Unions have been declining for decades. In the early 1950s, one out of three American workers belonged to them, four out of ten in the private sector. Today, only 11.8 percent of American workers are union members; in the private sector, just 6.9 percent. The vanishing act varies by region—in the South, it’s almost total—but proceeds relentlessly everywhere. Since 1983, the number of states in which at least 10 percent of private-sector workers have union contracts has shrunk from 42 to 8. Unions are battling for their lives. The current recession has only intensified labor’s descent and business’s ascent.
Princeton economist Henry Farber concluded that the wages of non-union workers in industries that were 25 percent unionized were 7.5 percent higher than they’d be if their industry were union-free. When unionized companies were common, firms that were non-union had to mimic the wages and benefits of their unionized counterparts for fear that their employees would leave or, worse, organize. That was certainly the practice at General Electric and other largely non-union giants.
The key to the wage advantage is the percentage of union membership in a given industry or market. Union workers generally maintained a 20 percent wage advantage over non-union workers. In cities where nearly all the class-A hotels are unionized, as they are in New York and San Francisco, housekeepers make more than $20 an hour. In cities where roughly half of such hotels are unionized, such as Los Angeles, their hourly wage is about $15. In cities where all the hotels are non-union, such as Phoenix, housekeepers make little more than the minimum wage, if that.
From 1947 through 1973, when union membership in America was at its peak, real wages for non-managerial employees rose by 75 percent. From 1947 through 1972, productivity in the United States rose by 102 percent, and median household income rose by an identical 102 percent.
From 1979 through 2006, as union numbers collapsed, real wages for non-managerial employees rose by only 4 percent. In recent decades, as economists Robert Gordon and Ian Dew-Becker have shown, all productivity gains have accrued to the wealthiest 10 percent. In 1955, near the apogee of union strength, the wealthiest 10 percent received 33 percent of the nation’s personal income. In 2007, they received 50 percent. Today, wages and benefits make up the lowest share of America’s gross domestic product since World War II. Wages have fallen from 53 percent of GDP in 1970 to 44 percent today. Profits have been growing at wages’ expense. Michael Cembalest, J.P. Morgan’s chief investment officer, has calculated that reductions in wages and benefits were responsible for about 75 percent of the increase in corporate profits between 2000 and 2007. Unable to get a raise, American households maintained their standard of living during those years by women entering the workforce and by going into debt.
Union membership is just one element of unions’ ability to raise wages, however. The other is strikes. We look back now at the three decades of broadly shared prosperity that followed World War II as a time of union-management concord, when executives made their peace with unions and unions didn’t rock the boat. In fact, more strikes occurred from the late 1940s through the early 1970s than before or since. When union contracts expired, workers and managers fought pitched battles over the terms of the next contract. The largest strike in American history came in 1959, amid the Eisenhower years, when 500,000 steelworkers stayed off the job for 116 days. It was through such expedients that workers compelled management to let them share in their company’s proceeds. But as density declined, unions’ ability to win strikes declined with it. By the late 1970s and early 1980s, unions were striking less to win raises than to resist management proposals to freeze wages and cut benefits. The weaker unions grew, the fewer their strikes. In the early 1950s, there were roughly 350 strikes in the United States every year. Over the past decade, there have been roughly 10 to 20 per year.
According to a Wall Street Journal survey of the S&P 500, revenues per worker, which were $378,000 in 2007, grew to $420,000 in 2010. Businesses now produce more with fewer employees, but even those workers who’ve kept their jobs haven’t seen their wages rise. Workers are better educated and more productive. What they lack is power. In the Midwest manufacturing belt unions struggle to preserve at least some of the wage and benefit levels they enjoyed before they found themselves in competition with the non-union South and workers abroad. When the South and Southwest began to grow in the 1960s, unions couldn’t gain entry there, impeded by right-to-work laws that the federal government had allowed states to adopt when it passed the Taft-Hartley Act in 1947. In 2001, 32 percent of the revenues of the S&P 500 came from abroad. By 2008, that figure had risen to 48 percent. Nearly six million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. According to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages. Companies would rather invest in technology and robots to reduce the need for labor, than to pay workers more money
While veteran workers in unionized plants still make $26 to $32 an hour, new hires in companies like General Motors and Caterpillar make between $12 and $19 hourly, with contracts that lock them into these lower levels no matter how long they may work there. In 2008, average hourly wage and benefit costs in the Midwest were $7 higher than they were in the South; by 2011, they were $3.34 higher. Fully 25 percent of all American workers make no more than $17,576 a year. The United States now has the highest percentage of low-wage workers—that is, workers who make less than two-thirds of the median wage—of any developed nation.
That’s what the disappearance of unions and the loss of worker bargaining power means.
Adapted from here
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