Economic Populism: What We Can Do about Ending Wage Stagnation

GELFAND’S WORLD-There is a rumor going around, beginning in the Wall Street Journal and continuing with Daily Kos, that there will soon be a unionized auto assembly plant in Tennessee. The story is that Volkswagen is strongly considering recognizing the United Auto Workers as the representative in their plant.

This is the same plant that narrowly voted down the union a short time ago. We should be careful not to get too excited about this as it's still rumor and there likely will be strings attached. For another, the circumstances may be unique in the southern factory sector. Nevertheless, there is significance, and we should recognize it. 

We begin our discussion with the fact that virtually everybody seems to be acting depressed about the economy, in spite of the fact that employment is in a recovery phase. The problem is that we're still far from having full employment, with a substantial fraction of the growth being in part time jobs. 

The other major issue is that wages have failed to grow, even though the economy has grown. What we're seeing is that old line about the rich getting richer. As for the rest of us, our buying power is declining and our income isn't improving. If anything, there are lots of people making less now than they did at the start of the great recession. 

There is a lot of thinking inside of the box about the problem. Josh Marshall of Talking Points Memo wonders whether we may just be stuck in this condition.  

"The great political reality of our time is that Democrats don't know (and nobody else does either) how to get wage growth and productivity growth or economic growth lines back into sync." 

In other words, stagnant wages may be with us for a long time. Marshall points to global and structural issues along with the decreasing power of labor in the modern American economy. His argument has been getting a lot of play over the past few days. You might characterize it as realism, or you might think of it as despairing. Maybe both. 

But I think that there is another way to look at the whole problem, which is that it is the result of political decisions. Simply put, the ability of workers to organize themselves through unionization was badly hurt in the late 1940s through federal legislation, and the power of right wing propaganda has had an equally pernicious effect over the more recent decades.

I'd like to consider one argument against unionization that is widely repeated among people who would benefit by belonging to a union. As explained to me by a resident of a small city in the upper South, there is widespread anti-union sentiment among people who struggle to earn enough to get by. What is the most common reason that is given?

Union dues. 


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There may be a lot more to the anti-union feelings than that, but the first response by people was that the unions take your money. Is this view reasonable, or just a fashionable rationalization? 

By way of comparison, let's start by considering the federal deductions for Social Security and Medicare. Together, they add up to 7.65%, with an equal amount paid by the employer. If you are lucky enough to be grossing forty thousand a year in the current economy, then you will see a little over $3000 deducted from your pay. 

You will also, most likely, see a substantially higher amount deducted from those same paychecks for your federal income tax withholding. 

So how do union dues compare? 

You can go online and do the research yourself, but a rough estimate can be gained by looking at two big unions, the Teamsters and the United Auto Workers. The UAW just increased their dues to the same percentage as the Teamsters. In each case, dues come to the equivalent of 2.5 hours' salary each month. For a full time worker, this is just over 1.4%. You might view it as one-fifth of the Social Security plus Medicare deduction. Of course, if you are a part-timer and you get charged the entire 2.5 hours, your dues will be a higher fraction of your wages, in proportion to the lost hours you didn't get to work. 

If you look at public sector unions such as the SEIU, the dues are a similar fraction of the total, figure around 1.7%, which is close to the amount paid by Teamsters. 

Another way to look at union dues is that when you come to work on the first day of the month, the time between your arrival and your coffee break goes to the union. What do you get for giving up that first morning's 2.5 hours worth of wages? 

No less an authority than the Wall Street Journal admits that unionized workers make more money and get substantially better benefits. 

The counterargument to the beneficial role of unions seems to be that employers close down unionized plants and move to states with less unionization. You can see that argument in the comments section of the above-linked Wall Street Journal article. 

A little thought should reveal that this argument is based on a set of assumptions that don't have to be true, because the assumption set is based on politics rather than the laws of economics. Since the Taft-Hartley Act was passed in the 1940s, the ability of workers to organize into unions, and the power of unions to engage in strikes, has been substantially limited. Equally important, the enforcement of the rights of workers to organize has been dismal. There is even an industry devoted to fighting off union organizational attempts, which brags about its prowess and effectiveness. 

Let's think outside of the political box for a moment. 

If the more egregious parts of the Taft-Hartley Act were rescinded, that would be a start. 

If employer retaliation against union organizing were punished to the full extent of the law, that would be a start. 

If the federal law were amended to allow for union organizing by "card check," that would be a start. 

If the United States were to abolish the federal rules that allow states to declare themselves as "right to work," which is to say, that employers are not obliged to enforce union shop agreements, that would be a start. 

Put them together, and we have an economic policy that will allow for increasing wages all over the country, for most mid-level earners. 

Voila -- we will have gone a long way towards repairing the current problem with wage stagnation. The fact that it will be done through income redistribution will also be the case, but it will be income redistribution through the give and take of collective bargaining, rather than through taxation. 

It would do for the middle income earner what the minimum wage does for the entry level worker. 

If the major unions want to increase their numbers, perhaps they should set a well known, publicly advertised limit on the amount of union dues. Let's say a limit of one percent for the first ten years of any new union's existence. Link that with collective bargaining gains and tie it to workers' rights. After all, when you read the stories of Walmart employees, you find that getting jerked around over hours and working conditions are right up there with low wages as worker complaints. 

Is any of this even conceivably possible? There is one little inkling of how this could start, based on that auto plant in Tennessee. You may recall that a unionization election failed there, just barely, not too long ago. Some elected officials argued against the unionization plan, and one of the arguments was that Volkswagen would not go for an expansion plan if the workers voted in the union. 

This turns out not to have been true, as Volkswagen has made clear. The union recognition, if it occurs, will be in spite of state government, and in spite of the union's defeat in the organizing election. The reason appears to be that German law and practice makes unions and ownership into a working partnership, and this includes union membership on the corporate board. 

In other words, one element of European practice is on its way to being applied to an American plant, because that plant is owned by a German company. 

The Kos article speculates that Mercedes could follow. 

One plant in one state does not a trend make, but it is encouraging to see even this much progress. If southern workers can learn to view unionization attempts in a positive light based on observed successes, then perhaps there can be some hope that we as a nation can get out of the wage stagnation box. 

The series of legal changes listed above, ranging from a redo of Taft Hartley to federal acceptance of the pro-union "card check" process for union recognition would make for a powerful economic shift. It would also be a great policy for the Democratic Party to run on. It would be that economic populism that the pundits have been searching for, but have been missing because they are stuck within their own little boxes. 

We even have a simple slogan, suitable for a bumper sticker. Repeal Taft Hartley.


(Bob Gelfand writes on culture and politics for CityWatch. He can be reached at [email protected]





Vol 12 Issue 92

Pub: Nov 14, 2014