Middle-Class Prosperity: The Special Interest of Unions

Today’s liberals view the decline of the American labor movement through a tragic lens. Although nostalgic for the Great Compression, a period of income convergence lasting from the 1940s through the 1970s (which coincided with high rates of unionization), these progressives accept globalization as an imminent death sentence for American unions. Even traditionally supportive Democrats stomach this impending elimination of collective bargaining out of a belief that industrialized nations no longer have a need for such organizations. This isn’t the Gilded Age, after all. But continued decline of unionization poses a dangerous scenario for both blue-collar union members and society as a whole.    

The recent strike at Illinois’ Caterpillar Inc. symbolizes a larger story of the decline of union power. Despite record profits, Caterpillar instituted a wage freeze. After a three-month-long strike, union workers ultimately agreed to almost all company-proposed concessions. For many, the showdown represented the broader decline of union influence. No longer did companies even require financial burdens to hold down wages – they simply needed to refer to the aim of future global competiveness. Union workers could either accept lower wages or cede their jobs to other countries. At least the workers could enjoy the cheaper goods that resulted from these changes. As Harold Meyerson of the progressive American Prospect frames this situation in the magazine’s September/October edition, “For many Americans, the death of labor would doubtless seem the natural order of things, the dinosaur finally shuffling off to the graveyard.” The story is not uncommon. In a May 2012 Foreign Affairs article, sociologists Bruce Western and Jake Rosenfeld similarly expressed that “the story of labor’s decline is often told with an air of inevitability; unions became outmoded as American capitalism became more dynamic.”

Fortunately for all Americans, the labor movement is not yet buried. Global labor competition has undoubtedly weakened the power of unions. In many cases, the most seriously weakened have been unions that were the pride of American labor in the first half of the century: those representing automobile workers, steelworkers, and other factory workers. But, as Meyerson argues, building on the Alan Blinder article that we read for class, while many jobs can now be outsourced, more than 100 million jobs cannot be shipped abroad (these include barbers, cooks, construction workers, bus drivers, etc.). A new union movement needs to focus on these geographically secure jobs.

A new union movement could also better serve the interests of workers by adopting a more European-style unionism. As Martin Wolf mentioned, Scandinavian unions speak on behalf of the community as a whole while American unions – comprising only a small segment of the private workforce – speak primarily on behalf of their members. Adopting this society-wide approach to unionization would not only take adjustments on the part of unions themselves, but would also require new legislation allowing industry-wide organization. If unions represented larger portions of the population, they could focus on broad issues like national competitiveness.

Unions serve as important institutional forces in restraining income inequality and promoting income growth in all quintiles. As Thomas Kochan wrote in a March issue of the Harvard Business Review, “The decline in unions accounts for about one-third of the increase in income inequality for about one-third of the increase in income inequality since the 1980s. Nothing else as filled the void in setting wages or disciplining employer practices.” Richard Freeman’s book America Works details this phenomenon: with the decline of unions, productivity has increased while wages have stagnated. Freeman calculates that the influence of organized labor in the overall economy in 1980 decreased GDP by 1/5 to 2/5 of one percent. I would agree with Freeman that this is a small price to pay for economic stability, a better-trained workforce, provision of fringe benefits to both union and non-union employees, and reduced income inequality.

Unions have been critical to the development of America’s economic structure, allowing a strong middle-class to develop in the twentieth century; however, the role of unions has not diminished, especially in a time of ever-increasing income inequality. Labor organizations do need to adjust to the changes brought by globalization, especially by focusing on representing employees in those service sectors not vulnerable to outsourcing. Finally, changes to labor law could allow more expansive forms of organization, such as those that many European nations have built. These unions can more effectively represent the interests of society as a whole.