By Tristam Pratorius
Part of the solution to reducing income inequality, raising wages and boosting economic growth is not overhyped tax cuts and deregulation, but un-busting unions and empowering labor. ‘’Middle-out’’ growth is a highly reliable way of building an economy, as the ‘’golden age’’ of capitalism showed. This quote, even if it is 122 years old, is timeless...
‘’There are two ideas of government. There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests up on them.’’
- William Jennings Bryan
A study by economists at Princeton and Columbia universities found that unions played an integral part in the post-depression and post-WW2 economic expansions between 1940 — 1970. Much of the ‘’middle-out’’ growth during that period can be attributed to this. It is also important to note, the massive union density during the post-war expansions would not have been possible without the 1935 Wagner Act, a piece of legislation that guaranteed workers a right to collective bargaining (the method through which unions negotiate wages, benefits and conditions)
Union membership, more than tripled from just over 10.0% in 1935 (after hostility to labor in the 20s) to 33.4% in 1945. Anyways, back to the general conclusions of the study:
Their research finds that “in their effect on household income, unions have exhibited remarkable stability over the past eighty years.”: Union members have seen wages between 10 and 20 percent higher than non-union members, with less educated workers seeing the greatest benefits. They are able to focus in particular on what they call the “Great Compression” era, from about 1940 to 1970, when U.S. union membership was highest, and economic inequality was at its lowest. (Union membership peaked in the years immediately after WWII, when more than one in three workers was part of a union. Today, it’s more like one in 10.)
In all, the new information adds to the already strong case that unions are one of the most effective tools that exist for keeping inequality to a minimum. The decline of unions was a strong contributing factor to the rise of inequality that has defined our lifetimes.
‘’We show that a combination of low-skill composition, compression, and a large union income premium made mid-century unions a powerful force for equalizing the income distribution. As unions have receded, it is perhaps surprising... that relatively skilled workers are the ones that remain. This pattern mimics the pre-World War II era, when unions were both small and their members relatively skilled. Our results show that over the last nine decades, when unions expand, whether at the national level or the state level, they tend to draw in unskilled workers and raise their relative wages, with significant impacts on inequality.’’
The study finds also that de-unionization since the 1970s and 80s played a significant role in increasing income and wealth inequality. As workers gain less representation and loose leverage over their employers, potential wages are increasingly funneled to investors, shareholders and dividend-holders. There seems to be evidence for this. According to the Center for American Progress tax cut article I referenced earlier, it also shows that since this period of lower union density, an increasingly large share of corporate profits has been redirected to ‘’net equity issues’’ and ‘’dividend payouts.’’ Not a coincidence.
1960: 38.2%
1970: 20.2%
1980: 96.5%
(!!!!!!!!!!!!!!!!!!!)
Furthermore, the strong correlation between ‘’union density’’ and increases in GINI are most apparent in the chart, provided in the study. The ‘’union density’’ half is primarily based on data published in the Bureau of Labor Statistics and Gallup.