Automotive strike in the US deals a blow to equality – 10/30/2023 – Paul Krugman

It’s not officially over yet, but the UAW (United Auto Workers) appears to have won a significant victory. The union, which began holding strikes on September 15, now has tentative agreements with Ford, Stellantis (which I still see as Chrysler), and finally General Motors.

All three agreements involve a salary increase of approximately 25% over the next four and a half years, in addition to other significant concessions.

Auto workers are a much smaller portion of the workforce today than they were in Detroit’s heyday, but they are still a significant part of the economy.

Furthermore, this apparent victory for the union comes on the heels of important achievements by the labor movement in other sectors in recent months, especially a major agreement with UPS, where the Teamsters, the American truck drivers’ union, represent more than 300,000 employees.

And maybe, just maybe, union victories in 2023 will be a milestone on the way back to a less unequal nation.

A little history you should know: Baby-boomers like me grew up in a nation that was much less economically polarized than the one we live in today.

We were not as middle-class a society as we liked to imagine, but in the 1960s we were a country in which many blue-collar workers had incomes considered middle class, while wealth disparities were much smaller than they have since become.

For example, CEOs of top companies were paid “only” 15 times more than their average employees, compared to more than 200 times more now.

Most people, I suspect, believed—if they thought it at all—that a relatively middle-class society had gradually evolved from the excesses of the Gilded Age and was the natural end state of a mature market economy.

However, a revealing 1991 paper by Claudia Goldin (who just won a much-deserved Nobel) and Robert Margo showed that a relatively egalitarian country emerged not gradually but suddenly, with an abrupt reduction in income differences in the 1940s — what the authors called the Great Compression.

The initial understanding undoubtedly had much to do with the economic controls of the war. But income gaps remained narrow for decades after these controls ended — overall income inequality didn’t really take off again until around 1980.

Why has a relatively flat income distribution persisted? No doubt there were several reasons, but certainly an important factor was that the combination of war and a favorable political environment led to a huge increase in unionization.

Unions are a force for greater pay equality — they also help enforce the “outrage constraint” that used to limit executive compensation.

On the other hand, the decline of unions, which now represent less than 7% of private sector workers, may have played a role in the arrival of the Second Gilded Age in which we now live.

The great fall of unions was not a necessary consequence of globalization and technological progress. Unions remain strong in some nations; In Scandinavian countries, the vast majority of workers are still members of trade unions.

What happened in the United States was that workers’ bargaining power was held back by the combination of a persistently weak labor market, slow recoveries from recessions, and an unfavorable political environment — let’s not forget that early in his term, Ronald Reagan crushed the air traffic controllers union, and his government was consistently hostile to union organizing.

But this time it’s different. Research by David Autor, Arindrajit Dube and Annie McGrew shows that a rapid recovery that drove unemployment to near 50-year lows appears to have empowered low-wage workers, producing an “unexpected compression” in wage gaps that eliminated about a quarter of the increase in inequality over the last four decades.

The strong labor market has likely encouraged unions to adopt more aggressive bargaining positions, a stance that so far appears to be working.

By the way, I constantly encounter people who believe that the recent economic recovery has disproportionately benefited the rich. The truth is exactly the opposite.

The political landscape also appears to be changing. Public approval of unions is at its highest point since 1965, and a president, Joe Biden, first joined the picket line of autoworkers in Michigan in September to show support.

Nothing that’s happening now seems remotely big enough to produce a second Great Compression.

However, it may be enough to produce a Small Squeeze — a partial reversal of the large increase in inequality since 1980.

Of course, this doesn’t have to happen. A recession can undermine workers’ bargaining power. If Donald Trump, who also visited Michigan but spoke at a non-union store, returns to the White House, you can be sure that his policies will be anti-union and anti-worker.

And Mike Johnson, the new speaker of the House, has a near-perfect record of opposing union-supported policies.

Therefore, the future is, as always, uncertain. But maybe, just maybe, we’re seeing America finally return to the kind of broadly shared prosperity we used to take for granted.

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