Please Henry, say the “U” word (Unions)

by pdxblake

Henry Blodget, the former tech industry analyst and current founding blogger at BusinessInsider gives a good perspective on the skewed situation in the US that has seen wages stagnate while the wealthiest have been rewarded with a larger share of pre-tax income from corporate profits and a tax system that then hands them the additional benefit of having to pay lower tax rates on dividend and capital gain income.

He writes:

Average hourly earnings have been flat for ~50 years (after adjusting for inflation), as companies steer their wealth primarily to senior management and owners at the expense of average employees.

Tax policies have increasingly favored investors and high wage earners over middle-class and upper-middle-class wage-earners
An obsession with “shareholder value” at the expense of other stakeholders (namely, customers and employees) has led companies to cut employee costs to the bone.

However, he doesn’t reach the conclusion that decades of anti-union policies have lowered the bargaining strength of workers (he doesn’t say it, but his attribution of “Globalization” opening “a vast pool of billions of workers who work for much less than Americans. This, in turn, has resulted in companies shifting formerly middle-wage-paying jobs overseas” suggests that his argument against unions would be based on the effects of globalization that would just see further outsourcing to non-unionized countries).

The tax policy argument he cites is real and I have described the lack of benefit for the economy from lowering tax rates on the wealthy (which does, however, lead to rising inequality).  There are certainly factors besides the decline of unions and the visceral hatred that unions conjure to many conservatives, but if you view the problem as management having a stronger position vis-a-vis workers, and observe rising profits and falling or stagnant wages, then why not consider policies that make the negotiation process more equal?

Currently, it is difficult for new growth in unions to occur since there are so many people out of work that their negotiating position would be quite weak, but that doesn’t mean they should be written off entirely.  There may also be some legitimate gripes about some of the actions unions take, but can anyone who makes this argument also argue that corporations are perfect angels?

Just because you have some gripes about unions (some of which might be legitimate, rather than just conjured up images of ‘evil unions’ with their pensions and their healthcare), the benefits from putting an equally organized group on the other side of the negotiating table is substantial (compare, for example, inequality pre-1980 and post-1980), measured by real family income growth by quintile for the two periods:

Source: The State of Working America

Something happened in 1980 and a decline in unionization (coincidentally beginning around the same time Ronald Reagan became president) is one large factor for the lack of income growth for the bottom half while the top half continued to see growth (breaking out the top 20% shows an even more disparate picture).