Economists disagree over importance of unions to the middle class
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It's a standard part of the liberal canon: Strong unions equal a strong middle class.
But many economists say it's not that simple.
David Card, a labor economist at the University of California at Berkeley, and John Pencavel, a labor economist at Stanford University, say the evidence for a direct link between union membership and middle-class pay is weak.
Mr. Card said union membership probably did strengthen pay for men, particularly those without a college education, because it raised their wages compared with other male workers. But women union members already were in somewhat higher paid professions such as teaching and nursing, so union pay didn't make that much difference.
If union pay reduced inequality, it did so largely within union ranks, Mr. Card said. "If two people were similar in how long they had been with a firm, they almost always were paid the same" in a union shop, he said, which reduced the pay range of union members.
At the same time, Mr. Pencavel added, unions tended to increase inequality with nonunion workers.
"The United Auto Workers organized the auto industry and jacked up wages and benefits, and what did that do?" he asked.
"It discouraged the employment of labor. If they hadn't done that, my guess is more workers would have been employed in the auto industry at lower wages. If that's true, who's bearing the principal cost of unionism? Nonunion workers. When people say unions bump up the wages of middle-class workers, do they also depress the wages of low-income workers?"
The conservative Heritage Foundation said in a 2009 study that unions do restrict employment in any given industry. "Unions function as labor cartels," the research paper said. "A labor cartel restricts the number of workers in a company or industry to drive up the remaining workers' wages, just as the Organization of Petroleum Exporting Countries (OPEC) attempts to cut the supply of oil to raise its price."
There are economists who strongly disagree with those conclusions, though.
The Center for American Progress -- a liberal Washington, D.C., think tank -- noted in a recent study that the share of national income earned by the middle class had declined since the late 1960s at a similar pace to the decline in union workers, whose membership went from 30 percent of private workers then to about 7 percent today.
Sylvia Allegretto, an economist at the University of California at Berkeley, also thinks there is a powerful connection between unions and middle-class stability. She describes the decline of the middle class since the late 1970s and the concurrent drop in unionization as "the great unraveling."
"We were building this Great Society with a large swath of workers in the middle class," she said, "and now there's this chipping away at that. Our private unions are pretty much gone, and if they can do away with the public sector unions, I don't know what kind of a world we're running toward."
Some union leaders have attributed organized labor's decline to companies moving their operations to the South and West to avoid unions.
But Mr. Pencavel said the South paid less than the North before unions were strong, and that differential has persisted now that unions are weak.
The one area where unions probably had a significant role in reducing inequality was their impact on CEO pay, he said.
When unions were more dominant, he said, CEO pay was "cannon fodder for the union when they came in to bargain, and that tempered the pay raises you gave to CEOs because you didn't want to supply the unions with bargaining chips."
Even the economists who are skeptical of the economic benefits of unions conceded that they have played one other important role -- they have provided a strong political voice for middle-income workers.
Jacob Hacker, a political science professor at Yale University, made that point strongly in the book he co-authored last year, "Winner-Take-All Politics: How Washington Made the Rich Richer And Turned Its Back on the Middle Class."
"While there are many 'progressive' groups in the American universe of organized interests," he wrote, "labor is the only major one focused on the broad economic concerns of those with modest incomes. In the United States and elsewhere, unions are the main political players pushing leaders to address middle-class economic concerns and resisting policy changes that promote inequality."
Frank Levy, an urban economics professor at the Massachusetts of Technology, agreed with that and said unions have been a major force in getting corporate America to share its profits with workers and not just shareholders.
"The issue here is that there is more to life than shareholder value, and the question is what organized interest is representing that other part."
First Published November 15, 2011 12:00 am