Krugman: ‘Union Resurgence’ a Vital Part of ‘New New Deal’

by Payson Schwin, Oct 19, 2007

This is a cross post from the Firedoglake blog.

Last week, The Wall Street Journal reported the “richest Americans’ share of national income has hit a postwar record,” and “the rich last had this high a share of total income in the 1920s.” The report is the latest evidence of the consistently widening income gap between America’s super-rich and working poor.

With impeccable timing, economist Paul Krugman leaps into the debate with The Conscience of a Liberal, a necessary book describing the causes of, and possible solutions to, today’s growing income inequality.

And in the book, Krugman rightly argues that “revitalizing unions should be a key progressive goal” because a strengthened labor movement will lead to greater economic fairness.

Krugman describes the political and economic reasons behind the “current disconnect between overall economic growth and the fortunes of typical Americans,” or what he calls the “new Gilded Age.” And he has advice for what the new progressive majority in Congress should do with their newfound power:

My answer is that it should, for the nation’s sake, pursue an unabashedly liberal program of expanding the social safety net and reducing inequality—a new New Deal. The starting point for that program, the twenty-first-century equivalent of Social Security, should be universal health care, something every other advanced country already has.

Krugman, a Princeton economics professor and winner of the John Bates Clark Medal, separates the three eras of income inequality in the United States—the “Long Gilded Age” (the period from the 1870s until the New Deal policies of the 1930s), the “Great Compression” (the 1940s and 1950s) and the “Great Divergence” (the 1970s to modern day).

Central to Krugman’s analysis is the connection between the relative strength of the labor movement and levels of inequality.

The high inequality of the Long Gilded Age, he argues, “partly reflected the weak bargaining position of labor”:

For most of the era, large employers were free to set wages and working conditions based on whatever the job market would bear, with little fear of organized opposition. [19]

But as more and more workers joined unions in the 1930s and 1940s, the middle class grew. And, Krugman points out, “if there’s a single reason blue-collar workers did so much better in the fifties than they had in the twenties, it was the rise of unions.” Membership soared during this time:

At the end of the twenties, the American union movement was in retreat.… But under the New Deal, unions surged in both membership and power. Union membership tripled from 1933 to 1938, then nearly doubled again by 1947. [49]

Increased union membership meant more workers moved into the middle class:

[E]verything we know about unions says that their new power was a major factor in the creation of a middle-class society.… [T]he known effects of unions on wages are exactly what we see in the Great Compression: a rise in the wages of blue-collar workers compared with managers and professionals, and a narrowing of wage differentials among blue-collar workers themselves. [51]

Not only were blue-collar workers earning more, but unions “acted as a restraint on the incomes of both management and stockholders.”

During the period following the Great Compression, the 1950s and 1960s, unions continued to thrive because “labor laws were interpreted and enforced in a way that favored unions.” “And there was often direct political pressure on large companies and top executives who were seen as stepping over the line,” Krugman argues.

Today, that’s no longer the case because the “decline of the unions has removed that moderating influence” on income inequality.

Krugman gets to the reasons why lower percentages of working men and women joined unions in the late 20th century:

Business interests, which seemed to have reached an accommodation with the labor movement in the 1960s, went on the offensive against unions beginning in the 1970s. And we’re not talking about gentle persuasion, we’re talking about hardball tactics, often including the illegal firing of workers who tried to organize or supported union activity. During the late seventies and early eighties at least one in every twenty workers who voted for a union was illegally fired; some estimates put the number as high as one in eight. [150]

But The Conscience of a Liberal isn’t all doom and gloom for working families. The book also offers a blueprint for turning things around.

Krugman reminds us the “2006 election wasn’t an aberration…the U.S. public is actually ready for something different—a new politics of equality.” He calls on politicians within the new governing majority to “seize the opportunity” and foster a “union resurgence”:

Specific legislation, such as the Employee Free Choice Act, which would reduce the ability of employers to intimidate workers into rejecting a union, is only part of what’s needed. It’s also crucial to enforce labor laws already on the books. Much if not most of the antiunion activities that led to the sharp decline in American unionization was illegal even under existing law. But employers judged, correctly, that they could get away with it. [263]

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