Some Graphs and Comments for Labor Day

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Tony Wikrent, who is Treasurer of the Progressive Democrats of Orange County, and chair of the Caucus’s Progressive Education Action Team, has published a blog post explaining with clear graphs the relationship between union membership and income inequality over the last century. This is particularly appropriate reading on Labor Day.

Tony has given permission for the Caucus to republish this on our web site.

For Labor Day today, David Sirota wrote:

if we hope to ever rebuild an economy that works for everyone, we’re going to need many more workers in unions and a much stronger labor movement.

and posted this graph:

Sirota continued:

This graph comes from the Economic Policy Institute — it shows the relationship between union density and the percentage of national income going to the richest 10 percent of Americans. As you can see, the larger the share of the American workforce that’s unionized, the lower the share of national income goes to the super-rich — and vice versa.

I would like to reinforce Sirota’s point by adding a graph from Thomas Piketty’s Capital in the Twenty-First Centurypage 24.

Clearly, there are four shifts that occur:

  • Around 1928, when income inequality stops rising;
  • Around 1940, when income inequality begins to be overcome; 
  • Around 1945, when this improvement ends and income inequality remains about the same for the next three decades; and
  • Around 1980, when income inequality suddenly begins to worsen.

The first shift Piketty has explained: the stock market crash of October 1929 and the onset of the Great Depression, which destroyed much of the wealth of the top one percent. (In the financial crisis of 2008-2009, by contrast, the Bush and Obama administrations, and the Federal Reserve, pulled out all the stops to prevent the squillionaires from losing, by pouring $29 trillion in the banking and financial systems. Result: unlike the years after the 1929 crash, in the years after the 2009 crash, income inequality continued to worsen.)

The next three shifts I think are even more interesting, if we plot onto Piketty’s graph three events from the AFL-CIO’s Labor History Timeline:

The 1937 strike forced General Motors to accept the UAW as the organized representative of its wage employees, and set the pattern for labor relations until 1980.

The Taft–Hartley Act — the official name is the Labor Management Relations Act of 1947 — was vetoed by President Harry S. Truman. But the Republicans had gained control of both the House and the Senate in the elections of 1946, and passed the bill over Truman’s veto. The Act prohibited unions from engaging in wildcat strikes, solidarity strikes, political strikes, secondary boycotts, secondary and mass picketing, and closed shops. Monetary donations by federal political campaigns to unions were made illegal. Taft–Hartley also allowed states to pass right-to-work laws banning union shops, and required union officers to submit signed affidavits to the federal government swearing that they were not communists and did not support the Communist Party.

Side note: Republican Senator Robert A. Taft of Ohio would go on to lose the Republican nomination  for President in 1952 to General Dwight Eisenhower. Taft’s defeat led to a group of reactionary extremists like Kansas oil tycoon Fred C. Koch, and William Buckley, son of a Texas oil baron, to begin building the modern conservative and libertarian movements. [1]

Reagan’s election as President in 1980 also marks a dramatic shift for the worse in dozens of economic indicators and statistics, such as debt ratios; capital spending as a percent of GDP; government funding of science and technology; production and exports of capital goods; and all the imaginable measures of financialization. Contrary to the fantasies of the Republicans and right wing, Reagan’s election in 1980 clearly marks the decline of the United States as a world power.

Most people can pretty well figure out the causal relationships. If they’re not indoctrinated with conservatism or neoliberlism, that is. (The hostility to organized labor runs deep in these ideologies. In a Mont Pelerin Society Tract dated 1949, Friedrich von Hayek, funded by the Foundation for Economic Freedom among others, wrote, “the question of how the powers of the trade-unions can be appropriately delimited by law as well as in fact is one of the most important of all the questions which we must give our attention.”[2]  Corey Robin has revealed how von Hayek and his collaborator, Ludwig von Mises, both shared and were shaped by, Friedrich Nietzsche’s contempt for Europe’s workers, and enchantment with European aristocrats, in whose image they molded the mythical hero of the capitalist “entrepreneur.”)

If we want to actually fix the problem of income inequality, we have to give back to organized labor the power it had, but which was stripped away by the Republicans’ 1947 Taft-Hartley Act. So far, there are no leading Democrats calling for the Act’s repeal. That has to change.

[1] Heather Cox Richardson, How the South Won the Civil War: Oligarchy, Democracy, and the Continuing Fight for America (Oxford University Press, 2020), pp. 153 ff.
[2] Yves Steiner, “The Neoliberals Confront the Trade Unions,” in Philip Mirowski and Dieter Plehwe, editors, The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective (Harvard University Press, 2009), page 182.