New Evidence of How Declining Union Power Has Hurt Worker Wages

Since the late 1970s, and especially more recently, the percentage of national income going to labor has fallen dramatically, and the percentage of national income going to owners (i.e. capital) has risen. The rise of capital income at the expense of labor income presents serious problems for the achievement of an egalitarian economic order. For instance, because capital income is heavily concentrated among the rich and wealthy, shifting national income from labor to capital accelerates income inequality. Indeed, a recent CBO report found that changes in capital gains and dividends were the single largest driver of increased income inequality between 1996 and 2006.

So we know national income is shifting from labor to capital and we know that the consequences of this are severely negative, but it is still a bit of an open question as to why this is happening. Is it caused by growing international competition? Is caused by technological changes? Is it caused by changing government policy? Declining unions? Something else?

A compelling new study out in the American Sociological Review pins the cause quite convincingly on the erosion of union power in the face of computerization. Tali Kristal, the author of the study, looks beyond the overall declining share of labor income and into specific sectors of the economy to find out which sector's workers have taken the biggest hit. The result was stark: labor's share declined much more dramatically in core unionized sectors like construction, manufacturing, and transportation than non-unionized sectors like the service industry.

Even as computerization swept across and affected all industries, only the heavily unionized ones saw the deep declines in labor's income share. From this, the author concludes that collapsing union power is the likely cause of labor's declining share of income, and that computerization contributed only indirectly insofar as it helped weaken unions in the core union sectors.

The study also provides support for what many regard as obvious: the distribution of income in society is primarily about power. Overall productive output defines how much income there is to go around, but where it goes is, as Kristal writes, "largely a function of the power relations that constrain and regulate the process of income acquisition and distribution."

As unions have declined, so has labor's bargaining power in the workplace and labor's political power over the state. Exploding income inequality has been the result. Unless the decline of union strength reverses or some other power agent for the working class picks up the slack, the near future looks grim for those who work for a living.