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Unions, Wages and the ‘Moral Economy’

• March 25, 2011 • 10:38 AM

Researchers say the decline of union rights in the U.S. contributes to the growing wage gap for all private sector workers, including nonunion members.

The public sector unions fighting for their lives in Wisconsin likely have had an influence well beyond their own members. It’s called the “threat effect,” as when a private schoolteacher gets a wage increase because her peers in public schools are under union contract.

In this way, workers who don’t pay union dues are beholden to those who do. But it’s not just the direct threat of unions that can make employers more generous, researchers say. A new study from Harvard University (“Unions, Norms and the Rise in American Wage Inequality”) contends that unions historically have been the “pillars of the moral economy,” promoting higher wages and better treatment for all workers. The message resonates a little louder today on the 100th anniversary of the deadly Triangle Shirtwaist Factory fire that ultimately bolstered private industry unions in the United States.

“At some level, the current fight over public sector unions is about whether teachers and police should be able to engage in collective bargaining,” co-author and Harvard sociologist Bruce Western said in a recent interview. “But there’s a broader argument as well. Unions are important, not just for the benefits they provide for their own members, but really as a countervailing power to employers and big business. They effectively represent a constituency beyond their own membership.”

In the United States today, 36 percent of public sector workers are union members. In the private sector, however, union membership and influence has declined sharply in recent decades. From 1973 to 2007, the census shows, union membership in the U.S. private sector dropped from 34 percent to 8 percent for men.

At the same time — and not coincidentally, according to Western — the wage gap between the richest and poorest workers in the private sector grew by 40 percent for men, reflecting both falling wages at the bottom and rising wages at the top.

In an analysis of 18 industries across four separate regions of the U.S., Western and co-author Jake Rosenfeld, a sociologist at the University of Washington, showed that more than a third of the rising wage inequality among male workers in the private sector was due to the decline in unions. That’s an impact comparable to the growing stratification of wages by education, they found.

“In the early 1970s, when 1 in 3 male workers were organized, unions were prominent voices for equity, not just for their members, but for all workers,” Western said. “Union decline marks an erosion of the moral economy and its underlying idea of fairness. Wage inequality in the nonunion sector increased as a result.”

Western and Rosenfeld captured CEO salaries in their data but not CEO stock and other benefits. According to the Economic Policy Institute, based on CEO salary, stock, bonuses and other compensation, a typical CEO in a major American industry earned 185 times as much as an average worker in 2009, compared to 27 times as much in 1973. (According to EPI, it’s been more than 100 times greater, with gusts in excess of 300 times greater, for about two decades.)

Economists generally contend that market forces such as immigration, foreign trade and technological change have fueled the growing wage gap in the United States. Some say the increased demand for highly skilled, college-educated workers drives the disparity. Others say that the stagnation of the minimum wage over the past 30 years has played a much bigger role than the decline of unions.

In a new twist, some economists have argued that the size of cities accounts for a third of the growth in the wage gap in recent decades, independent of workers’ skills, because big cities support the most advanced technologies and the highest-paying jobs.

Writing for a forthcoming issue of the American Sociological Review, Western and Rosenfeld take a different tack. To help explain why the labor market is so different today from what it was 30 years ago, they borrow the concept of a “moral economy” from E.P. Thompson, a British socialist and historian who wrote about the bread riots in 18th-century England.

In the 1960s and ’70s, Western and Rosenfeld said, major union rights agreements set the pattern for industry-wide wage increases in America, increases that extended to nonunion firms. Beyond the collective bargaining agreements for their own members, they said, unions helped shape a more equitable society, backing proposals for civil rights legislation, Medicare, universal health care and increases in the minimum wage. In Europe, unions also have exerted a broad influence in reducing the wage gap.

Despite the deterioration of unions in the U.S., Western said, “people do retain some sense of what a fair wage and what a fair wage distribution should look like, but the organizations than have sustained these ideas are gone. … The distribution of payroll over the workers in a firm is not a great concern for upper management — and in the 1970s, it was. We take that as a sign of a really significant erosion of the moral economy.”

Western and Rosenfeld analyzed trends in the private sector, where 85 percent of nonfarm employees work, and where the decline in unions and the growth in the wage gap have been largest. Dividing the national labor market into 18 industries in four regions, they identified 72 annual unionization rates across the U.S. On average, they found that unionization was highest in utilities, transportation and communications, particularly in the Northeast and Midwest. In those areas, the wage gap between the richest and poorest workers was relatively small in 1973, even among nonunion workers.

“As unionization declined in those industries and regions, then inequality among nonunion workers went up a lot,” Western said. “We interpret that result as due to the influence of unions on nonunion workers.”

The researchers found that the actual wage gap between the richest and poorest male workers increased by 40 percent overall from 1973 to 2007. But they estimated that if unionization had held constant at the 1973 level, the wage gap would have grown by only 25 percent by 2007. Union decline, they concluded, was responsible for one-third of the growth in wage disparity for men. The effects were smaller for women, Western said, because fewer women in the private sector were in unions.

As for why unions have declined so sharply in the U.S., scholars point to the growth of jobs outside the traditional union strongholds in manufacturing, construction and communications. In addition, they say, employer opposition in the 1970s, fueled by an influx of corporate donations, killed union attempts to strengthen labor law. Some view 1981 as a turning point, when President Ronald Reagan dismissed the striking federal air traffic controllers and hired permanent replacements. For a generation, labor organizing was stymied during Republican administrations as the National Labor Relations Board blocked new campaigns and weakened existing unions.

It’s true that unions may reduce competitiveness by raising labor costs for employers, Western said, but it’s also true that union workers are more productive and experience less turnover than nonunion workers. Perhaps the biggest benefit of unions is that they publicly take up the cause of working people and the disadvantaged, he added.

“Once the right to organize is lost, you lose the broader effect of unions, and there’s nothing to counterbalance the power of employers in the political process and the public conversation about fairness in American society,” he said. “This is partly what the debate in Wisconsin is about. An economy is not an anonymous sort of marketplace. People have ideas about what a fair price and wage is in the labor market. When those expectations of fairness are violated, people are outraged.”

 

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Melinda Burns
Former Miller-McCune staff writer Melinda Burns was previously a senior writer for the Santa Barbara News-Press, covering immigration, urban planning, science, and the environment.

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