How the middle-class became the underclass (HINT: Unions have something to do with it)
From ThinkProgress – The power of unions to create prosperity for working families is well recognized: Organized labor is one of the few voices for the economic interests of the middle class in our government. Unions were key to creating and protecting the social safety net (including Social Security and Medicare) and winning major legislative victories for working families such as the Equal Pay Act, the Civil Rights Act, the Family and Medical Leave Act and — most recently — the Affordable Care Act.
And unions ensure that workers are paid fair wages. Unionized workers today make significantly more on than their non-union counterparts — about $2.50 more per hour than an otherwise comparable worker in the typical state according to a recent study by the Center for Economic and Policy Research.
When unions were stronger in the middle part of the last century, American workers wages rose as they became increasingly more productive. But today, as union strength has decreased, this link has broken down: even though American workers grow increasingly more productive, their wages have stagnated. At the same time, more and more income has become concentrated at the very top of the income scale.
If DOL announces tomorrow that unionization rates have again fallen, it’s not just bleak news for the ranks of the unionized, it’s also bad news for the rest of the middle class.
From: Report: As Union Membership Rates Decrease, Middle Class Incomes Shrink | ThinkProgress – (1/20/2011) http://s.shr.lc/yUDYLP
Major Study Links Decline of Unions to Rising of Income Inequality
From MotherJones – It’s well known that the death of America’s labor unions coincides with a staggering rise in income inequality, though the link between the two has never been as obvious as it seems. Many academics argue that unions play a relatively minor role in the equation, instead blaming educational disparities and the shifting makeup of the economy. But now comes a major new study from Harvard sociology professor Bruce Western that suggests that the decline of unions is as important as any other factor, explaining a full third of the growth in of income inequality for male workers.
Western and co-author Jake Rosenfeld, a sociology professor at the University of Washington, looked at the period between 1973 and 2007, when inequality in hourly wages spiked by 40 percent. During that time, union membership for private-sector male workers fell from 34 percent to 8 percent (female workers were never as unionized as their male counterparts). Their paper in the August issue of the America Sociological Review concludes that deunionization’s biggest effects on inequality were indirect:
1) The threat of unionization caused non-unionized employers to raise wages; that threat disappeared along with unions.
2) Unions occupied a bully pulpit; knocking them off left the moral case for equality vulnerable to attack. (What do you mean Viacom’s CEO isn’t worth $85 million?)
3) Workers lost their Washington lobbyists, and with them, any hope of winning political battles for better wages and benefits.
These ideas are nothing new. Kevin Drum ably explores them in his March/April Mother Jones essay, “Plutocracy Now.” Yet the Harvard study bolsters them with a rigorous regression analysis of census data, showing empirically what many pundits have long suspected. “Our study underscores the role of unions as an equalizing force in the labor market,” Western says. If only proving their importance was as easy as figuring out how to replace them.
From: Major Study Links Decline of Unions to Rising of Income Inequality | Mother Jones – (8/1/2011) http://s.shr.lc/VJEpe5
Study cited: Union Decline Accounts for Much of the Rise in Wage Inequality – American Sociological Association (7/21/2011) http://s.shr.lc/p1wG38
How the Middle Class Became the Underclass
NEW YORK (CNNMoney) — Are you better off than your parents? Probably not if you’re in the middle class.
Incomes for 90% of Americans have been stuck in neutral, and it’s not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed.
In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data.
Meanwhile, the richest 1% of Americans — those making $380,000 or more — have seen their incomes grow 33% over the last 20 years, leaving average Americans in the dust. (How the rich became the über rich)
Experts point to some of the usual suspects — like technology and globalization — to explain the widening gap between the haves and have-nots.
But there’s more to the story.
A real drag on the middle class
One major pull on the working man was the decline of unions and other labor protections, said Bill Rodgers, a former chief economist for the Labor Department, now a professor at Rutgers University.
Because of deals struck through collective bargaining, union workers have traditionally earned 15% to 20% more than their non-union counterparts, Rodgers said.
But union membership has declined rapidly over the past 30 years. In 1983, union workers made up about 20% of the workforce. In 2010, they represented less than 12%.
“The erosion of collective bargaining is a key factor to explain why low-wage workers and middle income workers have seen their wages not stay up with inflation,” Rodgers said.
Without collective bargaining pushing up wages, especially for blue-collar work — average incomes have stagnated.
International competition is another factor. While globalization has lifted millions out of poverty in developing nations, it hasn’t exactly been a win for middle class workers in the U.S.
Factory workers have seen many of their jobs shipped to other countries where labor is cheaper, putting more downward pressure on American wages.
“As we became more connected to China, that poses the question of whether our wages are being set in Beijing,” Rodgers said.
Finding it harder to compete with cheaper manufacturing costs abroad, the U.S. has emerged as primarily a services-producing economy. That trend has created a cultural shift in the job skills American employers are looking for.
Whereas 50 years earlier, there were plenty of blue collar opportunities for workers who had only high school diploma, now employers seek “soft skills” that are typically honed in college, Rodgers said.
A boon for the rich
While average folks were losing ground in the economy, the wealthiest were capitalizing on some of those same factors, and driving an even bigger wedge between themselves and the rest of America.
For example, though globalization has been a drag on labor, it’s been a major win for corporations who’ve used new global channels to reduce costs and boost profits. In addition, new markets around the world have created even greater demand for their products.
“With a global economy, people who have extraordinary skills… whether they be in financial services, technology, entertainment or media, have a bigger place to play and be rewarded from,” said Alan Johnson, a Wall Street compensation consultant.
As a result, the disparity between the wages for college educated workers versus high school grads has widened significantly since the 1980s.
In 1980, workers with a high school diploma earned about 71% of what college-educated workers made. In 2010, that number fell to 55%.
Another driver of the rich: The stock market.
The S&P 500 has gained more than 1,300% since 1970. While that’s helped the American economy grow, the benefits have been disproportionately reaped by the wealthy.
And public policy of the past few decades has only encouraged the trend.
Considering Yourself Rich
The 1980s was a period of anti-regulation, presided over by President Reagan, who loosened rules governing banks and thrifts.
A major game changer came during the Clinton era, when barriers between commercial and investment banks, enacted during the post-Depression era, were removed.
In 2000, the Commodity Futures Modernization Act also weakened the government’s oversight of complex securities, allowing financial innovations to take off, creating unprecedented amounts of wealth both for the overall economy, and for those directly involved in the financial sector.
Tax cuts enacted during the Bush administration and extended under Obama were also a major windfall for the nation’s richest.
And as then-Federal Reserve chairman Alan Greenspan brought interest rates down to new lows during the decade, the housing market experienced explosive growth.
“We were all drinking the Kool-aid, Greenspan was tending bar, Bernanke and the academic establishment were supplying the liquor,” Deutsche Bank managing director Ajay Kapur wrote in a research report in 2009.
But the story didn’t end well. Eventually, it all came crashing down, resulting in the worst economic slump since the Great Depression.
With the unemployment rate still excessively high and the real estate market showing few signs of rebounding, the American middle class is still reeling from the effects of the Great Recession.
Meanwhile, as corporate profits come roaring back and the stock market charges ahead, the wealthiest people continue to eclipse their middle-class counterparts.
Major Study Links Decline of Unions to Rising of Income Inequality | Mother Jones – (8/1/2011) http://s.shr.lc/VJEpe5