This week an Oxfam report on inequality captured public attention, revealing the staggering fact that 85 people control nearly half of the world's wealth. That data point made headlines (and rightly so), but another chart caught my eye as well: one correlating union membership with inequality.
The data show that U.S. union membership has fallen off by more than 3 million over the last 30 years, while the share of income the top 1 percent of Americans earn has grown from around 10 percent to nearly 22 percent. Oxfam links the two causally: "As laws making it more difficult for unions to organize increased, average wages stagnated, auguring in the trend of rising inequality that has been evident for the past 30 years," the report says.
Of course, just because one thing declines and another increases doesn't mean the two are connected (America's love of disco died while inequality has rose – coincidence?). However, several studies haveexamined this link over the years and have found some connection between the two, but only to a certain extent, and that extent is of great debate.
One of the most often-cited studies, a 2004 paper co-authored by University of California-Berkeley economist David Card, found that a decline in unionization accounted for only about 14 percent of the growth in wage inequality between the richest and poorest workers. Of course, estimates range widely.Another 2011 study found that "the decline of organized labor explains a fifth to a third of the growth in inequality."
The disparate degrees of association between organized labor and wage equality lead to disparate takes on how much action should be taken.
"Unionization has played a role, but it's certainly not the prominent reason why we have seen a wide divergence in income between the top and the bottom," says Aparna Mathur, an economist at the conservative American Enterprise Institute. The bigger issues, she says, are technological advances and the degree to which education has helped some workers keep up with those advances and get better jobs.
Another, more liberal economist takes a different view: Robert Reich, former labor secretary under President Clinton, told the Joint Economic Committee in January that "unions gave the middle class the bargaining power it needed to gain a fair share of the gains from economic growth." He added, "We need to reinvigorate unions, beginning with low-wage service occupations." In recent years, unions have lost some of their strength as jobs – and therefore unionizable workers – in areas like manufacturing disappeared thanks to automation.
It's a question that economists may never settle, and certainly not in whatever brief span of time we now have in which inequality is the hot political topic of the moment. The point is more that inequality is the economic Rorschach test of the moment: business advocates say boosting economic growth is the way out of inequality.
Democrats advocate boosting the minimum wage, while Republicans say reforms to education and welfare would help. All of these might contribute to resolving such a vast, amorphous problem, but every potential solution is so politically charged that it may well be impossible to do anything, even while everyone is talking about it.