Why Americans Need Unions Now More Than Ever

Robert Creamer – Political organizer, strategist and author

Posted: February 23, 2011 09:06 AM

How often do you hear someone say, “Oh, at one time unions were a good thing, but not anymore”?

The premise of this argument is that once upon a time there were robber barons stalking the land, and it was a fine thing that workers organized into unions to prevent them from hiring children and paying employees a pittance as they labored in sweatshops working fifteen-hour days.

Now, goes the narrative, in the age of high-tech industrial campuses and “information” workers, unions are “obsolete.”

Next time you hear that argument from an otherwise rational person, give them a good shake and insist that they wake up from their dream world.

The central problem facing the American economy — and our society — is the collapse of the American middle class. The incomes of the middle class Americans, and those who aspire to be middle class — 90% of Americans — have been stagnant for almost three decades. This trend, which was briefly interrupted during the Clinton Administration, is the chief defining characteristic of our recent economic history.

This stagnation of middle class incomes has not happened because our economy has failed to grow over this period. In fact, real (adjusted for inflation) per capita gross domestic product (GDP) increased more than 80% over the period between 1975 and 2005. In the last ten years, before the Great Recession, it increased at an average rate of 1.8% per year. That means that if the benefits of economic growth were equally spread throughout our society, everyone should have been almost 20% better off (with compounding) in 2008 than they were in 1998.

But they weren’t better off. In fact, median family income actually dropped in the years before the recession. It went from $52,301 (in 2009 dollars) in 2000 to $50,112 in 2008. And, of course it continued to drop as the recession set in.

How is that possible?

Was it — as the Right likes to believe — because of the growth of the Federal Government? Nope. In fact, the percentage of GDP going to federal spending actually dropped during the last four years of the Clinton Administration. When Bush took office it began to increase again as the Republicans increased spending on wars. Over the last 28 years, federal spending has averaged about 20.9% of the GDP and varied within a range of only about 5%, with the high being in 1983 (in the middle of the Reagan years) and the low in 2000 before Bush took office. It has never even come close to the 43.6% of GDP that it consumed during World War II in 1943 and 1944, or the 41.9% it consumed in 1945. The percent of GDP that goes to Federal spending went up in 2009 and 2010 — but that was mainly because the economy shrunk on the one hand, and a major, temporary stimulus bill was need on the other to prevent another Great Depression.

Was it because taxes have skyrocketed? No again. In fact, according to the Census Bureau, the median household tax burden actually dropped from 24.9% in 2000 to 22.4% in 2009.

Was it that labor became less productive? No. In fact, there has been a major gap between the increase in the productivity of our workforce and the increase in their wages. Even when wages were improving at the end of the Clinton years, productivity went up 2.5% per year and median hourly wages went up only 1.5%.

From 2000 to 2004 worker productivity exploded by an annual rate of 3.8% but hourly wages went up only 1% and median family income actually dropped .9%.

The bottom line is that people who work for a living (most of us) are getting a smaller and smaller share of the nation’s economic pie.

In August of 2006, the New York Times reported that Federal Reserve study showed that, “Wages and salaries now make up the lowest share of the nation’s gross national product since the government began recording data in 1947; while corporate profits have climbed to their highest shares since the 1960.”

So the answer to the question is simple. Virtually all of the increase in our gross domestic product over the ten years before the Great Recession went to the wealthiest 2% of the population.

These changes in income distribution are not the result of “natural laws.” They are the result of systems set up by human beings that differentially benefit different groups in the society.

Economist Paul Krugman has summarized the history of income distribution in America.

At the beginning of the Great Depression, income inequality, and inequality in the control of wealth, was very high. Then came the great compression between 1929 and 1947. Real wages for workers in manufacturing rose 67% while real income for the richest 1% of Americans fell 17%. This period marked the birth of the American middle class. Two major forces drove these trends — unionization of major manufacturing sectors, and the public policies of the New Deal.