Labour Markets, Institutions and Inequality

Labour Markets, Institutions and Inequality

Building Just Societies in the 21st Century

Edited by Janine Berg

Labour market institutions, including collective bargaining, the regulation of employment contracts and social protection policies, are instrumental for improving the well-being of workers, their families and society. In many countries, these institutions have been eroded, whilst in other countries they do not exist at all.

Chapter 1: Labour market institutions: the building blocks of just societies

Janine Berg

Subjects: development studies, development economics, economics and finance, development economics, labour economics, social policy and sociology, labour policy


Equitable societies with large middle classes are not the natural outcome of market forces. Equity, rather, is created by society, by the institutions – the laws, policies and practices – that govern the society, its economy and, in particular, its labour market. Building just societies means designing institutions that support the creation of quality jobs with decent wages and working conditions, as well as enacting policies to support those who cannot work or who are unable to find work. This book argues that the lack of, or erosion of certain institutions that govern the labour market has contributed to rising inequality in many countries across the world, jeopardizing individual as well as societal wellbeing. Thus, if a country wants to improve equity it will need to strengthen its labour market institutions. The book employs a broad definition of labour market institutions that includes the more familiar institutions that regulate the workplace – collective bargaining, minimum wages, the type of employment contract, and working time regulations – as well as those institutions that redistribute income, including pensions, income support for the unemployed and the poor, as well as public social services. Because work is by far the most important source of household income among non-retired households, the book also considers full employment policies in its analysis. A commitment to full employment implies not treating employment as a residual outcome of economic growth, but designing and implementing policies that make job creation an explicit goal.