Unions and inequality

Declining union density is one of the contributing factors to the last few decades of rising inequality. Estimates on its impact vary, but one often-cited study found that declining union density accounts for around 20 percent of the recent inequality growth. The Economic Policy Institute had a blog post yesterday with graphs and other resources spelling out more exactly the relationship between unions and inequality. Here, I thought I would explain exactly how unions are supposed to reduce inequality.

The way unions work is quite simple. Workers at a workplace join together and then bargain collectively on workplace issues such as pay, benefits, and conditions. Because union workers bargain together and have the ability at times to shut down production, they can win higher compensation. So when a company becomes more productive, unionized workers are more able to capture some of its productivity increases for themselves, instead of the increases flowing just to shareholders and management.

This process generates more equality on two fronts then: it both increases labor’s share of productivity increases while decreasing the share of executive and owners. When union coverage is sufficiently dense, their bargaining power also has spillover effects that increase the income share of even non-unionized workers. When unions lose their bargaining strength however, labor loses its ability to capture some of the productivity increases, and inequality rises. That is, economic growth and middle-class income growth becomes decoupled. This is the story of the last few decades.

Perhaps there is some other way to keep inequality down that does not involve unions, but alternative ideas are far and few between. There are some plausible ways to do so purely through the state — tax-and-transfer programs for instance — but for those ideas to ever to be implemented, they will require a mobilized and funded political force that only organized labor is really capable of delivering.

Naysayers are wrong: the labor movement is here to stay

Scott Walker avoided a recall last night in what was in large part a union-driven initiative to remove him from office. Perhaps worrisome, 36% of voters from union households voted for Scott Walker in the recall. The outcome of this election will doubtlessly fuel more discussion about unionization and the future of organized labor, and that discussion tends to be fairly negative.

The central feature of commentary about the state of organized labor is the union density rate. Union density is hovering at around 12%, which is down from its historical peak of around 40%. Although this number is alarming for a number of reasons, I do not think it is as informative as people make it out to be. While official unions have declined, there are a number of other worker organizations that have sprung up.

In just the last few years, we have seen the creation and explosion of worker centers, a new type of worker organization that caters to those who are unable to access traditional unions. Expansive networks of non-unionized workers have formed around certain kinds of work and identities. For example, there is the National Day Laborer Organizing Network, the National Domestic Workers Alliance, the National Guestworker Alliance, and the Coalition of Immokalee Workers, just to name a few. There are also large community organizations like Jobs with Justice and Interfaith Worker Justice, which bring together community support for union and non-union worker struggles. Finally, there is Working America, a massive 3 million person organization made up non-union members that rallies political and electoral support for union-friendly and worker-friendly causes.

It is hard to know how many people are involved in these types of organizations, but it is probably a pretty substantial number once you add it all up. These folks represent a significant chunk of the modern-day labor movement, even though they do not get counted in the union density statistics. One of the reasons these types of organizations have proliferated is because unionization has become such a perilous venture. Pro-union workers are regularly fired during union campaigns, companies threaten to shut down businesses if workers vote for a union, and then companies break every labor law on the book to keep the union out. As a result, unionizing under the law is exceedingly difficult if an option at all.

Importantly however, the decline of unionization has not marched lockstep with a decline in public opinion towards unions. Although down, 64% of Americans still believe that unions are necessary to protect working people, with even 43% of Republicans saying so.

This support for unions is not a carry-over from a prior era either. Pew surveys have consistently shown a substantially larger level of support for unions among those aged 18-29. The belief that organized labor is necessary and that unions are important is a majoritarian belief in the United States, and younger people believe it the most.

The real difficulty is not convincing people of the importance of unions: most people already realize their importance. It is somehow making unionization a serious possibility again. For those in Right to Work states, and even those in other states, it is just incredibly difficult to establish a union at a new workplace. The level of intimidation from companies is just too high. There are legislative ways to counteract some of this coercive company behavior (the Employee Free Choice Act for instance), but such changes do not seem to be high enough on anyone’s priority list to become a reality anytime soon.

So, there is some promise in the future of the labor movement despite how grim things are usually presented. A large base of support for organized labor is out there, and a large sector of informal labor organization has been building up even as official unionization rates fall. It is hard to know what the future labor movement will look like, but it is even harder to imagine it going away altogether. Those who predict its annihilation seem to be participating in wishful thinking, or are simply unaware of the non-union developments within the labor movement in the last couple of decades.

Unemployed still suffering with nowhere to turn

Despite the two-year anniversary of the official end of the latest recession, around 14 million people are still unemployed, and the unemployment rate is at a staggering 9.2 percent. With the last couple of months having been monopolized by the high-stakes debt-ceiling theatre, this particular problem has been completely neglected with the exception of a few dogged commentators.

I am worried that as the unemployment crisis lingers on, many will eventually become tired of the problem altogether. Despite the fact that they did not cause the financial crisis, efforts to implicate the unemployed for their plight have already begun seeping into conversations about the issue. Some individuals refuse to believe that the unemployed cannot find a job, and as time progresses that sentiment will no doubt become more widespread. I can already imagine what the rhetorical line will be: “if you haven’t found a job 3-4 years after the recession, you must be lazy.”

Graph of number of unemployed and job openings

As the above chart indicates, the chances of an unemployed person landing a job still remains dismally low. There are just far too many unemployed persons per job opening. Although it has declined significantly since its peak, the ratio of unemployed persons per open job currently stands at 4.7. Even if every unemployed person was doing absolutely everything they could to fill those jobs, around 79 percent of them would still be out of luck.

With the number of job openings still as low as it is, the unemployed have very few if any places to find employment. Although the total inaction on this problem might seem to indicate otherwise, this level of unemployment is not unavoidable. There are ways that the government could act to decrease unemployment significantly.

For instance, the government could undertake a fiscal stimulus project. Despite the ignorant commentary to the contrary, the first stimulus did help soften the blow of the recession even if it was not big enough to completely turn it around. Allocating hundreds of billions of dollars for infrastructure projects and other enterprises would serve the dual purpose of improving the country while employing those currently languishing without work.

In addition to fiscal stimulus, the government could start a public jobs program. A new Works Projects Administration would serve the same basic function as the fiscal stimulus, but with public jobs instead of private jobs. Like the fiscal stimulus, the number of unemployed people would decline, useful public projects would be completed, and the incomes paid out to those employed by the project would be spent, increasing aggregate demand.

The last idea that I will mention here is the possibility of a work-sharing policy. Although the best time to implement a work-sharing policy has passed, it still could be called upon to provide some relief to the ranks of the unemployed. Under a work-sharing policy, instead of a firm laying off, say, 10 percent of its workforce, it reduces the hours of each of its employees by 10 percent. This kind of policy has been successfully put into use in Germany during the recession. In the German approach to work-sharing, the hours are cut as mentioned above, and the burden of those lost hours are shared among the government, the employer, and the workers. The government replaces some of the income; the firm replaces some of it; and, the worker foregoes the rest.

Of course, implementing any of these policies would require that the government actually care about the high rate of unemployment which does not appear to be the case. The government certainly should be concerned about unemployment if not for moral reasons than for practical ones. High unemployment rates cause the government to spend significant amounts of money on welfare programs like unemployment insurance and food stamps. The amount it might spend employing those people would probably be more, but at least it would lead to the production of useful things, something welfare does not.

Instead of focusing on this however, both the President and the Congress have been almost exclusively trying to work out just how much the elderly, the poor, and the disabled will pay in order to reduce a budget deficit that they did not cause. With the government uninterested in their plight and very few job openings available, the unemployed truly have reached a point where they have nowhere to turn.