Decline of Unions Redistributes Income; Corporate Profits Soar

By Jillian Berman

Corporate profit has been soaring for years at workers' expense and a decline in union membership is to blame -- not a rise in technology, a new study found.

The jump in corporate profit over the past few decades can be explained largely by a decline in union membership over the same period, according to a study by Tali Kristal, a sociologist at the University of Haifa in Israel. The boost in companies’ bottom line comes at workers’ expense, Kristal wrote in an email to The Huffington Post.

“It’s a zero sum game: whatever is not going to workers, goes to corporations,” Kristal said. “Union decline not only increased wage gaps among workers, but also enabled capitalists to grab a larger slice of the national income pie at the expense of all workers, including the highly skilled.”

The findings, published Thursday in the American Sociological Review, add a new dimension to the debate over income inequality in the U.S., suggesting that policies aimed at boosting unions may help. Corporate profit soared to a record high share of the economy earlier this year, according to Bloomberg, while workers' wages have remained largely stagnant. The rise in profit comes as union membership has dropped to a record low.

Kristal’s findings contradict claims that increased computerization largely accounts for the boost in corporate profit at the expense of workers. Kristal argued that the rise of machines is only indirectly to blame, because technology has reduced union workers by replacing some union jobs with automation, directly increasing corporate profit.

“If we want all workers to benefit from the economic growth, then policymakers can initiate some steps to strengthen unions, such as pro-union reforms of labor law, and deterioration with employers' illegal anti-union tactics that increasingly spread over the last decades,” Kristal wrote.

Indeed, other analyses, including one from the left-leaning Economic Policy Institute, have found that that the drop in union membership in recent decades correlates with the rise in inequality during the same period.
“The decline in union members is directly related to the stagnation of wages for working people,” Brandon Rees, acting director of the Office of Investment at the AFL-CIO, an umbrella labor organization for many unions, told HuffPost. “Economic growth has been going somewhere and its been going to the top 1 percent.”

That dynamic could be problematic for the U.S. economy as a whole, Rees said, as middle-class Americans burdened by debt and slow wage growth buy less and hold back the recovery.

“One of the reasons why we are suffering from anemic growth today is because consumers have been reducing their debt levels, but wages are not keeping up with productivity growth,” Reese said. “The rights of workers to join a union has helped create the middle class in this country and the middle class has been hammered in the past 20 years as unions have declined.”

This article originally appeared in The Huffington Post on June 9, 2013

Krugman and Sachs, leading economists, take on Walker's attacks on the working middle class

Nobel Prize winning economist writes:
What’s happening in Wisconsin is...a power grab — an attempt to exploit the fiscal crisis to destroy the last major counterweight to the political power of corporations and the wealthy. And the power grab goes beyond union-busting. The bill in question is 144 pages long, and there are some extraordinary things hidden deep inside.

The article is linked here.

Watch this video:

Columbia University Professor Jeffrey Sachs: inequality is greater than it has ever been in America, the middle class is in rapid decline and Republican governors want amazingly to crush unions that are one of the few institutions that speak and fight for the working middle class

Income inequality soars!

Inequality is growing in the United States. In recent decades, the bulk of income growth has gone to the top 10% of families. That was not always the case. Throughout most of the 20^th Century, and particularly following World War II when more than 1/3 of all workers were represented by unions, the bottom 90% claimed a much larger share of income growth than they have in recent years.

The chart below from Economic Policy Institutes's’s new interactive State of Working America Web site, compares the distribution of income growth over two periods.

Between 1948 and 1979, a period of strong overall economic growth and productivity in the United States, the richest 10% of families accounted for 33% of average income growth, while the bottom 90% accounted for 67%. The middle class grew and the overall distribution of income was stable for these three decades.

In an extreme contrast, during the most recent economic expansion between 2000 and 2007, the period that led up to the Great Recession, the richest 10% accounted for a full 100% of average income growth. During the same period, average incomes for the bottom 90% of households actually declined.

College, Jobs and Inequality

In an editorial today the New York Times writes that a college education is not a cure-all for joblessness and income inequality, although it does correlate with higher incomes and lower unemployment.

Searching for solace in bleak unemployment numbers, policy makers and commentators often cite the relatively low joblessness among college graduates, which is currently 5.1 percent compared with 10 percent for high school graduates and an overall jobless rate of 9.8 percent. Ben Bernanke, the chairman of the Federal Reserve, cited the data recently on “60 Minutes” to make the point that “educational differences” are a root cause of income inequality.

A college education is better than no college education and correlates with higher pay. But as a cure for unemployment or as a way to narrow the chasm between the rich and everyone else, “more college” is a too-easy answer. Over the past year, for example, the unemployment rate for college grads under age 25 has averaged 9.2 percent, up from 8.8 percent a year earlier and 5.8 percent in the first year of the recession that began in December 2007. That means recent grads have about the same level of unemployment as the general population. It also suggests that many employed recent grads may be doing work that doesn’t require a college degree.

Even more disturbing, there is no guarantee that unemployed or underemployed college grads will move into much better jobs as conditions improve. Early bouts of joblessness, or starting in a lower-level job with lower pay, can mean lower levels of career attainment and earnings over a lifetime.Graduates who have been out of work or underemployed in the downturn may also find themselves at a competitive disadvantage with freshly minted college graduates as the economy improves.

When it comes to income inequality, college-educated workers make more than noncollege-educated ones. But higher pay for college grads cannot explain the profound inequality in the United States. The latest installment of the groundbreaking work on income inequality by the economists Thomas Piketty and Emmanuel Saez shows that the richest 1 percent of American households — those making more than $370,000 a year — received 21 percent of total income in 2008. That was slightly below the highs of the bubble years but still among the highest percentages since the Roaring Twenties.

The top 10 percent — those making more than $110,000 — received 48 percent of total income, leaving 52 percent for the bottom 90 percent. Where are college-educated workers? Their median pay has basically stagnated for the past 10 years, at roughly $72,000 a year for men and $52,000 a year for women.

A big reason for the huge gains at the top is the outsize pay of executives, bankers and traders. Lower on the income ladder, workers have not fared well, in part because health care has consumed an ever-larger share of compensation and bargaining power has diminished with the decline in labor unions.

College is still the path to higher-paying professions. But without a concerted effort to develop new industries, the weakened economy will be hard pressed to create enough better-paid positions to absorb all graduates.

And to combat inequality, the drive for more college and more jobs must coincide with efforts to preserve and improve the policies, programs and institutions that have fostered shared prosperity and broad opportunity — Social Security, Medicare, public schools, progressive taxation, unions, affirmative action, regulation of financial markets and enforcement of labor laws.

College is not a cure-all, but it will certainly take the best and brightest minds to confront those challenges.

Main street's been in recession for years!

Barbara Ehrenreich writes that far removed from Wall Street, most Americans have been living in their own personal recession for years.

Read the entire Washington Post op ed.

The nation's richest families have a lot to celebrate tonight!

The nation's richest families have a lot to celebrate tonight.

For the remaining 95% of us there is not a lot of good economic news to celebrate as we enter 2008.

The Congressional Budget Office's (CBO) recently updated its authoritative data series on household incomes (1979-2005). Its latest report reveals a sharp and unprecedented increase in income inequality.

Total household income grew $1.1 trillion in the 2003-05 period. But despite strong productivity growth, these gains have not been shared broadly. Almost two-thirds (63%) of the gain in household income from 2003 to 2005 went to just 5% of the nation’s wealthiest households. those making more than $150,000 annually.

This increase in income inequality (both pre- and post-tax) as measured by the change in the shares of income going to different income classes, was greater from 2003 to 2005 than over any other two-year period covered by the CBO data.

An amazing $400 billion in pre-tax dollars was shifted from the bottom 95% of households to those in the top 5% (all income data in this report are inflation adjusted and in 2005 dollars).

By 2005 the top fifth held a larger share of income (both pre- and post-tax) than everyone else in the bottom 80%.

On a pre-tax basis in 2005, the top 1%, with 18.1% of total income, held a much larger share of income than the bottom 40% of households, which only received 12.5

Had income shares not shifted as they did, the income of each of the 109 million households in the bottom 95% would have been $3,660 higher in 2005.

For more than a decade elite opinion makers, including the Milwaukee Journal Sentinel editorial board, have argued that income inequality was growing because the global economy rewarded education. Stemming the alleged "brain drain" of four year college graduates and increasing their percentage of the workforce has become a centerpiece of Wisconsin's economic development strategy.

If education was the key to increasing incomes, inequality would have declined over the past 30 years as Americans have increased their level of educational achievement. From 1970 to 2004, the percent of college grads nearly doubled in the U.S. to almost 30% of the adult population, while the share of income going to the bottom 90 percent decreased by almost 15 percent!

We have become more unequal as we have become more educated!

Income inequality has grown because the distribution mechanisms that have historically worked to ensure more equitable outcomes, strong unions, progressive taxation, labor market policy, and regulation have largely been dismantled over the past thirty years, a victim of the nation's 30 year romance with"free market" economics. Under the alluring guise of economic liberty, laissez faire policies allow powerful corporations and wealthy individuals to manipulate market outcomes. As a result corporate profits, CEO compensation and income inequality have soared to record heights.

If we are serious about reducing economic inequality, we need to adopt policies that ensure that economic prosperity is shared broadly. These would include making it easier for workers to organize unions (including extending this right to the University of Wisconsin faculty); indexing the minimum wage to the CPI; legislating protection for homeowners facing foreclosures; enacting universal healthcare and progressive tax reform (including closing corporate tax loopholes); insisting that all developments receiving public subsidies pay the prevailing wage and hire locally; and regulating the mortgage and financial sectors whose recklessness has brought the economy to the verge of a recession.

If the Wisconsin's legislative bodies and the United States Congress fail to enact policies that address the nation's growing economic insecurity and income inequality, most of us won't have much more to celebrate in 2008 than we do tonight.

Very rich getting richer, much, much faster-leaving the rest behind

The New York Times' David Cay Johnston reported yesterday that income inequality continued to soar to heights not seen since the days of the robber barons, noting that:

"... the total 2005 income of the three million individual Americans at the top was roughly equal to that of the bottom 166 million Americans...."

Johnston also wrote:

The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows.

The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher.

The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003.

The report is the latest to document the growing concentration of income at the top...."