author of Straight Talk on Trade: Ideas for a Sane World Economy (Princeton University Press).

You are here: Home / Economy / A better deal for the world’s workers

Most Popular Posts

new world order,state,citizen A new world order: from warring states to citizensPaul Mason
Tesla,IF Metall,electric car,union US electric-car maker faces Swedish union shockGerman Bender
Israel,Hamas Israel and Hamas: the debasement of discourseRobert Misik
Israel-Palestine,refugee,refugees Israel-Palestine: a comparative perspectiveBo Rothstein
Germany,sick,economic Germany’s true economic diseasePeter Bofinger

Most Recent Posts

human security,Europe,investment,military Investing in human security in EuropeChiara Bonaiuti
citizenship education,European Union,democratic European citizenship education—antidote to hateRéka Heszterényi
healthcare,hospitals,social dialogue,pandemic Healthcare depends on the health of social dialogueJorge Cabrita and Victoria Cojocariu
multi-level,Europe,networks,sovereignty Barking up the wrong European treeJan Zielonka
renewable,fossil-fuel,energy,renewables,inflation,prices The renewable answer to Europe’s fossil-fuel inflationFelix Heilmann and Maximilian Krahé

Other Social Europe Publications

Global cities cover pdf Global cities
strategic autonomy Strategic autonomy
Bildschirmfoto 2023 05 08 um 21.36.25 scaled 1 RE No. 13: Failed Market Approaches to Long-Term Care
front cover Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans

Foundation for European Progressive Studies Advertisement

Transforming capitalism in the Age of AI

Will the EU once again accept Big Tech's power as a fait accompli while belatedly trying to mitigate risks, or can it chart a different course?

Join our conference on the EU approach to the digital transition. On Wednesday, 6 December, FEPS and the Friedrich-Ebert-Stiftung Competence Centre on the Future of Work are co-organising an evening of high-level debates on the digital future of Europe. There will be keynotes by the European Commissioner for Jobs and Social Rights, Nicolas Schmit; Evgeny Morozov, founder of The Syllabus; and Phoebe V Moore, globally recognised expert on digitalisation and the workplace. The event will be moderated by John Thornhill, innovation editor at the Financial Times.


MORE HERE

Hans Böckler Stiftung Advertisement

WSI European Collective Bargaining Report 2022 / 2023

With real wages falling by 4 per cent in 2022, workers in the European Union suffered an unprecedented loss in purchasing power. The reason for this was the rapid increase in consumer prices, behind which nominal wage growth fell significantly. Meanwhile, inflation is no longer driven by energy import prices, but by domestic factors. The increased profit margins of companies are a major reason for persistent inflation. In this difficult environment, trade unions are faced with the challenge of securing real wages—and companies have the responsibility of making their contribution to returning to the path of political stability by reducing excess profits.


DOWNLOAD HERE

ETUI advertisement

Response measures to the energy crisis: a missed opportunity to feed the socio-ecological contract

With winter coming and Europe ready to get through it without energy shortages, power cuts and recession, new research conducted by the ETUI in seven EU member states (AT-FR-DE-GR-IT-PL-ES) highlights that, with some 80 per cent of spending being directed to broad-based measures, short-term national government support during the recent energy crisis was poorly targeted. As a result, both social- and climate-policy goals were rather sidelined, with the biggest beneficiaries of public fossil-fuel subsidies being higher income groups and the wealthiest people.


AVAILABLE HERE

Eurofound advertisement

How will Europe’s green transition impact employment?

Climate-change objectives and decarbonisation measures are vital for the future of Europe. But how will these objectives affect employment and the labour market?

In the latest episode of the Eurofound Talks podcast series, Mary McCaughey speaks with the Eurofound senior research manager John Hurley about new research which shows a marginal increase in net employment from EU decarbonisation measures—but also potentially broad shifts in the labour market which could have a profound impact in several areas.


LISTEN HERE

Friedrich Ebert Stiftung advertisement

It‘s all about jobs: investing in Europe’s workers and qualifications for a competitive clean economy

An ecological miracle on the labour market? Or rather job losses? The impact on employment and job profiles in Europe of ecological modernisation is a question driving politics and society.

We have taken a close look at studies and forecasts on the development of the European labour market. One thing is clear: without qualified and motivated workers, the economy will not flourish and the modernisation process will come to a standstill. Europe must deliver on a massive scale in the coming years to remain at the forefront.

We spoke to trade unionists and experts: what trends do we need to shape, what risks do we need to avoid, what course do we need to set now? Key findings in this study from FES Just Climate.


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on LinkedIn

Follow us on YouTube

Social Europe ISSN 2628-7641