The Alcove

The Path Back To Equality Leads Through Unions

The Nation summarizes an important new finding: Americans of the mid-twentieth century had unions to thank for their booming, egalitarian economy.

By Nathan Pippenger

Tagged InequalityLaborUnions

From the end of World War II until about 1980, the United States was in the fortunate position of benefiting from two simultaneous trends: The economy prospered as wages became more equal (an era known as the “Great Compression”). There’s still some debate among economists about exactly why this happened, an argument with obvious relevance to our own era of deep inequality. But according to a new study highlighted by Mike Konczal in The Nation, the role of one factor is now undeniable: unions. Summarizing the new research, Konczal writes that “the growth of union membership—to a height of nearly 30 percent in 1955, before falling to its current low of 10.7 percent—explains the Great Compression every bit as much as theories about education or any other single factor.”

Konczal knocks the economics profession for “casually dismissing the role of unions” and gently ribs the idea that anybody would be surprised by “the statement ‘unions help workers.’” But as he acknowledges, detailed data on union membership was unavailable until recently—and moreover, there’s at least the possibility that unions could actually increase overall inequality, by widening the wage gap between their members and non-unionized workers. As Timothy Noah noted in his book The Great Divergence, this was actually what most economists believed until the 1980s. Konczal doesn’t precisely comment on the older idea that unions might actually exacerbate inequality, but he does refer to the theory that “since unions merely transfer wealth among workers, they wouldn’t lower inequality overall and might even slow economic growth.” It turns out that idea is probably mistaken as well. In fact, the results seem to effectively counter all the familiar theories about the possible negative effects of unionization on either income equality or economic growth—all while demonstrating that unions were more diverse, in terms of both skill and racial composition, than is widely believed.

You might get the impression from Konczal’s piece that economists have, in general, had little to say about the relationship between union density and income inequality. But while this study breaks new ground on the question of wage compression, the profession hasn’t ignored the question of how union membership relates to wage divergence. Again, as Noah reported a few years ago, over the last two decades, leading economists have estimated that declining union membership over the last four-plus decades could account for as much as 15-20 percent, or perhaps even a third, of the growth in inequality among male workers. And it might have caused as much as 20 percent of the growth in inequality for all workers.

In other words, we already had some sense of the negative results that can follow a decline in union membership—and now we have more evidence for the positive impact of robust unionization as well. It’s a timely finding, with the Supreme Court poised to gut public-sector unions in Janus v. AFSCME, courtesy of the decisive fifth vote provided by Neil Gorsuch. With the balance of the Court snatched away from them for the near future, at least, Democrats will face significant judicial obstacles to restoring the power of organized labor—if, that is, they decide to prioritize that goal when they retake control of the government. In light of these findings, if they want to do something about inequality—to say nothing of remaining politically relevant—they have no excuse for inaction.

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Nathan Pippenger is a contributing editor at Democracy. Follow him on Twitter at @NathanPip.

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