March 6, 2024
Labor Unions and Inequality in the United States
Henry S. Farber
Professor of Economics, Princeton University
Labor Unions and Inequality in the United States
Henry S. Farber
Professor of Economics, Princeton University
Introducer: Micky Weyeneth/ Speaker Henry Farber
Minutes of the 21st Meeting of the 82nd Year
John Cotton, Old Guard president, called the meeting to order and presided. Frances Slade led the invocation. The minutes of the February 28 meeting were read by Julie Elward-Berry. The attendance at Springdale Golf Club was 115 members and guests. The following guests were in attendance: Howard Graves and Julie Baller Graves (guests of Daniel Shapiro), and Toby Taylor (guest of Patricia Taylor).
Miquelon (Micky) Weyeneth introduced Henry Farber, Hughes-Roger Professor of Economics Emeritus at Princeton.
Farber grew up in Linden, New Jersey, and earned his bachelor’s degree at Rensselaer Polytechnic Institute, his master’s at Cornell, and his PhD in economics at Princeton. He served as a professor at MIT before coming to Princeton to teach economics in 1991, gaining emeritus status last fall. Farber’s research interests include labor unions, worker mobility, and wage dynamics.
After briefly summarizing the history of unions in the United States, Professor Farber provided a synopsis of how inequality is measured, described the role of unions in the economy, and offered his views on what the future of unions might hold.
Unions had a history of episodic growth and decline until the Great Depression, when Congress passed the National Labor Relations Act, which provided a governmental framework for the growth of the labor movement. Unions then entered a long decline in the 1960s, which has continued to the present day, when only six percent of workers are members of unions in the private sector.
Important changes in the economic environment since the 1970s accelerated unions’ decline: the U.S. economy opened to imports of goods beginning in the 1970s, and unions had a hard time competing with goods from lower-wage countries. In addition, employers developed more sophisticated anti-union strategies.
The corporate/labor partnership of the 1940s and 1950s broke down with globalization.
With the increasing mobility of capital, organizing has been handicapped. Unions have not been capable of organizing the competitors to unionized firms.
This has allowed employers to keep workers’ wages low and made it harder for unions to exercise the countervailing power that had benefited workers in the past: Having a union might result in higher wages and affect the regulatory environment (in such matters as minimum wages and health and safety rules).
The increase in inequality is in part a consequence of the decline of unions, particularly, as unions had been important in raising the wages of low-skilled workers.
Professor Farber went on to explain how the distribution of income in the United States has become increasingly unequal. He employed statistical methods to demonstrate that the U.S. has among the highest inequality rates in the developed world and that the level of inequality has increased greatly in the last 25 years. This is undesirable, because too much inequality leads to unrest and inefficiency.
Professor Farber argued that the rise of neo-liberalism gave political weight to the idea that the sole goal of business should be to maximize the return on capital. And, hence, capital should be completely mobile and go where returns are highest, without any consideration of the negative repercussions of that policy.
So, the question for the present is what can be done nationally to strengthen unions?
There has been some bargaining success recently, evident in the UPS agreement and the UAW’s agreements with the big three automakers.
These successes might encourage more workers to be receptive to the idea of voting for union representation.
This opening needs to be aided by policy reform to make new organizing and bargaining on any substantial scale possible. In Farber’s view, this support is of the utmost importance, because a decline in inequality and wage growth for the less skilled would help address the alienation of large segments of the U.S. population and reduce the threat from the new populism.
Respectfully submitted,
Michael Lapp
Miquelon (Micky) Weyeneth introduced Henry Farber, Hughes-Roger Professor of Economics Emeritus at Princeton.
Farber grew up in Linden, New Jersey, and earned his bachelor’s degree at Rensselaer Polytechnic Institute, his master’s at Cornell, and his PhD in economics at Princeton. He served as a professor at MIT before coming to Princeton to teach economics in 1991, gaining emeritus status last fall. Farber’s research interests include labor unions, worker mobility, and wage dynamics.
After briefly summarizing the history of unions in the United States, Professor Farber provided a synopsis of how inequality is measured, described the role of unions in the economy, and offered his views on what the future of unions might hold.
Unions had a history of episodic growth and decline until the Great Depression, when Congress passed the National Labor Relations Act, which provided a governmental framework for the growth of the labor movement. Unions then entered a long decline in the 1960s, which has continued to the present day, when only six percent of workers are members of unions in the private sector.
Important changes in the economic environment since the 1970s accelerated unions’ decline: the U.S. economy opened to imports of goods beginning in the 1970s, and unions had a hard time competing with goods from lower-wage countries. In addition, employers developed more sophisticated anti-union strategies.
The corporate/labor partnership of the 1940s and 1950s broke down with globalization.
With the increasing mobility of capital, organizing has been handicapped. Unions have not been capable of organizing the competitors to unionized firms.
This has allowed employers to keep workers’ wages low and made it harder for unions to exercise the countervailing power that had benefited workers in the past: Having a union might result in higher wages and affect the regulatory environment (in such matters as minimum wages and health and safety rules).
The increase in inequality is in part a consequence of the decline of unions, particularly, as unions had been important in raising the wages of low-skilled workers.
Professor Farber went on to explain how the distribution of income in the United States has become increasingly unequal. He employed statistical methods to demonstrate that the U.S. has among the highest inequality rates in the developed world and that the level of inequality has increased greatly in the last 25 years. This is undesirable, because too much inequality leads to unrest and inefficiency.
Professor Farber argued that the rise of neo-liberalism gave political weight to the idea that the sole goal of business should be to maximize the return on capital. And, hence, capital should be completely mobile and go where returns are highest, without any consideration of the negative repercussions of that policy.
So, the question for the present is what can be done nationally to strengthen unions?
There has been some bargaining success recently, evident in the UPS agreement and the UAW’s agreements with the big three automakers.
These successes might encourage more workers to be receptive to the idea of voting for union representation.
This opening needs to be aided by policy reform to make new organizing and bargaining on any substantial scale possible. In Farber’s view, this support is of the utmost importance, because a decline in inequality and wage growth for the less skilled would help address the alienation of large segments of the U.S. population and reduce the threat from the new populism.
Respectfully submitted,
Michael Lapp