The distribution of total income between labour and capital is basically determined as a result of the struggle between workers and employers. In this struggle, while employers are strong in money, workers are strong in numbers. But in order for numerical strength to be meaningful, the workers must be able to organise themselves and bargain collectively with the employers. Trade unions serve this purpose. The existence of unions is an indicator of the potential bargaining power of workers. For this reason, the share of labour in total income is expected to increase when the unionisation rate (the share of union members in the total number of employees and casual workers) increases, and this share is expected to decrease when the unionisation rate decreases.
The purpose of this study is to examine the impact of unionisation on the share of labour in total income in Turkey. The impact of unionisation on the labour share has not been empirically investigated in Turkey. There are only a few studies in the literature. Fichtenbaum (2009), using time series data for the US manufacturing sector between 1949 and 2006, found that unions have a positive effect on the income share of labour. Kristal (2010) found that unionisation and strike activity had a positive effect on labour’s share of total income in 16 developed countries over the period 1960-2015. Fichtenbaum (2011) concluded that unions have a positive effect on the labour share in his analysis of state-level manufacturing data for the period 1997-2006 in the US. Bengtsson (2014), examining the period 1960-2007 for 16 OECD countries, found a positive relationship between union density and wage share. Young and Zuleta (2018), analysing panel data for 35 industries in the US for the period 1983-2005, reported that union membership has a positive and statistically significant relationship with labour share.
In this study, analyses have been carried out for the period 1990-2022 in Turkey. The simplest measure of the labour share is the ratio of total compensation of employees to gross domestic product (GDP). However, since GDP includes taxes and subsidies on production and imports, the ratio of total compensation of employees to gross value added (GVA), which excludes taxes and subsidies, is often used instead. However, it is recognised in the literature that this method biases the labour share downwards. This is because compensation of employees only includes the income of employees. However, there are also self-employed. They receive a mixed income, partly from labour income and partly from capital income. In the literature, some adjusted labour share measures have been developed to take into account the labour income of the self-employed. For this reason, we have constructed two alternative labour share indicators in addition to the simple indicator. Thus, three labour share indicators were calculated and the effect of the unionisation rate on these indicators was estimated using two models. The first model includes the log of real GDP per worker and the ratio of the sum of exports and imports to GDP as control variables. The former is the indicator of technological change and the latter is the indicator of globalisation. In the second model, the change in the net minimum wage, inflation and economic growth are also included as control variables. ARDL models were used as the econometric method, the cointegration between the variables in the model was tested using the bounds test, and the long-run coefficients were calculated after determining the existence of this relationship.
The results show that the unionisation rate has a positive effect on the labour share in Turkey. There is also evidence that globalisation and technological change have a negative effect on the labour share. In addition, the results show that inflation has a negative effect on the labour share and that the change in the net minimum wage has a positive effect. The results suggest that the decline in the labour share in Turkey over the last 30 years can be explained to a large extent by the decline in the unionisation rate. In order to increase the labour share and improve income distribution, the obstacles to unionisation must first be removed. This will raise the unionisation rate, increase workers’ bargaining power vis-à-vis employers and allow the labour share to grow. The results also indicate that in order to improve income distribution in Turkey, it is necessary to control the openness of the economy and ensure price stability by fighting inflation.
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