The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It by Noah Timothy

Author:Noah, Timothy [Noah, Timothy]
Language: eng
Format: mobi
Publisher: Bloomsbury Publishing Plc
Published: 2012-04-24T04:00:00+00:00

I chickened out. I felt so bad. They wheeled Josh in, and he voted for the union. I felt like I let him down. I was scared of being the only one, so I didn’t vote … But if they’re all there and they see you go in, they know you voted. I thought they’d fire me.

Most (possibly all) of the bullying tactics described here are legal. For the UFCW to prove any of them illegal would probably have taken years of litigation, with only the remotest likelihood of a satisfying outcome. The union didn’t file suit.2

That’s what labor organizing is like three decades into the Great Divergence.

The age of inequality has coincided with a dramatic decline in the power of organized labor. Union membership in the United States reached its historic peak in 1979 at about 21 million, representing about 21 percent of the workforce. Today membership stands at about 15 million and represents about 12 percent. When you exclude public-employee unions (more than half of all union members today work not for a private company but for the government), union membership has dropped to about 7 percent of the private-sector workforce. Draw one line on a graph charting the decline in union membership, then superimpose a second line charting the decline in middle-class income share (with “middle class” defined broadly as the middle 60 percent), and you will find that the two lines are nearly identical.3

The chief purpose of a union is to maximize the income of its members. Since union workers earn, on average, 10 to 30 percent more than nonunion workers, and since union members in higher-paying occupations tend to exercise more clout than union members in lower-paying ones, you might think higher union membership would increase income inequality. That was, in fact, the consensus among economists before the Great Divergence. But Harvard’s Richard Freeman demonstrated in a 1980 paper that at the national level unions’ ability to reduce income disparities among members outweighed other factors, and therefore their net effect was to reduce income inequality.4 A logical conclusion was that as union membership declined, income inequality would likely grow. And that’s what happened.

The number of union members started falling in 1979, but as a percentage of the workforce the decline actually began a generation earlier. What labor economists call “union density” peaked in 1954 at 28 percent. If you eliminate from this calculation government workers (who were not yet widely unionized) and if you add to the “union members” category nonunion members who were nonetheless covered by union contracts, the union-density peak was closer to 40 percent. After 1954, union density began a slow downward slide that picked up speed in the 1980s as the absolute number of union members began to drop. The Berkeley economist David Card calculated in a 2001 paper that the decline in union membership among men explained about 15 to 20 percent of the growth in male income inequality between 1973 and 1993. (Among women—whose incomes, as noted in chapter

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