Why Unions Matter

WHY UNIONS MATTER….Mark Thoma hosts a conversation over at Economist’s View today. First, Stephen Gordon writes about the effect of unions on income inequality:

It’s hard to conclude from this chart that union density matters much when it comes to reducing inequality. For example, look at Germany (where unions play a crucial role in setting wages) and the US (where they are decidedly less important): both have identical levels of inequality of market income. The distribution of disposable income [i.e., income after taxes and government benefits] is lower in Germany because of its redistributive policies, not because unions are more powerful.

Commenter Anne is aghast:

Rubbish, complete rubbish. Unions in Germany are both a reflection of social-economic attitudes and reinforce those attitudes. Unions have been continually and successfully active politically in Germany, continually shaping policy.

“Rubbish” is a little harsh — and as another commenter says, the data here is a little tricky because reunification probably increased German income inequality after 1989 for reasons unrelated to unionization. (If you look only at the former West Germany, inequality in market income is probably lower than in the U.S.) Still, Anne makes a good point: the bulk of the evidence suggests that unionization raises wages modestly, but not immensely. However, if you’re interested in government policies that actively favor the working and middle classes, you need to have some kind of substantial political interest group fighting on their side. That’s Politics 101, and right now unions are pretty much all we’ve got. They aren’t perfect, and they frequently act only in their own narrow self-interest, but without them there’s no organized opposition to the agenda of corporations and the rich. Warts and all, they’re worth supporting until something better comes along.