Ever wonder why income inequality in the U.S. is so extreme? Here is one big reason why:
This graphic compares the portion of income received by the richest 10% and the portion of the workforce who are union members. Note that those at the top earners take a larger share of the nation’s income when unionization rates are low but a smaller slice in times when union membership is high. It’s no mystery that income inequality today is at a historic high at a time when union density is historically low.
This is only one piece of the story. Another key part of the inequality equation are changes in tax policies over the last 30-40 years that reduced taxes on corporations and on those with high incomes and more wealth, while increasing sales taxes and payroll taxes that take a larger portion smaller incomes. Another factor are “free” trade policies that allow capitalists to move assets freely around the world to maximize profits, but deny workers the freedom to pursue higher wages beyond their nation’s borders.
Declining union membership is critical to understanding the growing gap between those at the top and everyone else. And it also points to a practical strategy to reverse the trend. If more workers formed unions — particularly those workers with college degrees and white-collar jobs who have been convinced by employers that they don’t need unions — it would go a long way to making our society more equitable. And best of all, it’s a solution that doesn’t depend on the actions of politicians or the wealthy who fund them. We can do it ourselves.
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There are a lot of things that have happened in recent decades that have brought about the current situation that makes this comparison seem much too simplistic.
Union membership was driven by American industry, such as the auto industry, which has largely left the US since the 1980s. The many reasons for leaving include the excessive demands of labor unions that made these companies not competitive in the worldwide market. By excessive, I mean high salaries for low skilled jobs and high-cost employee benefits, such as what we would now refer to as platinum health insurance. American labor is not competitive with foreign labor, so people lose jobs.
Secondly, since the 1960s, the nation has become more and more addicted to using debt to make purchases. The interest on that debt can only move upward. Those using said debt become increasingly burdened by having to make monthly payments on that debt and find little cash available for doing other things they may want to do. Thus, they take on more debt. It is a cycle that makes it hard for people to advance financially.
This is all true to one extent or another, but it ignores a few things. One important one is right-to-work laws. By allowing freeloaders, unions lose dues revenue even though the union negotiated the better pay rates (and benefits) that the freeloaders enjoy. Another is the seeming dispositional dislike of membership in any kind of union arrangement. I don’t recall the state – Kentucky, Tennessee – but Volkswagen sought to establish an employee council at their plant. This wasn’t even a body to negotiate pay, etc, only to have a voice in workplace decisions, but employees didn’t want it. I guess you could call that a case of the workers drinking a certain Kool-Aid, and that’s a tough thing to overcome.