How Unions Fight Inequality and Strengthen Democracy
A new study from the International Monetary Fund
concludes that unions reduce inequality and foster a healthier economy
for everyone, mainly by preventing the wealthiest among us from keeping
the fruits of a collaboratively created prosperity for themselves.
The IMF study
shows that a reinvigorated labor movement is essential to both a just
economy and a well-functioning democracy. It deserves widespread
attention – and should inspire concerted action.
Unionization Matters
The IMF is not
considered a hotbed of leftism, yet the conclusion reached by research
economists Florence Jaumotte and Carolina Osorio Buitron is clear. As
they explained in a summary of their work,
they found that “the decline in union density has been strongly
associated with the rise of top income inequality” and that
“unionization matters for income distribution.”
Jaumotte and
Osorio Buitron examined the relationship between unionization and income
inequality indicators in 20 advanced economies between 1980 and 2010.
They found “a strong negative relationship between unionization and top
earners’ income shares,” and concluded that this relationship “appears
to be largely causal.”
In other words,
the IMF authors found that the very wealthy capture a larger share of an
economy’s overall income when fewer people belong to unions. They found
this to be true even after controlling for other forces that can affect
inequality, including technology, globalization, and financial
deregulation.
Cause and Effect
Their findings
are consistent with this country’s experience. Hourly wages kept pace
with productivity gains in the United States for roughly a
quarter-century after World War II, as the Economic Policy Institute observes.
As the EPI
notes, “If the hourly pay of typical American workers had kept pace with
productivity growth since the 1970s, then there would have been no rise
in income inequality during that period.”
Union membership
began declining in this country at roughly the same time as wages began
to lag behind productivity. EPI noted the relationship between union
membership and inequality back in 2012. The IMF study provides further insight into the forces behind that relationship.
Inequality Matters
But why does
inequality even matter? There are those, mostly on the right, who argue
it doesn’t. They claim that inequality is irrelevant as long as the
economy is growing, perhaps because they assume that growing economies
more effectively meet people’s basic needs.
But that’s not
what’s happening. Stock markets may be booming, but wage stagnation in
the United States is choking off the middle class. Basic needs like
higher education are becoming increasingly unaffordable.
An economy can
only grow in an equitable, well-distributed way when there is a large
base of consumers to purchase goods and services. When all the wealth is
concentrated among a very few people at the top, the majority is
deprived of spending income. The wealthy few will have difficulty
spending all their money – or even investing all of it – while millions
of others are unable to make the purchases they want and need.
Despite right-wing mythology, the wealthy are not “job creators.” As economist J. Bradford DeLong
says, “save for those in the top 0.01 percent who are going to use
their money for useful purposes” – that is, by leaving it to charity –
“the contribution they make to any reasonable utilitarian measure of
societal welfare is zero.”
In other words, an economy for the rich is an economy where society as a whole suffers.
The Democracy Effect
Inequality is
not the only adverse outcome of a weakened union movement. The IMF
authors also conclude (reasonably enough) that decline in union
membership has led to unions having less influence on public policy.
That has led to a lower real minimum wage, weaker unemployment benefits,
and weaker employment protection laws.
The IMF’s
Jaumotte and Osorio Buitron cite Nobel Prize-winner Joseph Stiglitz’s
work, which shows that highly concentrated wealth allows top earners to
(in their words) “manipulate the economic and political system in their
favor.”
To put it more plainly: The rules are rigged.
The evidence for
that is all around us. The very wealthiest among us have captured a
much larger share of the U.S. national income in recent decades. They
have also, as a Princeton study shows, been able to dictate our national political agenda with little or no regard for what the majority wants.
Unrigging the Rules
How do we
restore balance to our economy and our democracy? Tax policy clearly
needs to be changed so that millionaires, billionaires, and corporations
once again pay their fair share of taxes. Actual tax rates for all
three groups have fallen dramatically in the last 50 years. And campaign
financing needs to be reformed so that the wealthy can no longer “buy”
candidates or single-handedly sponsor presidential campaigns.
We need to break
up the too-big-to-fail banks, resist the financialization of our
economy (where more and more of our national income goes to banking
institutions), and regulate Wall Street more effectively.
And now, thanks to these IMF researchers, we also know that we need a stronger union movement, too.
Looking to Labor
American unions
introduced many of the reforms we take for granted today. They gave us
weekends off, workplace safety laws, the 40-hour work week, and dozens
of other innovations. But these reforms are endangered, while others are
needed – including guaranteed sick leave, vacation time, and caregiver
leave.
What do we do
now? The union movement has been politically demonized for decades.
Union membership has plummeted, for a number of reasons. The labor
movement needs to be revitalized and renewed, and that effort needs to
be one of the major undertakings of our time.
Pro-corporate
forces would have us believe that our economic woes are irreversible,
that we are the victims of unstoppable, God-like forces like
globalization and technology. But, while these forces are powerful, we
now know that much of our destiny remains within our control.
The union
movement is one of our democracy’s most potent economic tools. Its
benefits flow not only to its members, but to society as a whole. The
IMF paper is a research study, but it can also be taken as a call to
arms.
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