1 Boring Old Man

6. The Great Divergence and the Death of Organized Labor:

^{"The Great Divergence coincided with a dramatic decline in the power of organized labor. Union members now account for about 12 percent of the workforce, down from about 20 percent in 1983. When you exclude public-employee unions (whose membership has been growing), union membership has dropped to a mere 7.5 percent of the private-sector workforce. Did the decline of labor create the income-inequality binge?"}
^{"But the Harvard economist Richard Freeman demonstrated in a 1980 paper that at the national level, unions’ ability to reduce income disparities among members outweighed other factors, and therefore their net effect was to reduce income inequality. That remains true, though perhaps not as true as it was 30 years ago, because union membership has been declining more precipitously for workers at lower incomes. Berkeley economist David Card calculated in a 2001 paper that the decline in union membership among men explained about 15 percent to 20 percent of the Great Divergence among men. [Among women—whose incomes, as noted in an earlier installment, were largely unaffected by the Great Divergence—union membership remained relatively stable during the past three decades.]"}
^{" …even as Truman was romancing Big Labor, the Republican Party won majorities in the House and Senate and passed the Taft-Hartley Act over Truman’s veto in 1947. Levy and Temin don’t dwell on this, but in his 1991 book Which Side Are You On?: Trying To Be For Labor When It’s Flat On Its Back, Thomas Geoghegan, a Chicago-based labor lawyer, argues that Taft-Hartley was the principal cause of the American labor movement’s eventual steep decline."}
^{"President Reagan’s 1981 decision to break the air-traffic controllers’ union and to slash top income-tax rates killed off Truman’s 1945 pact entirely. Although Reagan was a onetime union president, he showed little concern when the 1982 recession rapidly eliminated so many Rust Belt manufacturing jobs that the proportion of private-sector workers who belonged to unions dropped to 16 percent in 1985, down from 23 percent as recently as 1979. Reagan’s hostility to unions was further reflected in his choice of Donald Dotson to chair the National Labor Relations Board. Dotson had previously worked as a management-side labor adversary for Wheeling-Pittsburgh Steel, and (presumably with both lips and heart) believed collective bargaining led to "the destruction of individual freedom.""}
^{"Geoghegan’s latest book, Were You Born On The Wrong Continent?, makes this point largely by looking at Germany. German firms, Geoghegan writes,"}
^{"…don’t have the illusion that they can bust the unions, in the U.S. manner, as the prime way of competing with China and other countries. It’s no accident that the social democracies, Sweden, France, and Germany, which kept on paying high wages, now have more industry than the U.S. or the UK. … [T]hat’s what the U.S. and the UK did: they smashed the unions, in the belief that they had to compete on cost. The result? They quickly ended up wrecking their industrial base."}
^{"Geoghegan’s book went to press too soon to report that Germany is now experiencing a recovery that’s leaving the United States in the dust. New York Times columnist David Brooks takes away the lesson that the Germans succeeded by spending less government money than the United States to stimulate its economy (a conclusion that Krugman, his fellow Times columnist, had already labeled "foolish"). Brooks mentions only in passing (and somewhat elliptically) that government policy in Germany is much more supportive of labor; for example, during the recession it paid businesses to keep workers employed (something the United States was willing to do only for state government workers). The idea that pro-labor policies can produce an economy that’s both more egalitarian and more robust—as occurred under the Treaty of Detroit—has, regrettably, become unfashionable."}