That reference to labor may have struck some of you as odd or out of the blue. It came to my mind because I've been reading a lot lately about the labor movement. Why?
Some of my reasons are summarized in this article by Henry Blodget in the Business Insider, "I've Always Hated The Idea Of Labor Unions, But It May Be Time To Reconsider".
After noting many of the (very legitimate) problems with labor unions, Blodget brings to our attention a few trends, trends that I'm pretty concerned about.
First, income disparity--the separation between the proverbial 99% and the 1%--is the greatest it has been in America since the Great Depression. (To explore more about these trends you can examine these charts in a separate article by Blodget.)
Second, corporate profits are at an all time high.
Third, wages as a percent of the economy are at an all-time low.
Fourth and finally, Blodget shares this chart from the EPI showing the increasing income disparity in America against the decline in union membership:
Now, of course, correlation does not equal causation. But the problems we are facing--historic levels of income inequality and decreased wages--are real and are creating a sociologically and politically volatile and unsustainable situation. Class warfare isn't a phantom being ginned up by President Obama. It's an economic reality getting worse every year. And it's going to keep getting worse until something--God knows what--hits the fan.
(And all that is to say nothing about the collision course we are on between capitalism and the finite resources of the environment.)
At this moment I am unsure about if the labor movement, as it has done in the past, has the resources that can help with the crises we are facing. Maybe it does, maybe it doesn't. The labor movement was pretty damn corrupt.
And yet, the labor movement has been the only force outside of the government in American history that has successfully challenged and chastened the corporate profit motive.
The point being, if the government isn't the solution to these problems then perhaps we should be looking toward the people.
Yes! Finally a topic I (an economist) might know more about than Richard Beck! Doesn't happen often. A few points:
1. You are absolutely right in all the facts you cite. You do overstate the role that strengthened unions could play in reversing those trends, however. Much of what drove the decline in unions are the same factors that have driven increases in inequality -- globalization and technological change. These changes weaken the positions of workers, and simply forming unions again won't reverse those forces. But, yes, it can help. For a breakdown of the factors increasing inequality in the 1980s (where the action really is), see DiNardo, Fortin, and Lemieux, "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semi-Parametric Approach".
2. To Dan Heck: I would worry about citing inequality as a reason for the slow recovery, as Joseph Stiglitz does. I believe (and Paul Krugman, who always agrees with Stiglitz, also believes) that this is a case of taking an issue you feel strongly about and assigning it too much importance. Inequality is bad bad bad, yes. But is it the reason for the slow recovery? No, not really. There just isn't evidence there. Inequality is not the source of all of our problems. Economics doesn't always give us neat moral answers like that.
Unfortunately this sort of talk is the liberal version of the conservative obsession with low taxes. What's the solution to everything? Lower taxes! Well, it would be equally wrong to suggest that the source of all our ills is inequality just because we don't like inequality.
Dan is right that the recession is all about lack of demand, but that's not really about inequality. You can have lack of demand in a perfectly equal society.
3. There are lots of other things we can do to help the working poor that have fewer negative effects than increasing union power. Don't take this as me opposing increasing union power, but it's only one piece of the puzzle. Raising the minimum wage (some, not a huge amount) and increasing the generosity of the EITC would be a great start. Increasing the generosity of programs aimed at the poor like food stamps might reduce inequality, but also has some problems of its own (reducing incentives to work, etc.), so those types of policies are trickier.
4. I don't really like the dichotomy of "government is the solution" vs. "people are the solution". In the case of unions, the ability of workers to start and join unions is strongly tied to laws the government passes. That is to say, government has a lot to do with how powerful the people can be.
5. As economics Nobelist Jim Heckman has said, the most important constraint in the economy is that you can't choose your parents. The evidence that inequality begins at birth is very, very strong. Test score gaps, and health gaps, are visible from the very early stages of life. This means that if we are serious about combating inequality, we have to focus on early interventions. I would say that everything else discussed above, as well as policies like affirmative action for college, are small potatoes in the grand scheme. Early health and education interventions -- notably, high-quality universal pre-K -- would have the biggest impact. These programs reduce educational inequality, reduce crime, lower teen pregnancy, and pay for themselves many times over given the benefits (see Heckman's work). This is the real ballgame, and it's President Obama's best idea.
I could have more to say, but that's it for now.
Woohoo! A real economist :) And thanks for the replies.
I'm glad you brought up Krugman vs Stiglitz. I confess, I do think that history is a morality tale, but I'm not so sure that Stiglitz is 'guilty' of the same. I think there is a great conversation to be had on the philosophy of science here. At any rate, I think we can both easily agree that we should be disciplined in how we look at economics, and we certainly shouldn't assume that the economy happens to work the way we'd like it to. I would argue that I'm not drawing these conclusions based on how I'd like things to be, but based on the evidence, but that my story (just like yours and everyone else's) makes prior assumptions that can be questioned.
I was going to add a piece to this about the demand shortfall also being solvable by rich people consuming more. They could start building pyramids, for example, and that could also address the demand shortfall. So I'd say that you're right that these problems could conceivably persist under conditions of total income equality, and I'd add that they could conceivably be resolved while maintaining high income inequality. However, we know that the rich have a higher propensity to invest than to consume. I think you could tell a general diminishing marginal utility of consumption story here, to justify making this a central feature of a model. And we know that the rest of people have a higher propensity to buy things than to save for retirement. Given these factors, I think the inequality story maps rather easily onto demand shortfall story.
At any rate, I think Krugman does an admirable job of teaching and re-teaching basic macro to the world. Super important. But I'm quite comfortable in the company of Stiglitz :) From everything I've read of Stiglitz and Krugman, I think Stiglitz has the better judgment and the more probing mind. I can't keep up with either of them, but I know which one I trust more.
Where should the church sit in all this? Where COULD the chuch sit in on this? Church labor unions? As a liberal believer, I don't want the church MORE into politics. It should be a political safe-haven. That no matter who the Caesar is, I know who Jesus is. I know that the church's food bank is always open. I know that they will fight inequality by preaching love, forgiveness, and acceptance for all. But should it raise it's voice and say, "Gov't, pay your people more. People, band together again, get your money." Money and church is always a slippery slope. I say if there was less cronyism in unions, then we would wouldn't be so against them in 2013. But as they were (and some still are) so corrupt, as you pointed out, I would argue that some think the church should step in to fill this union void. I just don't know. I really don't want more corruption in the church, and money and power do that to everyone, including Christ's Bride. Thoughts on this take?
1. Let's don't conflate "labor movement" or "solidarity of the working class" with "unions". As we Christians don't conflate "righteousness" with "Law". We're not going to go back to the '30's, no.
2. Let's don't conflate "a healthy economy" with "a strong recovery". Lots of things are missing from the metrics our leaders are using to evaluate situations and solutions ... I would say that is the root of the problem right there. Look at the awkwardness around Blodget saying "this is unfair".
I just hear a (liberal) specialist say that Headstart programs have had zero impact on the education/ crime prevention/ etc. issues they were supposed to help. It would be tragic if we noticed the problem (the pre-K disparity of environment as a major cause of poverty/ crime/ inequality) and only compounded it by decreasing the best pre-K environment available, namely, PARENTS. Universal high-quality pre-K seems certain to dramatically shrink the role of parents in our society.
I'm not sure of the scholarship on this issue but I'm curious what you think about this "angle."
Evidence is mixed on Head Start, but I think the most recent evidence suggests that it has positive effects: http://www.people.fas.harvard.edu/~deming/papers/Deming_HeadStart.pdf. Some smaller, more expensive programs have been shown to have really large positive effects, but it's questionable if you can scale them up and keep the quality high. But that should be the goal.
As for shrinking the role of parents, if it improves outcomes, I don't see why that's a concern. Two things: first, the people who are most helped by these programs are generally children of poor, often single parents. From a policy perspective, we WANT to reduce their influence on their kids. That may sound bad, but that's the way I think about it. Having said that, my second point is that some of these high-quality programs, like Perry Preschool, included components designed to involve the parents and improve their parenting -- things like home visits by child development experts.
Your claim that parents are the best pre-K may be true for educated, stable parents, but it just isn't true for the kids most at risk. This is reinforced by the evidence on most educational interventions, which suggest they have the largest positive impact for kids with poor, uneducated parents. For those kids, substituting more school for less parental involvement is a positive.
Let me just clarify one thing. I agree that parents are the most important variable here. But it's the very fact that parents are so important that justifies intervention. If parents are extremely important, and they vary widely in quality, and you can't do anything about who your parents are, then intervention is justified and necessary, in my view. I don't mean in any way to diminish the importance of parents. I just don't think "importance" implies that you don't intervene, even if it means reducing their influence. I think the opposite is what's implied.
I get this, I really do. It's a real dilemma. That's the reason for public school, etc.--because just educating your own creates too great a disparity.
Yet each step to even out the raising of children, and to institutionalize it, puts real pressures on families to parent LESS. If "reducing their influence" means "create society-wide disincentives for parents to spend time with their own children," then yes, I think the "intervention" could make the problem worse. It's almost like saying, "Some people aren't getting as many vegetables as others, so let's take away all the vegetables and replace them with a vitamin pill that can be distributed to everyone." We then act surprised when the vitamin pill doesn't quite do the job that the vegetables were doing, and that the number of people who can afford to do what's really healthy (eat vegetables) has decreased, not increased.
OK. I'll have to keep thinking about this. I have a HUGE bias toward the personal/ local/ familial over the institutional/ program/ professional, and so I keep my ears perked for those studies that suggest that even those whose parents suck, benefit more from a grandmother/ aunt/ brother than from being put in an assembly-line classroom at an ever earlier age.
Of course we have to care about those things that "improve outcomes," but I happen to think that institutions (including all schools, public and private) have a habit of gaming the "outcomes" to measure the very things that they CAN provide, but overlook the things that they can't.
A resource: http://www.amazon.com/All-You-That-Labor-Transformation/dp/0814741126/ref=sr_1_1?ie=UTF8&qid=1375142575&sr=8-1&keywords=melissa+snarr
Your bias is not unfounded, and the issue you bring up about gaming results is a real one. In this case, however, I think it would be hard to argue that's what's going on. I say this because Head Start and other preschool programs have actually been found to have little lasting effect on test scores (which is usually the most accessible measure for people to study), and the lasting effects come on things like crime, pregnancy, etc., which are harder to pick up in research because you have to wait until the kids are adults. So if they're gaming things here, they're doing it in a very weird way.
Hi Jamin,
Thanks so much for this! Very helpful.
To add only one clarification. My word choice in the post was very deliberate. That is, I don't want to claim that we need to increase union power. I don't know enough to make such a clear and strong recommendation. What I said was that I'm looking for "resources in the labor movement." Times change. The workforce is more global. Etc. My interest in the labor movement is that it wrought significant social, political, and economic change outside of the government and how it formed, at various times and places, partnerships with the civil rights, peace, and environmental movements. Can some popular movement like this be recovered to address our current crises? That's my question and interest.
Thanks! Encourages me. I really do want to do something--just never sure that the political/ institutional/ programmatic is the best "something."
Nice. I think Stiglitz's book "The Price of Inequality" is helpful here. And so is his NYT article: "Inequality is Holding Back the Recovery."
To your point on unions: yes, they matter. The attack on them has been an important part of increasing inequality. And they are working on creative ways to have this kind of impact again. I hope we live up to our potential, and our mission, to help fix this.
You'll note that one of the latest target of GOP attacks have been public sector unions, one of the few areas that, though they generally operate under somewhat different laws and conditions, unions have maintained a reasonable percentage of membership across the country. And the tactics are interesting. They point to the benefits public sector workers have, which used to be pretty low to middle of the road compared to private sector, and incite jealousy because the non-unionized private sector workers have lost many of those benefits.
And so far it's been a fairly successful tactic. Instead of people asking why they don't those benefits, a significant portion have been eager to strip them from public sector workers. The approach of setting people against people, whether it's against public sector workers (mostly teachers, firemen, police, etc.), against "immigrants", against "race" (usually appropriately coded these days), against "gays", and the rest still seems to be a pretty effective tactic. We can argue that the returns are diminishing, but they aren't diminishing all that rapidly. I think "academics" also show up on that list. ;-)
Unions, especially unions supported by law, are the only mechanism we've found to date to give workers an effective collective voice and stand some chance against the more powerful voices often arrayed against them. Yes, as human institutions they are as subject to corruption as any other institution. But private corporations are often corrupt. Politicians are often corrupt. It's something we always need to fight against, but it's not anything we can escape. Labor unions haven't been notably more corrupt than any other institution.
Yes, there are other forces involved. No, traditional labor unions are not a panacea and also need to evolve (with government support in the form of laws, etc.). But collective bargaining under an effective rule of law remains the best approach we have for achieving a little greater share of the productivity gains we've experienced over the past 3-4 decades.
I don't know what the answer is, that's what I'm currently puzzling about. A couple of random thoughts.
First, I don't think there is one route of action for the church. I think any given church or Christian can choose between a few different things. For example, a church might elect to create an alternative community and economy of mutuality. Christian anarchist and new monastic communities would go in this direction. For many other churches most of their members are going to be deeply embedded in the American workforce. These churches might elect to, in their local context, as a form of social justice and solidarity, support these workers in their efforts to address workplace and wage issues. The church could, for example, walk a picket line or provide material support during a strike/protest action. Or they could just use their votes to vote consistently with the middle and lower classes. Finally, the church could just stay out of class struggle and aim at providing locations of spiritual support and life-affirming community.
Second, my interest in the labor movement is broader than labor. I'm mainly interested in how the labor, peace, civil rights, and environmental movements converged in various synergistic ways. Social change was wrought by these movements and I'm wondering, if income inequity continues to increase, if these movements might become resurgent with something like Occupy Wall Street being the first of many coming waves.
It often isn't :) That just happens to be what I know more about.
Thanks Dr. Beck. I appreciate seeing all the trails where Christianity has freedom to act in this area.
Proposition: In a country whose poorest quartile is materially better off than the corresponding quartile in just about any other country on the planet, the modern labor movement is fueled primarily by covetousness, and its means are intimidation, coercion, and violence.
By all means, let's use Christianity as a platform for advocating its resurgence.
Proposition: In a country where the richest 1% has 40% of the nation's wealth the corporate oligarchy is fueled primarily by covetousness, and its means are intimidation, coercion, and violence.
By all means, let's use Christianity as a platform for advocating its continuing exploitation.
:-)
The main issue I have with unions are their extremely unreasonable pension demands. They seem to have circa 1960s expectations of what their retirement should look like. If you look at a city or organization in financial distress (Detroit, the Postal Service, LA not so long ago), it seems that 9 out of 10 times, the major money sucker is funding some kind of pension program. Likewise, on a national level the largest money suckers are and increasingly will be the national equivalent of a pension program - social Security and Medicare. The problem with these systems is that it creates an expectation in the worker that the company or the government will take care of them in their old age and there is less incentive to save and responsibly handle their own investments during their working years. The government and/or the company makes a promise to the worker that takes no consideration of economic changes. How can Detroit have predicted that the bottom would fall out of the auto industry and its tax revenues would evaporate? How could Franklin Roosevelt or some of the other architects of our social aid programs have predicted that humans may eventually all live to be 95, the birthrate (and thus the taxable workforce) would drop, medical costs would sky rocket, and the overall US economy would become less of a powerhouse relative to Asia and Europe.
Certainly, some of this can be covered by increasing taxes on the rich, but even that can't predict a major recession or heaven forbid a depression. And yet, even if that happens and revenues evaporate, companies and the government are still responsible for covering pensions. It's not fair or sensible to shove the lion's share of the risk on either the company or the individual. A safety net should exist but people should be heavily encouraged to take control of their own finances and retirement planning.
Who the Sam Hill is suggesting anything remotely like what your last statement intends? Seriously, Richard, that's a retort without a retort, irony or no.
Ontarah,
A couple points
1 - If you look at the cities or organizations in financial distress what you generally see are organizations which raided their pension systems for operating expenses long ago, never put the money back, and now lack the funds to do so. A properly designed pension system is funded when the workers are paid as part of an overall compensation system agreed to by both parties. This money is then put in a separate fund, managed by professionals, and grows until it is needed to pay benefits. If a city is using current revenue to pay pensioners look for the financial trickery in the past.
2 - Although average lifespans have increased significantly since the implementation of Social Security nearly all that increase has come through reduced infant and early child mortality rather than extended lifespans once an individual begins to collect SS has barely changed. Again, look for the financial trickery in the past. In the 80's Reagan wanted to reduce income tax rates and increase military spending without needing to sell treasuries on the open market. What he and Congress did was to increase the payroll taxes earmarked for social security so that it would collect more in revenue than it paid in benefits and use that excess money to purchase T-Bills which could fund government operations. For the last 30 years this is what has been happening but now those bills are coming due. When people say "Social Security is going broke" what they really mean is "The government doesn't want to honor the obligations it made to the social security system"
3 - Individual responsibility and the 401(k) as a retirement vehicle has been a huge failure and essentially a large tax cut for the already well off. Because of stagnating wages for the past 40 years despite increasing productivity most individuals have simply not been in a position to save on their own. That is why government systems are so important. To protect the least well off among us and ensure everyone a basic level of dignity.
qb,
So your perspective is that as long as I am better off than a peasant living in rural china (or a factory worker in Bangladesh, or a beggar on the streets of mumbai) then any attempt on my part to increase the share of my own production which I am permitted to keep is simply covetousness? And any effort on my part to organize with my fellow workers who share many intrests in common consists of intimidation, coercion, and violence.
Please tell me, what percentage of my own product do you think is fair for me to be permitted to enjoy? And recall that the alternative is not that production going to aforementioned peasant, factory worker, or beggar. It would instead go to my boss, who already has more than he knows what to do with.
1. Those "professionals" managing the pension are responsible for investing it. That's kind of my point. There is no financial manager on earth who can guarantee that an investment will return enough to pay out 60% or 70% of wages all through a retiree's remaining years. We think of "pension" as being somehow magically secure if we just leave it there to accrue. But it's no more secure than a 401K. It's still invested by *somebody* and manged by *somebody.* This is all an argument of who should assume the risk if the investment doesn't produce the "promised" results. Pensions aren't a saving account. There is risk involved. And when we talk of cities raiding pension funds, you have to ask the question, *why* are they having to raid pension funds? Probably because their tax revenue is no longer sufficient to support all the services and current employee wages people expect. Sure sometimes there is fraud. But more often, the answer is that people expect more in payout in the form of services, wages, and pensions than the institution is currently making in tax revenue.
2. Those promises were ill advised because nobody can predict the state of government finances in 30 years. It is simply not worth riding our government into bankruptcy or insolvency just to keep ill advised promises from 30 years ago. People are so determined to to see these promises kept that they are gutting spending in education, infrastructure building, job training, and new hiring to maintain Medicare and Social Security. What we will end up with is a lot of old people expecting returns on promises with an unskilled, poor workforce not capable of providing the taxes to support them.
3. Stagnating wages is a whole other thing. I agree in pushing for a living wage. I'm not specifically advocating for a 401K model. I'm saying that *no* government or company can possibly realistically promise its workers that they will be taken care of indefinitely because no one can predict what bad management, economic downturns, or upheavals might happen. People need to stop thinking of Social Security, pensions, and Medicare as being a comfortable guarantee that will be there no matter what. There is *no* such guarantee to be had in any system anywhere.
But these Governments are often taxing the rich at a far lower rate than the middle class and poor. Why pit head start against retires, when both can have what they need if the rich just pay a comparable tax rate to the rest if us?
qb's ire was directed precisely at the UNION culture (and its institutional representatives, and those who actively support them and their coercive goals), not the individual. And here's prima facie evidence, from a self-identifying Blue-Dog Democrat (Detroit's emergency manager, Mr. Kevin Orr), of the effects of union covetousness as a primary driver of fiscal disaster and catastrophic civic degradation:
http://www.jewishworldreview.com/cols/will080313.php3#.Uf-31RbgRRc
By the way, the very idea that, paraphrasing you, "some third party should decide what percentage of YOUR own product YOU should BE PERMITTED to enjoy" is sad - anathema to the American experiment - and represents a cascade of deeply unfortunate, breathtakingly patronizing assumptions about property rights. It's not my job to tell you what percentage you should be allowed to keep, much as it is not men's place in the church to give women permission to take on this or that role. It's all patronizing, patriarchal BS.
qb