More than anything else, Lawrence Summers’s and Anna Stansbury’s Washington Post op-ed making the argument that the way to reverse the declining share of income claimed by labor is to increase the power of unions, reminds me of the old vaudeville joke: “If we had some ham, we could make a ham and cheese sandwich if we had some cheese.” Consider:
Economic analysis often ascribes these trends to some combination of globalization, technological change and rising monopoly power. But our research suggests that a more compelling explanation is the broad-based decline in worker power. As workers have become less able to share in the profits generated by their firms, income has been redistributed from employees to the owners of capital. That has contributed to higher income inequality along class and race lines.
The evisceration of private-sector unions is the most obvious example of the decline in worker power. At the peak, one-third of the private-sector workforce belonged to a union; that number is now 6 percent. But other factors also affect the degree to which workers can share in firms’ profits. Because of increased shareholder activism, rising levels of debt, increases in private equity and changing corporate norms, businesses are increasingly run for shareholders rather than their stakeholders. Ruthless management tactics involving precise measurement of workers’ day-to-day activity have become widespread.
Meanwhile, workers at large firms or in highly paid industries (such as manufacturing, construction or transportation) used to earn large wage advantages, as they shared in the profits generated by their companies, but these benefits have declined by half since the early 1980s. An increasing number of workers are outsourced domestically, employed by staffing or temp agencies or misclassified as independent contractors, reducing their ability to share in the profits of the main firm they work for. And the real value of the minimum wage is lower than it was in the 1970s.
Why did this happen? Some portion of the decline in worker power may have been an inevitable outcome of globalization or technological change. But our research — which examines shifts in labor shares and corporate profits across different industries — indicates that changes in policy, norms and institutions are the most important explanatory factors. This view is supported by the fact that the legal and political environment has been tilted substantially in favor of shareholders and against workers since the 1980s, a trend exemplified by the expansion of state right-to-work laws undermining unions’ ability to fund themselves and the increasing corporate use of union avoidance tactics, both legal and illegal. The fact that the decline in unionization, the rise in income inequality and the fall in labor’s share of income have all happened to a greater extent in the United States than in much of the rest of the industrialized world also suggests an important role for U.S.-specific explanations.
See what I mean? The decline in bargaining power is less a consequence of globalization, technological change, or consolidation than it is due to reduced workers power which is due to globalization, technological change, and consolidation. If you read very carefully you can ferret out their proposals for remedying the situation:
- Eliminate right to work laws
- Ensure that workers that aren’t actually independent workers are not classified as such
- Sector level collective bargaining
Fair enough. How? Constitutional amendment? And how do they propose to reduce offshore outsourcing in the face of rising U. S. labor costs? I genuinely want to know.
The art of making policy resides in identifying the alternatives, weighing their costs and benefits, and pursuing the most doable. Contrary to Dr. Summers I would attribute the decline in union power overwhelmingly to globalization, technological change, consoolidation and their run-on effects as well as the following:
- Union corruption
- Obeisance of the unions to the Democratic Party even as the party abandoned policies that bolstered workers’ power in favor of neoliberal policies.
- The adversarial relationship between organized labor and corporations built into our legal system.