Commentary: An Antidote to Income Inequality

Commentary: An Antidote to Income Inequality

The founding principle of American society written by Thomas Jefferson in our Declaration of Independence is that each one of us has a right to life, liberty and the pursuit of happiness. One of the key ingredients to a life full of liberty and happiness is being able to provide for yourself and your family. That is the American dream. Yet, today too many individuals are forced to work multiple jobs just to make enough money to earn a livable wage. As earnings for corporations and CEOs rise at an astronomical rate, why aren’t everyday Americans seeing the same proportional increases in their wages? The roots of this wage stagnation are multifaceted. Many agree the main culprits are automation, globalization and a tax code that favors the wealthy. These issues are contributing factors to rising income inequality but one factor we do not discuss nearly enough is the decline of unions in America. Historically, unions were created to protect the rights of labor against company management that took advantage of their workforce. Unions fought to ensure safe working conditions and a fair wage. But strong unions do not equal weak business. It is not a zero sum game. American companies are only as good as their workers; and unions, through apprenticeship programs, high quality workforce training and advocacy for equal pay and benefits, help guarantee employers a strong, safe and valued workforce.

If we look back we can see how dire income inequality has become in our country. In 1980, the top 1 percent of earners accounted for a 10 percent share of the total income while the bottom 50 percent accounted for a 20 percent share of the total income, according to the World Inequality Database. Now, the top 1 percent earn 20 percent of the total income while the bottom 50 percent of the population earn just 12 percent of the total income. The last time this level of disparity existed was in 1928 when the top 1 percent received 23 percent of all pre-taxable income, according to the Pew Research Center. The following year was the start of the Great Depression. Additionally, the Brookings Institute found that since 1979 the lower middle class have seen their real wages slightly decrease over the last 40 years while the top percentile have seen their real wages increase by 27 percent. This type of inequality tears at the fabric of the American Dream. Americans can’t climb the economic ladder or build a better life for their children if they can barely afford to pay their mortgage and put food on the table.

A groundbreaking study from Princeton University argues one of the biggest factors in increasing income inequality is the decline in union membership. The Princeton study found that the benefits workers derived from unions over the course of the last 80 years have been remarkably steady. Using a combination of census data collected by the government and polling information from Gallup about union workers, Princeton was able to study the effects of union membership while controlling for variables such as education, skill, and race. What the study found is that on average over the last 80 years, union workers make around 15-20 percent more than non-union workers in the same field. This trend continued in 2017 when union workers made 20 percent more than non-union workers. The study also found that unions can benefit the wages of non-union workers. Going back every year to the 1930s, in states where workers were more likely to be unionized, income inequality was lower and wages rose faster. This is because companies have to offer wages and benefits that can compete with others in the industry that are paying union wages — and out of fear that if they don’t pay comparably, their workers would unionize themselves. In communities where unions are strong, all workers, regardless of union status, earn higher pay.

Unfortunately, union membership has taken a nosedive since the 1970s. According to a study by the Economic Policy Institute, in 1979, 34 percent of private sector workers belonged to unions while in 2016 that number was only 10 percent. Unionization among men without a higher education degree fell from 38 percent to 11 percent over that same time period. They found that if union membership levels returned to the 1979 levels in 2016, non-union men without a high school degree would have their wages increased by 9 percent which would have worked out to an extra $3,000 a year. The study even controlled for fields like trucking and construction where automation and outsourcing are still uncommon, but wages are still falling. They found non-union workers wages are declining in large part because employers are not compelled to raise wages and increase benefits to compete with union salaries.

Now, we have to wonder will it ever be possible to raise union density to the levels seen in the mid 20th century? Under our current political climate the answer is no. We have seen unions gutted through “right to work” laws in 28 states (including Virginia) and the landmark decision earlier this summer made by the Supreme Court which ruled that public sector unions could not force workers benefiting by the union to pay agency fees. However, in the midst of this turmoil, there have been bright spots to the union movement and reminders that it can still make a huge difference in the lives of workers when given the opportunity. This summer voters in Missouri resoundingly voted down a right-to-work proposition by over 67 percent thereby allowing unions to require the payment of union fees. Furthermore, we saw the teachers unions strike in West Virginia due to incredibly low wages which sparked teachers strikes in Oklahoma and Arizona. The result of this strike was a 5 percent salary increase for teachers in West Virginia. A strong workforce is good for business too by creating a skilled and prepared workforce. So, on this Labor Day, remember that union strength not only benefits employees but the economy in its entirety and most importantly, is an antidote to income inequality.