Inequalities and the World of Work

Understanding and reducing inequalities in Europe

A new report by the ILO in cooperation with the European Commission looks at the key factors leading to rising inequalities in fourteen EU Member States.

Press release | 23 February 2017
BRUSSELS (ILO News) – Labour market policies and the industrial relations systems underpinning collective bargaining practices have a key influence on the level of inequalities observed in EU Member States, a new ILO report shows.

The report “Inequalities and the World of Work: What role for industrial relations and social dialogue?” looks beyond wage inequalities and also analyses other forms of inequality, such as inequality in working time, as well as access to jobs, training, career opportunities and social protection. It examines overall trends in Europe and includes specific chapters on Belgium, France, Germany, Greece, Ireland, Italy, Slovenia, Spain, Sweden, the Baltic States, the Netherlands and the United Kingdom.

© Jessica Mulley
In several European countries, the erosion of collective bargaining has led to an increased number of low-paid jobs and rising inequality among the workforce. Conversely, countries with more centralized or highly coordinated collective bargaining systems such as Sweden or Belgium have been successful at preventing the rise of low-paid or employment insecurity and the growth of inequalities.

“Countries with low income inequality tend to have strong social dialogue institutions, leading to a reduction of the gender pay gap and better working conditions for employees in non-standard forms of employment,” explains Daniel Vaughan-Whitehead, ILO Senior Economist, who edited the volume.

The minimum wage can also contribute to limiting wage inequality, but only if it is combined with effective collective bargaining, the report finds. In the United Kingdom and the Baltic States, for instance, the minimum wage helped to raise wages at the very bottom of the pay scale. However, the industrial relations systems have not allowed to generate positive spill-over effects on wages and working conditions overall. By contrast, even if in different ways, in Belgium and Ireland but also France and the Netherlands, the combination of a floor-setting minimum wage and a strong social dialogue framework has limited fragmentation in terms of pay and working conditions.

Compared to other European countries, Belgium stands out as one of the few that have been able to prevent the development of low-paid jobs and the growth of inequalities. It has a higher minimum wage than most EU Member States, which helps to reduce the lower tail while multi-level collective bargaining contributes to limit overall wage dispersion.

“The erosion of social dialogue in some countries is worrying and calls for a strong policy agenda. If we want to preserve economic growth and social cohesion, we must strengthen collective bargaining to curb inequalities,” concludes Heinz Koller, ILO Assistant Director-General and Regional Director for Europe and Central Asia.

The full report will be presented at a two-day conference on 23 and 24 February, attended by the Ministers of Labour of Greece, Ireland, Luxembourg and Portugal, and the European Commissioner for Employment and Social Affairs.