Sunday, August 7, 2011

New Harvard Study ties Income Inequality to Union Decline

As if it wasn't obvious, the decline in working-class and middle-class incomes is tied directly to the decline in unionization in America (pdf).
The decline of organized labor in the United States coincided with a large increase in wage inequality. From 1973 to 2007 union membership in the private sector declined from 34 to 8 percent for men and from 16 to 6 percent for women. During this time, wage inequality in the private sector increased by over 40 percent. Union decline forms part of an institutional account of rising inequality that is often contrasted with a market explanation. In the market explanation, technological change, immigration, and foreign trade increased demand for highly-skilled workers, raising the premium paid to college graduates (for reviews, see Gottschalk and Danziger 2005; Autor, Katz, and Kearney 2008; Lemieux 2008).


The analysis suggests that unions helped shape the allocation of wages not just for their members, but across the labor market. The decline of American labor and the associated increase in wage inequality signaled the deterioration of the labor market as a political institution. Workers became less connected to each other in their organizational lives, and less connected in their economic fortunes. The de-politicization of the American labor market appears self reinforcing: as the political power of organized labor dissipates, economic interests in the labor market are dispersed and policymakers have fewer incentives to strengthen unions or otherwise equalize economic rewards.
It's interesting to consider who benefits from this decline in unionization and increase in inequality...

As Deep Throat counseled...
"Follow the money..."

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