23 January 2014

Statistics have been published by Scottish trade unionists preparing for the launch of Scotland’s People’s Assembly (a network of local group fighting against austerity) revealing that Scotland has an unequal income rate.

It was found that inequality in Scotland is about five percentage points higher than in various Nordic countries, which are used as a measure of inequality of wealth as they have a relatively small population but manage to distribute their income much more evenly than Scotland.

The Economic and Social Research Council (ESRC) said that if Scotland becomes independent this alone will not be enough to solve the current inequality issues.

If the Scottish government was independent it would have access to fiscal powers that would potentially solve the nation’s inequality crisis. However, the impact of additional powers would be minimal, according to the ESRC.

Dr David Comerford, author of Constitutional Change and Inequality in Scotland and researcher in Economic at Striling Management School, said, "Achieving the level of inequality reduction the Scottish Government desires through fiscal policy alone would require major policy change. This could be problematic because Scotland's high degree of integration with the rest of the UK means such policy change could trigger migration between countries."

Co-author David Eiser added, "The Nordic countries have lower levels of inequality than Scotland not only because they have more progressive tax and benefit policies, but also because the level of inequality in income before taxes and benefits is much lower than in Scotland," he adds.

"Achieving Nordic levels of inequality in Scotland will likely have to involve some equalisation of incomes before taxes and benefits, rather than a large increase in redistribution."

Due to Scotland's higher level of market-income inequality, achieving substantial decreases in inequality through fiscal policy levers will be "challenging", the experts warned.

The IER believes that income inequality is a very serious problem, that needs to be resolved.

We fully support the ethos or predistribution – a term coined to describe the reduction in inequality before tax and benefits that the researchers refer to. The most effective method of reducing inequality at this level is to provide government support to largescale collective bargaining: the process by which employers negotiate with workers’ representatives on wages and conditions. Allowing workers a voice around the negotiating table will result in more realistic salaries that will help to close the income gap as well as improving the provision of workplace training (which will upskill the national workforce and improve their attractiveness to investors), saving the public purse money in tax credits, stabilising the economy and even improving public health outcomes.

Our publication Reconstruction after the Crisis: A manifesto for collective bargaining contains comprehensive policy proposals for the next UK government, fully evidence-based using historical, legal and ethical arguments, in order for the nation to effect these changes.