Unions are the solution, not the problem

By Richard A. Levins

The process of devolving from a middle class society into a banana republic is well under way.  The signs are everywhere.  Wages, even for college graduates, are falling behind inflation.  The number of families in poverty is growing.  The middle class debt load is off the charts and the personal savings rate is below zero.  The costs of a college education, of health insurance, of energy for heating and driving, and of pharmaceuticals grow out of reach for ever more Americans with each passing day.

What economists call the “income distribution” is, from a middle class perspective, as bad as it has been since the Great Depression.  During the Roaring 20’s, the split between rich and poor grew exceptionally large, leaving relatively few in the middle class. In the decades following the Depression, things began to change for the better as income and wealth became more evenly distributed.  But now we are back to where we were as the nation stood on the brink of its greatest economic catastrophe ever.  The very rich are richer than ever, but the rest of us are falling behind at an increasingly rapid pace.

What caused these changes in the balance between a middle class society and neo-Feudalism?  The history of labor unions in America gives an important clue.  Private-sector unionization was legislated during the Depression.  Union membership grew into the mid-twentieth century, then began a slow decline that continues today.  Remember the income distribution numbers:  a weak middle class in the Depression, a strong middle class in the decades following, and a weakening middle class now.  The way these income distribution numbers generally track those for union activity is no coincidence.

Unions equalize power in the market place between those who work for a living and those who own something for a living.  Those who work for a living are the stuff of which the middle class is made.  Those who own something for a living fill the ranks of the very wealthy.  When the balance of power is with labor unions, the gains from production stay with the middle class.   When the balance shifts as it has today, the very wealthy take an ever-larger share from economic activity.

As the very wealthy become even more so, they do not spend money in the way middle class people do.  After all, how many houses and cars, no matter how fine, can one have?   Once people have more money than they can possibly spend on goods and services, they no longer use it in ways that stimulate the economy.  Instead, they use the power their money brings to get more tax breaks, less regulation, more support for globalization, and policies that favor capital over labor.  The middle class continues to weaken.

In spite of all this, we are told not to worry, because the United States is becoming what some politicians call an “ownership society.”  Instead of supporting unions that bring decent wages to working people, we are advised to buy shares in the corporations that profit when wages are falling. Meanwhile, we ignore the most important part of our economy—we are a great market for goods and services.

The trouble with all strategies that trade good jobs for cheap toasters is that they eventually erode the market for the goods and services being provided.  A handful of hyper-wealthy individuals along with millions of people living on the economic edge are not the sound, stable market needed for growth.  Only the middle class, with buying power widely distributed, can provide that.  And that is what we are losing.

Rebalancing power in the economy is essential if the middle class is to thrive.  Doing this, however, will require more than our government alone can reasonably be expected to deliver.  We must act together in the market place as well.  The way to do that is the way we have always done it—to join and support the unions that built the middle class in the first place.

 _________________________

Richard A. Levins is Professor Emeritus of Applied Economics at the University of Minnesota.  His most recent book Middle Class * Union Made (June 2006) is available from Itasca Books at www.itascabooks.com or .