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Blue Model Blues
Unions Aren’t The Answer

The orthodox liberal theory of economic inequality goes something like this: In the 1950s and 1960s, America was a highly egalitarian and prosperous society, thanks to strong unions, public-spirited CEOs, and progressive taxation. Then, beginning with the Reagan revolution and proceeding through the neoliberal 1990s and Bush tax cuts of the 2000s, conservative policies undid the institutions—particularly labor—that enabled prosperity to be broadly shared. The right path forward, then, is to resurrect them, in an attempt to recreate the more egalitarian economy that existed at midcentury.

This narrative isn’t all wrong. Middle and working class incomes really did grow more quickly in the postwar decades, and a strong alliance between big government, big business, and big labor really did play a large role in making that possible. Where it errs is in assuming that the ensuing policy changes were chiefly a cause rather than an effect of the increasingly unequal economy, and that the institutions of the 1950s can be reconstituted as if nothing has changed.

In the Washington Post, Robert Samuelson (no hyper partisan) concisely explains why a unionist revival—a key part of the blue model agenda—would be unable to counteract the economic transformation of the last half-century:

Many middle-class workers have lost their ability, mostly through unions, to create their own rents — higher wages. In the 1950s and early 1960s, when roughly 30 percent of non-farm workers belonged to unions, this was possible. Companies could pass higher wage increases along to consumers, because many industries were dominated by a few large firms and competition was weak.

Even if today’s unionization rate exceeded 2015’s 11 percent, it would be hard to duplicate this feat. Competition has intensified in too many ways for too many firms: from foreign companies (autos, steel); from the Internet (retailers, movie studios); from deregulation (airlines, trucking and telecom firms). Companies with high labor costs that cannot be recovered in the market are likely to shrink or vanish.

To be sure, private sector unions, unlike their public sector counterparts, are not undermining public accountability and bankrupting entire cities and states. They remain a useful way for workers to prop up their wages on the margins, especially at larger companies in less competitive sectors. But the structure of the 21st century economy means that it is simply impossible for organized labor to act as a guarantor of wage equality on the scale that it was in the blue heyday.

As WRM explained in “The Once and Future Liberalism,” a convergence of globalization, technological change, foreign competition, demographics, and consumer demand have converged to make the blue model unsustainable. That doesn’t mean we can ignore the problem of stagnating wages for people who depended on the old system—indeed, as this election is showing, that is one of the most pressing political problems we face. But overly zealous attempts to double down on an old system—to put the genie back in the bottle—can become a diversion from thinking about where to go next: that is, updating and even re-engineering our institutions for the economy we have now.

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  • Pete

    “Middle and working class incomes really did grow more quickly in the postwar decades, and a strong alliance between big government, big business, and big labor really did play a large role in making that possible. ”

    No, the reason middle class income grew in the post WWII era was becasue America had the only industrial base left standing. And it is this fact which allowed inefficient unions to thrive as much as they did.,

    • Kevin

      That and the catchup effect from Depression and War through the the Western world. The baby boom (throughtheir oaents’ demand) also bid up wages for workers (an effect reversed when the boomers entered the workforce).

    • Jim__L

      You make a good point – but I can’t help but think what might be possible if low-wage countries were to be aggressively unionized. I suspect that would be good for everyone.

      • Pete

        I don’t think so, Jim.

        If low-income countries unionized and raised the cost of labor, jobs would flee. Remember, the only reason jobs go to those countries in the first place is low wages.

        • Jim__L

          I’m the last guy to advocate a dictatorship of the proletariat, but I would like to see healthy unions in every country on earth.

          Oh, and I would also like to see common ownership of the means of production through near-universal use of prudent 401(k) retirement plans. =)

          And have I ever mentioned that I think “from each according to his abilities, to each according to his needs” is about the only humane way to run a family? My 9-year-old doesn’t need to have a job, but he can certainly clean up his room and help set the table. =)

          • Pete

            ” … but I would like to see healthy unions in every country on earth.”

            Really?

            And do you want to see ‘healthy’ unions in every sector of society even after seeing how destructive public sector unions are to the common good?

          • Jim__L

            I think there are good reasons to have grassroots organizations looking after the rights of workers in the private sector.

            Communists have historically targetted union organizers for elimination, as a threat to the power of the totalitarian state. Countries that lacked grassroots worker organizations were far more likely to flirt with communism. I firmly believe that private sector unions are an essential part of civil society and a well-functioning economy.

            The main problem with these unions is the decent life they push for is made impossible by the fact that the workers of other countries do not have similar organizations through which to look after their own interests. Correcting this would go a long, long way to raising quality of life throughout the world, now that the world is mostly industrialized.

            Public sector unions, on the other hand, have a different mechanic — it’s demonstrably too easy for them to get politicians to hand them someone else’s money. I’m all for making them illegal. If workers don’t like that, they should push for their jobs to be privatized.

  • Blackbeard

    The reason we need more unions is because unions are a core Democratic Party interest group. It has nothing to do with wages or inequality.

  • Anthony

    An observation: in order to understand the dynamics of wages (capital/income ratio) perhaps factors like institutions and rules that govern the operation of the labor market ought to be more carefully considered (as well as unions -public/private). That is to an even greater extent than politics, the labor market may not be considered blue/red but a social construct perhaps based on specific rules and compromises. “Where to go next” ought to be cognizant.

  • Jacksonian_Libertarian

    I have no idea what “wage equality” means, it sounds like some leftist 1984 word speak gobbledygook. I think a “fair wage” is whatever an employer and employee decide it is?

    It is the “Feedback of Competition” that provides both the Information and Motivation which forces continuous improvements in Quality, Service, and Price in free markets. Monopolies including the Government Monopoly and Labor Gang Monopolies all suffer from the same disease, the lack of the “Feedback of Competition”. This means that where Labor Gang Monopolies are found extorting monies and benefits with their monopoly on labor, NO improvements get made. This is why Government services Suck, this is why Union workers Suck. Everyone suffers from the unproductive, inefficient, and stagnate monopolies in the economy. Therefore, while there has to be a Government Monopoly to provide the essential services of Defense, Foreign Relations, and Justice, it should be limited to only those tasks that only a government can perform. And all other monopolies, like the Labor Gang Monopolies should be broken up by the anti-trust laws. While the parasitic Union members would suffer a loss, this would be more than made up for by the growth, increased efficiency, and productivity of the economy.

  • Fat_Man

    Maybe national expectations [of happiness] are skewed. As Gregg Easterbrook wrote in “The Progress Paradox,” the typical American is much better off today than a half-century ago, but is typically discontented.

    Shy of that, reviewing Mr. Easterbrook’s book in The Wall Street Journal, Darrin M. McMahon, a professor at Florida State University and author of the forthcoming “Happiness: A History,” warned: “We will never completely resolve the paradoxes of progress by altering our genes or controlling their effects. As the pressure to do so mounts, it may be worth recalling an older paradox: Paradise was not enough to satisfy Adam and Eve.”

    Measured against nostalgic visions of paradise, the present is bound to pale. In New York, where many people begrudgingly acknowledge that things are generally better than they were a decade or two earlier, most will hasten to add that things were even better many years ago.

    Edward I. Koch, the former mayor, recalled the elderly woman he encountered in Coney Island just after he was first inaugurated. “Mayor,” she appealed, “make it like it was.”

    “It never was the way you think it was,” Mr. Koch said he thought to himself.

    Keeping The Faith
    In Government We Trust (as Far as We Can Throw It)
    By Sam Roberts
    http://www.nytimes.com/2004/01/04/weekinreview/04robe.html

    • FriendlyGoat

      What the hell exactly are “national expectations” and typical Americans who are typically discontented? This crap is too deep even for you.

    • White Knight Leo

      I certainly agree that Americans are better off than they were in the 1950s, but they aren’t – in many important ways – better off than they were 10 years ago. That’s the reason for the discontent: living people remember being in better straits a decade ago. Whereas previous generations were being constantly told by their parents about the privations that used to exist, so everyone felt better off.

  • FriendlyGoat

    “That doesn’t mean we can ignore the problem of stagnating wages for people who depended on the old system—indeed, as this election is showing, that is one of the most pressing political problems we face.”

    NONSENSE. OF COURSE YOU CAN. In fact, both this website and the entire conservative movement plans PRECISELY to ignore this problem and—-if possible—-make it worse by enacting more high-end tax cuts. I wouldn’t be so cranky about this if it weren’t true. But there is no evidence anywhere in conservatism or Libertarianism to the contrary. The declining fortunes of the working class gets nothing but lip service about more tax cuts for the ownership class.

    • Anthony
      • FriendlyGoat

        Thanks. From that piece:

        “In the end, it speaks poorly of the state of American politics that many of the most important subjects we should be debating cannot be discussed realistically in the political arena.”

        Nobody really knows what “GDP growth” is. We would be better served to talk about named actual products and services that can grow because somebody (and who?) can buy them. Who does that?

        • Anthony

          Well, FG I thought piece echoed much of what you have been stressing, only more generally. The key takeaway from GDP aspect is the population and productivity component. As I write, four of your favorite combatants are ignoring GDP in Detroit (Fox News Presidential Debate).

          • FriendlyGoat

            Thankfully, I don’t have cable or Fox News. I’ll sleep better without the ramblings of those four. Somebody will tell me the highlights (or low-lights most likely) tomorrow.

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