Union Rights and Inequalities

Competing arguments surrounding the relationships between inequalities and labor rights have persisted over time. This paper explores whether labor rights increase or decrease two types of wage inequalities: vertical inequality and horizontal inequality. Vertical inequalities reflect inequalities in wealth or income between individuals, while horizontal inequalities reflect inequalities between social, ethnic, economic, and political groups which are usually culturally defined or socially constructed. By broadening the scope beyond traditional indicators of inequality (i.e., vertical inequality) to include horizontal inequality, we test whether government respect for labor rights can help reduce inequality. We find that as labor rights and practices improve, countries see a decrease in horizontal inequality. Furthermore, as stronger protections for labor rights improve within countries, this also serves to reduce individual levels of inequality (i.e., vertical inequality).