Recognizing a Correlation Between Labor Union Prevalence and Both Economic and Social Equality: A Consideration of Icelandic Labor Law

By: Bryan Davis Jr.

Over the last several decades labor unions within the United States have continued to drastically lose their power, finding themselves declining in areas such as membership and political strength.[1] Undoubtedly, labor unions have found themselves faced with declining numbers in the past several years due to numerous factors, including, but not limited to, “technological and organizational changes, globalization, policy reform and the decline of the manufacturing sector.”[2] For the last several years, the United States has held “one of the lowest union densities out of economically strong countries.”[3] However, the decline in labor union membership is not solely confined to the United States, and, in fact, such union membership has been decreasing among many developed nations over the last several years.[4]

While union membership has decreased among countries within the Organisation for Economic Cooperation and Development (OECD), in 1985, 45% of workers were covered by collective agreements, while in 2015 this number dropped to 33%.[5] Iceland has maintained a labor union prevalence, which has significantly surpassed most other nations around the world.[6] Interestingly, among countries within the OECD, Iceland maintains the highest labor union membership rate.[7] It might also be noted that Iceland received an income inequality rate of .26 from the OECD, compared to an income inequality rate of .39 which was reported for the United States.[8] A theory that might be put forward would contend that Iceland’s labor union prevalence has aided in combatting income inequality. However, it can also be argued that labor unions have the potential to not only combat income inequality but social inequality as well.

Addressing economic inequality, labor unions within Iceland continue to bargain for pay raises on behalf of low-wage workers, found in the fact that, as of 2019, labor unions were able to reach a collective bargaining agreement which not only led to increased wages, but also increased bonuses, and a greater amount of democracy in the workplace.[9] However, of equal importance is the fact that the government also agreed to provide relief to those found in “the bottom step of Iceland’s three-step tax system” and has dedicated funds to create several apartments, with an intention to assist younger individuals in being able to purchase such property.[10] Interestingly, the labor system within Iceland is largely dictated through collective agreements, with the law noting only the “basic principles,” which are found to affect the various rights and responsibilities of workers.[11] It is also noted that, within Iceland, pursuant to the Act on Wage Earners Terms no. 55/1980, “the pay and other working conditions upon which parties in the labour market agree shall at least be the minimum conditions for all paid employees in the relevant type of work in the area covered by the agreement.”[12] What is also found to be unique within Icelandic labor law is the fact that the government of Iceland has played an active role in resolving wage disputes which arise, often through the agreement to “introduce particular measures in the political arena in order that wage-earners agree to lower wage increases.”[13]

Turning to the issue of social inequality, at the outset, it is noted that of the 500 largest corporations around the world, there are only thirteen with female chief executive officers and, beyond this, when looking across the developed world, there is an earning disparity recognized wherein women, in fulltime jobs, make 16% less than their male counterparts.[14] Also acknowledged is the fact that, at a global level, women are found to be more likely to work in sectors such as agriculture, service, and sales, with such sectors often times being considered as bringing little value and the possibility of growth.[15] The United States has found itself holding one of the largest gender gaps among countries around the world.[16] In fact, within the United States, as of 2012, women were found to receive only 77% of what males were being paid.[17]

Within Nordic countries such as Iceland, employment isolation is fought against through both collective agreements and unions.[18] In fact, Nordic countries are found to pave the way in terms of gender equality, with Iceland being given, for the fifth year in a row, the top ranking in WEF’s global gender gap rankings for 2013.[19] Although this does not mean that Nordic countries do not experience gender pay gaps, the extent of such a gap is found to be lesser than those gaps found in other countries around the world.[20]

While labor union prevalence is not a sole factor in combating income or social inequality in a country, there is perhaps a correlation that can be found between the labor union prevalence in Iceland and the lesser rates of income and social inequality found in the country. If an argument can be made that labor union prevalence within a country can impact economic and social inequality, it is only logical that an argument can be made alleging that decreased labor union prevalence can lead to increased rates of both economic and social inequality. While the future of labor unions might be unknown at this point in time, within Iceland, 87% of workers feel that unions serve a necessary function in protecting their interests and, beyond this, the majority of workers within the Country reported satisfaction with their jobs, with 80% reporting that they held good relationships with supervisors and bosses, and 77% reporting that they felt a sense of security in their jobs.[21] These are numbers that can bring some comfort to those who believe that labor unions have the ability to combat economic and social inequality.

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[1] Lily Hall, Unbinding Working Women in a “Binders-Full-of-Women” Nation: How the United States Can Learn From Swedish, Norwegian and Icelandic Successes in Gender Pay Gap Legislation, 22 Cardozo J. Int’l & Comp. L. 627, 657 (2014).

[2] See Niall McCarthy, The State of Global Trade Union Membership, Statista, (May 7, 2019), https://www.statista.com/chart/9919/the-state-of-the-unions/

[3] Hall, supra note 1, at 657.

[4] See McCarthy, supra note 2.

[5] See Niall McCarthy, Which Countries Have the Highest Levels of Labor Union Membership?, Forbes, (Jun 20, 2017), https://www.forbes.com/sites/niallmccarthy/2017/06/20/which-countries-have-the-highest-levels-of-labor-union-membership-infographic/#692fd9f733c0

[6] Id.

[7] See McCarthy, supra note 3.

[8] See OECD Income Inequality Data, https://data.oecd.org/inequality/income-inequality.htm

[9] See Andie Fontaine, Collective Bargaining Agreement in Iceland Reached, The Reykjavík Grapevine, (April 4, 2019), https://grapevine.is/news/2019/04/04/collective-bargaining-agreement-in-iceland-reached/

[10] Id.

[11] Lára V. Júlīusdóttir, Icelandic Labour Law, Stockholm Institute for Scandanavian Law 1957-2009 360 (2002).

[12] Id. at 366.

[13] Id.

[14] Hall, supra note 1, at 629.

[15] Id. at 656.

[16] Id. at 633.

[17] Id. at 632

[18] Id. at 656-657.

[19] Id. at 632.

[20] Id.

[21] Staff, Large Majority of Icelanders Believe Strong Unions Crucial for Workers, Strengthen Economy, Iceland Magazine, (Feb 28, 2017) https://icelandmag.is/tags/labour-unions