Editorial: The Multiple Effects of Economic Uncertainty

  • Union supporters march on Labor Day to protest low wages on Sept. 4, 2017, in downtown Chicago. The recent Supreme Court ruling that says public sector workers can't be forced to pay fees to unions could weaken labor organizations and limit their political activism. (Nancy Stone/Chicago Tribune/TNS)

Tuesday, July 10, 2018

Despite a long economic expansion and low unemployment, the lot of the American worker is not a happy one — at least not for a significant portion of those workers.

That is a reasonable conclusion to draw from a new study by the Organization for Economic Cooperation and Development, as described by The Washington Post in Thursday’s Valley News. The OECD, which comprises 36 advanced or advancing nations, is a leading source of international economic data and research. Among the lowlights in the 2016 data for the U.S.:

Greater income inequality and a larger share of low-income residents than almost any other advanced nation.

Unusually high levels of job turnover due to layoffs and firings.

Greater difficulty in finding a new job when firings and layoffs occur, and longer time frames for displaced workers to recover their earnings when they do find a new job.

Workers’ portion of national income dropped by 8 percentage points from 1995 through 2013, faster than anywhere in the group of countries studied except for Poland and South Korea.

This kind of economic uncertainty could be playing out in the current baby bust, as reported by The New York Times last week. The American fertility rate is at a record low for the second year in a row, a source of concern to many rapidly graying states, including Vermont and New Hampshire. To find out why more people are choosing to have fewer children or not have them at all, the Times commissioned a survey by Morning Consult of a nationally representative sample of men and women ages 20 to 45. Many factors play into the low birth rate, especially that in an age of increased equality between the sexes, many women view motherhood as one option among many rather than as an obligation. But among those who said they did not plan to have children, 23 percent cited as a reason being worried about the economy; 24 percent said they could not afford a house; 13 percent cited student loan debt; and about a third pointed to unaffordable child care. In sum, they worried that their economic future was cloudy and were reluctant to make the commitment involved in bringing a child into the world.

The prevailing theory to explain rising income inequality centers around the effect of market forces — technological advances that have concentrated in better educated, high-income workers the skills necessary to make the best use of these new tools, leaving the rest of the workforce not merely behind but in the dust.

But a recent paper produced by three Princeton economists and one from Columbia points to another reason as well. As described in a Times column Sunday by Susan Dynarski, a professor at the University of Michigan, the scholars analyzed newly available data going back to the 1930s, tracing the rise, heyday and then steady decline of unions. They concluded that unions historically played a key role in holding down income inequality throughout the economy, not merely for their own members. While the economists were not able to fully explain the phenomenon, they speculated that several factors might be at work: nonunion companies paid more because they feared unionization of their workforce; unions lobbied for increases in the minimum wage and sought to hold down executive salaries; and they also advocated for broader access to health care.

Currently, union workers enjoy a 20 percent premium in wages over their nonunionized counterparts, a percentage that has held steady for decades. And the biggest benefits accrue to the unskilled labor force.

In a sane political environment, lawmakers would conclude that the way to shrink inequality would be to make it easier to join unions, not harder; and put into place policies that promote economic security, rather than erode it, such as investing in affordable child care; constraining levels of student debt; and promoting the building of more affordable housing. None of those seem likely at present.

And as Dynarski points out, last month’s Supreme Court decision banning “agency fees,” in which public employees who are represented by a union but choose not to join are assessed a fee to cover the costs of collective bargaining, is likely to weaken unions further. The economic data strongly suggest that if that happens, income inequality will get even worse.