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Unions, Norms, and Inequality

By Matthew Yglesias on August 4, 2011 at 4:44 pm

"Unions, Norms, and Inequality"

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The Bruce Western and Jake Rosenfeld paper on unions and inequality that I wrote up in February has now been officially published and is getting some attention. You can find a free version here (PDF).

The key finding is that “the decline of organized labor explains a fifth to a third of the growth in inequality—an effect comparable to the growing stratification of wages by education” and this is the conclusion:

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 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. Though industry and regional variation plays an important role, the key comparison implied by our analysis is fundamentally historical, from the early 1970s to the 2000s.

In the earlier period, unions offered an alternative to an unbridled market logic, and thisinstitutional alternative employed over a third of all male private sector workers. The social experience of organized labor bled into the nonunion sectors, contributing to greater equality overall. As unions declined, not only did the logic of the market encroach on what had been the union sector, the logic of the market deepened in the nonunion sector too, contributing to the rise in wage inequality.

This tends to make the outlook for a revival of unionization look pretty bleak. Among other things, it indicates that high-income individuals across the board have a strong rational interest in solidaristic anti-union behavior.

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