It’s not officially over yet, but the United Auto Workers appear to have won a significant victory. The union, which began rolling strikes on Sept. 15, now has tentative agreements with Ford, Stellantis (which I still think of as Chrysler) and, finally, General Motors.
All three agreements involve a roughly 25% wage increase over the next 4 1/2 years, plus other significant concessions. Autoworkers are a much smaller share of the workforce than they were in Detroit’s heyday, but they’re still a significant part of the economy.
Furthermore, this apparent union victory follows on significant organized-labor wins in other industries in recent months, notably a big settlement with United Parcel Service, where the Teamsters represent more than 300,000 employees.
And maybe, just maybe, union victories in 2023 will prove to be a milestone on the way back to a less unequal nation.
Historical context
Some history you should know: Baby boomers like me grew up in a nation that was far less polarized economically than the one we live in today. We weren’t as much of a middle-class society as we liked to imagine, but in the 1960s we were a country in which many blue-collar workers had incomes they considered middle class, while extremes of wealth were far less than they have since become. For example, CEOs of major corporations were paid “only” 15 times as much as their average workers, compared with more than 200 times as much as their average workers now.
Most people, I suspect, believed — if they thought about it at all — that a relatively middle-class society had evolved gradually from the excesses of the Gilded Age, and that it was the natural end state of a mature market economy.
However, a revelatory 1991 paper by Claudia Goldin (who just won a richly deserved Nobel) and Robert Margo showed that a relatively equal America emerged not gradually but suddenly, with an abrupt narrowing of income differentials in the 1940s — what the authors called the Great Compression. The initial compression no doubt had a lot to do with wartime economic controls. But income gaps remained narrow for decades after these controls were lifted; overall income inequality didn’t really take off again until around 1980.
Why did a fairly flat income distribution persist? No doubt there were multiple reasons, but surely one important factor was that the combination of war and a favorable political environment led to a huge surge in unionization. Unions are a force for greater wage equality; they also help enforce the “outrage constraint” that used to limit executive compensation.
Conversely, the decline of unions, which now represent less than 7% of private-sector workers, must have played a role in the coming of the Second Gilded Age we live in now.
The great decline of unions wasn’t a necessary consequence of globalization and technological progress. Unions remain strong in some nations; in Scandinavia, the great majority of workers are still union members. What happened in America was that workers’ bargaining power was held back by the combination of a persistently slack labor market, with sluggish recoveries from recessions and an unfavorable political environment — let’s not forget that early in his presidency, Ronald Reagan crushed the air traffic controllers’ union, and his administration was consistently hostile to union organizing.
This time is different
But this time is different. Research by David Autor, Arindrajit Dube and Annie McGrew shows that a rapid recovery that has brought unemployment near to a 50-year low seems to have empowered lower-wage workers, producing an “unexpected compression” in wage gaps that has eliminated around a quarter of the rise in inequality over the previous four decades. The strong job market has probably encouraged unions to stake out more aggressive bargaining positions, a stance that so far seems to be working.
By the way, I constantly encounter people who believe that the recent economic recovery has disproportionately benefited the affluent. The truth is exactly the opposite.
