Goodbye Unions, Hello Inequality

There has been a trend of union berating that has been present for decades now. It is especially prevalent among conservatives, which is unsurprising, but in my experience also widely held among the mainstream. At the same time there is also a welcome concern about income inequality which has seen dramatic increases. The culprits of rising inequality are numerous and include everything from tax regimes that favour the wealthy, to the effects of increased trade liberalization. Paramount among these however, as well as the focus of this entry is unionization. It is not an accident that declining unionization happened concurrently with increasing inequality.

It may not be initially intuitive why unions contribute to greater equality. As a result of their ability to collectively bargain on behalf of their workers for higher wages, unions have had a strong contribution on maintaining a middle-class. The same middle-class whose gradual demise is lamented today. In fact, union’s representation is heavily concentrated among middle-class workers. This has positive spillover effects for entire sectors, even for non-unionized employees. When unions at one workplace secure higher wages and better working conditions, competing companies are pressured into matching this to ensure they do not loose workers and to discourage their own workers from unionizing. Critics of unions, foremost among them economist Milton Friedman retort that while resulting in higher wages, unions have the deleterious effect of fewer available jobs. It is also widely believed that much outsourcing can be attributed to unions which increase the cost of domestic labour, and make labour abroad for everything from call centres to computer programming more appealing.

There is no question that unions are not perfect. Economic doctrine establishes that there are trade-offs and Mr. Friedman might have had a legitimate claim that unionization has led to less jobs. Having full employment by sending workers to poor conditions might not be desirable either however. To use a brief example, many recent jobs have been created by retail goliath Wal-Mart. Wal-Marts in Ohio held food drives for their employees for thanksgiving because wages were too low for most employees to be able to afford holiday Turkeys for their families. Wal-Mart unsurprisingly has been a flash point for unionization with the company determined to ensure that workers do not unionize. I think many people would argue that these are not the types of jobs and working conditions that should be encouraged. Again, unions are often subject to bad management, ineffectively representing their workers, and are only representing their own interests. When large American unions support the Keystone XL pipeline they are not taking into account the environmental implications, they are simply interested in the jobs it could lead to for their employees. The flip side is that companies repeatedly suffer similar problems but no one advocates for the elimination of corporations. The fact that unions sometimes have problems does not circumscribe their important role in worker representation and helping in an economy-wide manner to greater equality.

While it is difficult to ascertain exactly how much of the upswing in economic inequality is the result of decreasing union presence, researchers at Harvard have tried to quantify this. They used data from the population survey from 1973-2007 in the US, during which time union membership collapsed from 34% to 8% of private sector employees. They conclude that a fifth to a third of growth in inequality during this timeframe was determined by the decline in organized labour. The trend to decreasing unionization has been slower in Canada but like our neighbours in the USA and UK the development has been ever-present. Perhaps one of the most striking visual representations of this trend and its economic effects are found in the following graph from the Economic Policy Institute, a think tank in the US.

The question is why this is happening? And while once again there are several factors, government policy is a significant reason. Instead of taking serious steps to tackle excessive levels of inequality which should include a healthy organized labour movement, policy has been routinely anti-union. Scott Walker the governor of Wisconsin might be the most famous anti-union activist. He is not alone however, so called “right to work” legislation is spreading in the US. The tenants behind right to work are enticing. Most workers do not particularly like having part of their salary taken away in the form of union dues. If workers have the option of opting out of their union as this legislation enshrines many will choose to do so. This law is pernicious because it undercuts the union’s bargaining position and effectively guts all unions in the states which have this law enforced. Canada is not immune from Ideological laws that hamper the middle-class by attacking unions. Russ Hiebert a little known conservative MP from White Rock has introduced bill C-377. This bill had the support of the Conservative caucus but is mercifully being held up and gutted in the Senate. This represents one of the few moments the Senate has been anything other than a wasteful repository for partisan faithful and actually served a purpose. This bill apparently aims to make unions transparent. This sounds great, but is terrible. It imposes extremely onerous requirements that apply to unions and no one else. These include a minimum of 24 different detailed statements, including reporting any transaction over $5,000. These extremely costly requirements would place more burden of “transparency” on unions than any other group in Canada including companies, non-profits, even government departments themselves face less requirements. The fact is this bill is not necessary, by law unions must make annual financial statements to their members and provide necessary financial disclosures publicly, as well as being democratically accountable to their members. Mr. Hiebert ostensibly states that the reason for this bill is because unions receive public funding. Shockingly we are still awaiting the announcement that oil companies and agri-business that receive millions in government subsidies will be under the same scrutiny.

Unions are increasingly under attack accelerating the decline of organized labour that has been taking place for years. Many still view unions as antiquated and archaic, if that is the case than apparently adequate economic equality and a thriving middle class are antiquated as well.