Sheva Diagne at the Center for Economic and Policy Research (CEPR) wrote a really interesting article on social scientist Tali Kristal’s recent paper, The Capitalist Machine: Computerization, Workers’ Power, and the Decline in Labor’s Share within U.S. Industries (pdf). There are many aspects to explain how automation decreases the income share of workers relative to business owners. But the main way, according to Kristal, is that it leads to lower unionization rates.
The finding isn’t exactly surprising, but the mechanism is. Those industries that were highly unionized are the ones that have been hit hardest by automation. So as automation came into manufacturing, unionized auto plant workers (for example) became non-unionized fry cooks. This hammers home just how important unions were to the shared gains in productivity from the 40s through the 60s. No one can really question this fact. Traditionally, conservatives argued that it was all right because a rising tide lifted all boats. But that just isn’t the case anymore. According to John Schmitt (also at CEPR), from 1979 and 2012, average American worker productivity rose by 85%. But average worker pay rose by only 6%. What’s more, the minimum wage fell by 21%.
There is an obvious question. Why does Canada still have roughly the same unionization level that it had in 1960? After all, America isn’t alone in automation. I think there are two reasons for this: the Taft–Hartley Act and Ronald Reagan. The Taft–Hartley Act made unions far less powerful than they were. And interestingly, it did it in ways that would be unconstitutional if the Supreme Court were at all consistent. Remember, in Citizens United v. Federal Election Commission, the Court found that it would infringe on the constitutional free speech rights of businesses. Well, much of what Taft-Hartley did is stop unions from the right of free association. But I don’t see the Supreme Court ever considering this logic.
As for Reagan, what little power the unions had when he came into power was destroyed by him. It isn’t that he changed the laws. He just stopped enforcing them. And no one (Including our great Democratic presidents) has since changed that. To some extent, the labor movement got what it deserved with Reagan. Carter only barely won the labor vote. And I know, Reagan had some nice things to say about labor while he was campaigning. But it really wasn’t mysterious where he really stood. And just like my brother-in-law, many union members were more interested in going after that mythical welfare queen than in protecting their very real interests. But I still feel sorry for all of them—all of us.
So the big problem is not that union jobs are being lost due to automation. The problem is that the new jobs created are not unionized. For example, there is no reason why Walmart workers shouldn’t be unionized. In fact, in other countries they are. But they aren’t here because the government allows and even encourages it. Somehow, Walmart can make money with unions in Brazil, but would go bankrupt if it had to allow unions here.
There are a lot of things that the federal government could do to decrease inequality in his country. It could, for example, make income taxes more progressive. It could make the payroll tax less regressive. It could use the extra revenue to help the poorer classes. And all of that would do a great deal. But by far the biggest thing that the government could do is to allow workers the right to unionize. Because effectively, that right is dead.