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The Power of Labor

David Broder in the Washington Post decries the decline of labor unions.

The economic effects of that trend are well documented. In the just-published update of their annual volume, “The State of Working America,” Lawrence Mishel, Jared Bernstein and Sylvia Allegretto of the Economic Policy Institute chart the decline of union membership from roughly one-quarter of the workforce in the late 1970s to barely one-eighth today.

“This falling rate of unionization has lowered wages, not only because some workers no longer receive the higher union wage, but also because there is less pressure on non-union employers to raise wages,” they write. And the gap is large. In 2003 the average blue-collar union job paid $30.76 an hour in wages and benefits, compared with $18.11 for the nonunion job.

According to the Bureau of Labor Statistics, (not on their web site—email me if you want the spreadsheets an economist there sent me) unionization peaked in 1953 when 26.9% of the workforce was unionized. That number had fallen to 18.6% in 1980. During those years, average compensation of workers rose in real terms from $10.65 an hour to $20.03. (Data in 2001 dollars taken from the same Employment Policy Institute that Broder quotes. Here’s the source). In 1980, the BLS changed the way they collected the unionization data and started a new series in 1983. Since 1983, unionization has fallen from 20.1% of employment to 12.9%. During that time, according to the Employment Policy Institute, average real compensation in 2001 dollars rose from $20.67 to $24.79.

Somehow, over the last 50 years, while unions have become a less important force in the labor market, workers have managed to raise their wages and do better. This is one of the great mysteries of life. How can it be possible? It is not unrelated to the question as to how workers manage to earn so much more than the minimum wage. What protects workers from greedy employers?

The simple answer is that there’s more than one place we can work. Without unions, without minimum wages, workers thrive because of the competition of employers for our skills.