The Financial Page
State Of The Unions
by James Surowiecki January 17, 2011

In the heart of the Great Depression, millions of American workers did
something they’d never done before: they joined a union. Emboldened by
the passage of the Wagner Act, which made collective bargaining
easier, unions organized industries across the country, remaking the
economy. Businesses, of course, saw this as grim news. But the general
public applauded labor’s new power, even in the face of union tactics
that many Americans frowned on, like sit-down strikes. More than
seventy per cent of those surveyed in a 1937 Gallup poll said they
favored unions.

Seventy-five years later, in the wake of another economic crisis,
things couldn’t be more different. The bailouts of General Motors and
Chrysler saved the jobs of tens of thousands of U.A.W. workers, but
were enormously unpopular. In the recent midterm elections, voters in
several states passed initiatives making it harder for unions to
organize. Across the country, governors and mayors wrestling with
budget shortfalls are blaming public-sector unions for the problems.
And in polls public support for labor has fallen to historic lows.

The hostility to labor is most obvious in the attacks on public-sector
workers as what Tim Pawlenty, Minnesota’s former governor, calls
“exploiters”—cosseted, overpaid bureaucrats whose gold-plated pension
and health plans are busting state budgets. But there’s also been a
backlash against labor generally. In 2009, for the first time ever,
support for unions in the Gallup poll dipped below fifty per cent. A
2010 Pew Research poll offered even worse numbers, with just forty-one
per cent of respondents saying they had a favorable view of unions,
the lowest level of support in the history of that poll.

In part, this is a simple function of the weak economy. The
statistician Nate Silver has found a historical correlation between
the unemployment rate and the popularity of unions. Furthermore, an
analysis of polling data by David Madland and Karla Walter, of the
Center for American Progress, shows that, when times are bad, the
approval ratings of government, business, and labor tend to drop in
sync; voters, it seems, blame all powerful institutions equally. And
although organized labor is much less powerful than it once was,
voters don’t seem to see it that way: more than sixty per cent of
respondents in the 2010 Pew poll said that unions had too much power.

The recession has also magnified the gap between unionized and
non-unionized workers. Union workers, on average, get paid more than
their non-unionized counterparts—most estimates put the difference at
around fifteen per cent—and that wage premium widens during
recessions. Similarly, union workers often still have defined-benefit
pensions, which sets them apart from all those Americans who watched
their retirement accounts get ravaged by the financial crisis. That’s
given rise to what Olivia Mitchell, an economics professor at Wharton,
calls “pension envy.” This resentment is most evident in the backlash
against public-sector workers (who now make up a majority of union
members). A recent study by the economics professors Keith Bender and
John Heywood found that, when you control for a host of variables,
public employees are not actually paid more than their private-sector
counterparts. But they do often enjoy good retirement schemes, and in
states like Illinois and California politicians have agreed to hefty
contracts with state employees and then underfunded the pension plans,
leaving future taxpayers to pick up the bill. It’s no wonder that
people are annoyed.

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Still, the advantages that union workers enjoy when it comes to pay
and benefits are nothing new, while the resentment about these things
is. There are a couple of reasons for this. In the past, a sizable
percentage of American workers belonged to unions, or had family
members who did. Then, too, even people who didn’t belong to unions
often reaped some benefit from them, because of what economists call
the “threat effect”: in heavily unionized industries, non-union
employers had to pay their workers better in order to fend off
unionization. Finally, benefits that union members won for
themselves—like the eight-hour day, or weekends off—often ended up
percolating down to other workers. These days, none of those things
are true. Organized labor has been on the wane for decades, to the
point where just seven per cent of private-sector workers belong to a
union. The benefits that union members still get—like
defined-contribution pensions or Cadillac health plans—are out of
reach of most workers. And the disappearance of unions from the
private sector has radically diminished the threat effect, meaning
that unions don’t raise the wages of non-union workers.

The result is that it’s easier to dismiss unions as just another
interest group, enjoying perks that most workers cannot get. Even
though unions remain the loudest political voice for workers’
interests, resentment has replaced solidarity, which helps explain why
the bailout of General Motors was almost as unpopular as the bailouts
of Wall Street banks. And, at a time when labor is already struggling
to organize new workers, this is grim news. In a landmark 1984 study,
the economists Richard Freeman and James Medoff showed that there was
a strong connection between the public image of unions and how workers
voted in union elections: the less popular unions were generally, the
harder it was for them to organize. Labor, in other words, may be
caught in a vicious cycle, becoming progressively less influential and
more unpopular. The Great Depression invigorated the modern American
labor movement. The Great Recession has crippled it. ♦


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