The Demise Of The Middle Class In The United States – The Role Played By Changes In The Rules Of The Market – unions

This continues a summary of some notes I took from Robert Reich’s book “Saving Capitalism. For the Many, Not the Few” (2015), specifically chapter 13 “The Declining Bargaining Power of the Middle”.

Changes in the way the market is organized has occurred in a number of key areas over time: property, wages, and unions. I will look at the final area of unions.

If you compare the situation 50 years ago in the U.S. with today we see a stark contrast. GM was then the largest employer in the country. A typical worker’s wage was $35 an hour (equivalent today). The largest employer today is Walmart. The typical worker’s wage is $11.22 (2014).

One of the main differences is the presence (in the case of GM) and absence (in the case of Walmart) of unions.

Collective bargaining power is important when it comes to wages. The autoworkers were able to get a good share of company profits. This was the era of the union with one-third of workers belonging to one. The non-unionized workers got carried along with the tide also.

Looking at Walmart (and this is truly sickening), there are no unions. In fact, today less than seven percent of the private sector is unionized which means unionized places get dragged down. Some measures also exist at Walmart to stop union votes and prevent people organizing, many of which are illegal under the National Labor Relations Act. But this won’t help workers because the National Labor Relations Board had its funds cut severely so it is very behind on its caseload. Also, the penalties under the Act are quite timid towards employers.

Reich looks at Germany which is a country that has good unions and a market similar to the U.S. The average wage there has increased about 30 percent in the last 20 years. America has had close to a zero increase.

What is going on here? Reich looks at unions in terms of the political/legal decisions made over the last 100 years and how they have impacted the allocation of power.

1. Sherman Anti-Trust Act targeted unions. When the railways went on strike, the courts said it was an “illegal restraint of trade” and the unions were a threat to the country economically.

2. Progressive Era and Clayton Antitrust Act exempted unions from antitrust laws. Labor was not to be seen as a commodity, though the Supreme Court tried to ban unions in 1921 under the Act.

3. Norris-LaGuardia Act 1932 resulted in unions being legalized.

4. National Labor Relations Act 1935 meant the right to organize into unions and employers had to bargain with them.

5. Treaty of Detroit 1950, Big Business and Big Labor agreed to share productivity in exchange for labor peace. Membership, wages, and benefits increased.

6. 1950’s half of workers in private sectors in unions. Median wage increased with growth in productivity.

7. late 70’s unions in decline. Membership, workers bargaining power, union economic/political power decreased.

Overlaid on the above political/legal decisions were the issues of globalization, trade agreements and jobs lost overseas; technology taking jobs; corporations shedding jobs to increase profits for shareholders; wage reductions in exchange for keeping jobs; companies moving to “right-to-work” states where union membership not mandatory, and more political/economic decisions that served to disempower unions.


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