A lower share of wages in national income is down to the
decline of unions, rather than technology or the rise of "superstar firms",
such as Google and Amazon, according to new research.
The three-year study of data from 44 countries also found that "offshoring", where companies move part of the production elsewhere to pay lower wages, is still a strong bargaining power used against workers.
Dr Alexander Guschanski, from the university's business school, will present his findings in a webinar on Thursday 9 July (3pm). He said: "A lower wage share is not an inevitable outcome of technology and globalisation. It's a political problem of bringing the bargaining power of labour more in line with the bargaining power of capital.
"Our research with my colleague Özlem Onaran shows that, where workers feel confident that the state will look after them in ill health, or their parents in old age, they are more likely to bargain for better wages.
"Previously it was felt that automation, where machines do the work, and the rise of massive companies, such as Google or Apple, was the main reason for the decline in the wage share. But this research shows factors, such as the decline in union density, the rise in the importance of shareholders, and intensification of global value chains, are more important than previously assumed.
"The focus on shareholders means managers and owners want a higher share price, partly because of their own dividends, but also there's the worry of a takeover if the price drops.
"You see a behavioural change, where a manager might work to ensure they are popular with employees but now they're concerned with keeping shareholders happy. And the more money going to shareholders the less going to workers.
"To boost workers' share we need to see stronger bargaining power of labour via an improvement in union legislation and increasing minimum wages. Improving and enforcing equal pay legislation, in particular for gender and race, is also needed.
"Second, we need higher taxation of dividend payments and capital gains, prohibition of share buybacks, as well as decoupling executives' remuneration from share prices. Representatives of employees and the wider public also need to be on company boards."
Alex added that, by working together and coordinating efforts – including across continents –workers could increase their share.
He said: "If you take a car firm, an assembly line in China working with factory workers in the UK could stage a strike and they would be in a very strong position because combined they can have a huge impact, but it's hard to achieve.
"In the UK it's also more difficult to organise a strike now as there are thresholds to be met that weren't there 40 years ago. On the other hand, we now have better technology at our disposal that can facilitate organisation.
"Our results also suggest that a simple attempt to reduce income inequality through skill-upgrading will not work as medium-skilled workers have experienced the strongest negative impact of technological change among all workers, although low-skilled workers experienced the strongest decline in the wage share. "
The research is based on statistical analysis using data from 1970 to 2016 in over 44 countries. It used different sources that provide data at the national, industry and firm level. The researchers used data for over 400 industries and 7,000 firms and conducted separate analyses for advanced and emerging economies.
