Economic
snapshot | Economic
Inequality
As unions decline, inequality rises
By Ross
Eisenbrey and Colin
Gordon | June 6, 2012
To a remarkable extent, inequality, which fell during the New Deal but has
risen dramatically since the late 1970s, corresponds to the rise and fall of
unionization in the United States.
BLOG: Union
decline and rising inequality in two charts
The passage in 1935 of the National Labor Relations Act, which protected and
encouraged unions, sparked a wave of unionization that led to three decades of
shared prosperity and what some call the Great Compression: when the share of
national income taken by the very rich was cut by one-third. The “countervailing
power” of labor unions (not just at the bargaining table but in local, state,
and national politics) gave them the ability to raise wages and working
standards for members and non-members alike. Both median compensation and labor
productivity roughly doubled into the early 1970s. Labor unions both
sustained prosperity, and ensured that it was shared; union bargaining power has been shown to
moderate the compensation of executives at unionized firms.
However, over the next 30 years—an era highlighted by the filibuster of labor
law reform in 1978, the Reagan administration’s crushing of the PATCO strike,
and the passage of anti-worker trade deals with Mexico and China—labor’s
bargaining power collapsed. The consequences are driven home by the
figure below, which juxtaposes the historical trajectory of union density and
the income share claimed by the richest 10 percent of Americans. Union
membership has fallen and income inequality has worsened—reaching levels not
seen since the 1920s.
Colin
Gordon is Professor of History at the University of Iowa and a
Senior Research Consultant at the Iowa
Policy Project