New Research: Decline in Unions and Rise in Inequality are Linked

In a new paper entitled Unions, Norms, and the Rise in U.S. Wage Inequality by Bruce Western and Jake Rosenfeld and published in the American Sociological Review the authors find that unions help drive wage equality not just for their members, but for all people in the surrounding area as well.

Institutionally, U.S. industrial relations often extend union conditions to nonunion workers. When a third of the male labor force was organized, unions were national economic actors who shaped centralized wage policy. During World War Two, government boards with business and labor leaders helped set wage standards to control inflation and assist wartime production. Centralized wage policy continued during the Korean War. The tripartite Wage Standardization Board monitored wage increases among key firms and aimed to narrow inter-firm wage differentials and reduce wage inequality in the wider econ- omy (Ross and Rothbaum 1954). In the 1960s, unions influenced national pay policy when the Kennedy and Johnson administra- tions set wage and price targets to stabilize prices and promote the “distributional equity” of wages (Ulman 1998:170). The Nixon administration also adopted a tripartite wage policy. Concluding that “no program works without labor cooperation,” (Matusow 1998:160), Nixon’s national pay board urged wage restraint in major contract negotiations but also examined executive pay levels, sup- ported raises for low-wage workers, and monitored merit pay increases (Mitchell and Weber 1998). In the 1970s, President Carter pursued a national wage policy with union representation in a Pay Advisory Committee that set industry wage and price guidelines.

The paper draws the following conclusion from an extensive analysis of the available data:

More generally, the analysis contributes to a political account of rising economic inequality in the United States. The analysis suggests that unions helped shape the allocation of wages not just for their members, but across the labor market. The decline of U.S. 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 U.S. labor market appears self-reinforcing: as organized labor’s political power dissipates, economic interests in the labor market are dispersed and policymakers have fewer incentives to strengthen unions or otherwise equalize economic rewards.