Why Labor Unions Don't Have the Clout They Used To

Episode Summary

Executive Summary: The episode examines why a tight U.S. labor market has not translated into stronger wage growth, focusing on the decline of unions, weaker bargaining power, globalization, and changing labor-market structure. Jared Bernstein argues that tight labor markets and unionization once helped middle- and lower-wage workers share in economic gains, but those forces have faded, leaving wages more unequal and gains less broadly distributed.

Main Topics: Labor-market tightness vs. wage growth (Priority: 5/5): The hosts note that employment is strong and unemployment is low, yet wage gains remain disappointingly modest compared with past recoveries, highlighting a disconnect between jobs data and paychecks. Decline of union power (Priority: 5/5): Bernstein argues that union density has fallen sharply over decades, reducing workers’ bargaining clout and weakening the link between full employment and wage growth. Bargaining power as a wage determinant (Priority: 4/5): The conversation emphasizes that wages depend not only on skills and productivity but also on workers’ ability to negotiate through unions, tight labor markets, and labor standards. Union benefits and spillovers (Priority: 4/5): Union jobs still often provide better wages and benefits, and higher unionization can lift pay standards beyond unionized workers through pattern bargaining and spillover effects. Why organizing is harder now (Priority: 4/5): Bernstein points to aggressive employer anti-union efforts and a well-funded union-avoidance industry as major obstacles to organizing today. Globalization, sector pressure, and wage inequality (Priority: 4/5): Manufacturing and other blue-collar sectors face more global competition, while wage growth appears to be accelerating more for higher-paid workers than for the broader workforce. Future union strategy (Priority: 3/5): The union movement may shift from industry-wide organizing toward place-by-place campaigns, especially in a fissured or gig-heavy economy, though this would likely require labor-law changes.

Key Arguments: Strong labor markets no longer produce the broad wage gains seen in earlier decades because workers have less bargaining power than they used to. Unionization mattered not just for union members but for nonunion workers too, because higher union density helped raise wage standards across sectors. The private-sector unionization rate is now so low that unions have far less ability to create spillover wage effects or pattern bargaining. Employer opposition to unions has become more sophisticated and better funded, making organizing substantially harder. Globalization and sectoral competition, especially in manufacturing, have reduced wage pressure in ways that did not exist as strongly in the mid-20th century. Recent strikes and settlements, such as in Hollywood and Verizon, show unions can still win gains, but these are exceptions rather than the rule. Wage growth is beginning to improve, but gains appear uneven: lower-paid workers may be plateauing while higher-paid workers are accelerating. The flat Phillips curve suggests the traditional relationship between low unemployment and faster wage growth is weaker than in the past.

Data Points: Union membership rate (overall, 2016): 10.7% - Bernstein and the hosts discuss the long-term decline in unionization. Union membership rate (1983): over 20% - Used as a historical comparison showing much stronger union presence in the early 1980s. New York union membership rate: just under 24% - Cited as the highest state-level union membership rate. South Carolina union membership rate: 1.6% - Cited as the lowest state-level union membership rate. Private-sector unionization rate: 7% - Bernstein notes that most workers are in the private sector, where union density is especially low. Period at full employment before 1980: almost 70% of the time - Bernstein contrasts the postwar era with the period since 1980. Period at full employment since 1980: less than 30% of the time - Shows that tight labor markets have been much rarer in recent decades. Union wage premium: about 10% to 15% - Bernstein estimates union workers still earn materially more than comparable nonunion workers. Inflation target: 2% - Bernstein says the Fed has anchored expectations around its inflation target. Unemployment rate mentioned: 4.4% - Referenced as a level where stronger wage growth might traditionally be expected. Nominal wage growth a year and a half earlier: 2% year-over-year - Bernstein describes earlier wage growth as sluggish. Current nominal wage growth: 2.5% to 3% - He says wage growth has improved somewhat more recently. Bernstein composite wage index growth earlier: 2% - He references his own blended wage measure from the prior period. Bernstein composite wage index growth now: 2.8% - Used to show wages are improving, but not uniformly. Blue-collar / non-manager wage growth earlier: 2% - Bernstein separates lower-wage workers from higher-wage workers. Blue-collar / non-manager wage growth now: 2.5% - He says this segment has plateaued in recent months. Higher-wage worker growth: closer to 3% or above - Bernstein warns that gains are increasingly concentrated among the top 20%.

Pivotal Quotes: "Your paycheck is not just a function of how skilled you are or your value added." — Jared Bernstein: Explaining that wages depend heavily on bargaining power, not only productivity. "There is a deep-pocketed, multi-billion-dollar union avoidance industry." — Jared Bernstein: Describing why union organizing has become harder for workers. "I'm worried that there's this wage inequality problem evolving." — Jared Bernstein: Warning that recent wage gains are becoming more uneven across the workforce.

Implications: The discussion suggests future wage gains may stay uneven unless bargaining power improves through unions, labor policy, or a sustained very tight labor market. Listeners should expect continued wage inequality and only limited spillover from current job growth.