Beyond the rising number of the unemployed and underemployed, the conditions of many of those employed have been deteriorating as well. Globally, informal employment and short-term contracts, which give workers few entitlements and little security in their jobs, are becoming the norm for far too many. Outsourcing and subcontracting have become more common, causing more insecurity for workers, now dubbed the “precariat.” Such worsening employment conditions have been taking place in many countries, especially for workers with low education and low skills. In their desire to remain or become competitive, governments and employers around the world have taken many steps to increase labour market ‘flexibility’, thus increasing insecurity among most workers. Such labour market ‘flexibility’ has exacerbated economic insecurity and inequality. For decades now, the world has seen employment increasingly dominated by the service sector, in which many jobs are low-paying and precarious, and not covered by formal social security provisions. Thus, entitlement to unemployment benefits has ceased to be a social right for many in the developed world.
A new study from the International Monetary Fund, not usually considered as a hot-bed of leftism, concludes that unions reduce inequality and foster a healthier economy for everyone, mainly by preventing the wealthiest among us from keeping the fruits of a collaboratively created prosperity for themselves. The IMF study shows that a reinvigorated labor movement is essential to both a just economy and a well-functioning democracy.
IMF’s research economists Florence Jaumotte and Carolina Osorio Buitron are clear. As they explained in a summary of their work, they found that “the decline in union density has been strongly associated with the rise of top income inequality” and that “unionization matters for income distribution.” In other words, the IMF authors found that the very wealthy capture a larger share of an economy’s overall income when fewer people belong to unions. They found this to be true even after controlling for other forces that can affect inequality, including technology, globalization, and financial deregulation. The IMF authors also conclude (reasonably enough) that decline in union membership has led to unions having less influence on public policy. That has led to a lower real minimum wage, weaker unemployment benefits, and weaker employment protection laws.
The Economic Policy Institute observes that, “If the hourly pay of typical American workers had kept pace with productivity growth since the 1970s, then there would have been no rise in income inequality during that period.” Union membership began declining in the country at roughly the same time as wages began to lag behind productivity.
Despite the mythology, the wealthy are not “job creators.” As economist J. Bradford DeLong says, “save for those in the top 0.01 percent who are going to use their money for useful purposes” – that is, by leaving it to charity – “the contribution they make to any reasonable utilitarian measure of societal welfare is zero.” In other words, an economy for the rich is an economy where society as a whole suffers.
The IMF’s Jaumotte and Osorio Buitron cite Nobel Prize-winner Joseph Stiglitz’s work, which shows that highly concentrated wealth allows top earners to (in their words) “manipulate the economic and political system in their favor.” To put it more plainly: The rules are rigged. The very wealthiest have captured a much larger share of the U.S. national income in recent decades. They have also, as a Princeton study shows, been able to dictate our national political agenda with little or no regard for what the majority wants.
American unions introduced many of the reforms we take for granted today. They gave us weekends off, workplace safety laws, the 40-hour work week, and dozens of other innovations. But these reforms are endangered, while others are needed – including guaranteed sick leave, vacation time, and caregiver leave. The union movement has been politically demonized for decades. Union membership has plummeted, for a number of reasons. The labor movement needs to be revitalized and renewed, and that effort needs to be one of the major undertakings of our time. Pro-capitalists would have us believe that our economic woes are irreversible, that we are the victims of unstoppable, God-like forces like globalization and technology. But, while these forces are powerful, we now know that much of our destiny remains within our control.
The union movement is one of our democracy’s most potent economic tools. Its benefits flow not only to its members, but to society as a whole. The IMF paper is a research study, but it can also be taken as a call to arms.