On where we are now and why we need labor unions

From today's New York Times:

The Great Divide

The 1 Percent Are Only Half the Problem

One reason the left plays down the growing skills-based gap is that it accepts at face value the conservative claim that educational failure is its root cause. But the decline of labor unions is just as important. At one time union membership was highly effective at reducing or eliminating the wage gap between college and high school graduates. That’s much less true today. Only about 7 percent of the private-sector labor force is covered by union contracts, about the same proportion as before the New Deal. Six decades ago it was nearly 40 percent.

The decline of labor unions is what connects the skills-based gap to the 1 percent-based gap. Although conservatives often insist that the 1 percent’s richesse doesn’t come out of the pockets of the 99 percent, that assertion ignores the fact that labor’s share of gross domestic product is shrinking while capital’s share is growing. Since 1979, except for a brief period during the tech boom of the late 1990s, labor’s share of corporate income has fallen. Pension funds have blurred somewhat the venerable distinction between capital and labor. But that’s easy to exaggerate, since only about one-sixth of all households own stocks whose value exceeds $7,000. According to the left-leaning Economic Policy Institute, the G.D.P. shift from labor to capital explains fully one-third of the 1 percent’s run-up in its share of national income. It couldn’t have happened if private-sector unionism had remained strong.

Reviving labor unions is, sadly, anathema to the right; even many mainstream liberals resist the idea. But if economic growth depends on rewarding effort, we should all worry that the middle classes aren’t getting pay increases commensurate with the wealth they create for their bosses. Bosses aren’t going to fix this problem. That’s the job of unions, and finding ways to rebuild them is liberalism’s most challenging task. A bipartisan effort to revive the labor movement is hardly likely, but halting inequality’s growth will depend, at the very least, on liberals and conservatives better understanding each other’s definition of where the problem lies.

--Timothy Noah, author of "The Great Divergence: America's Growing Inequality and What We Can Do About It"

The Great Divide is a series on inequality — the haves, the have-nots and everyone in between — in the United States and around the world, and its implications for economics, politics, society and culture. The series moderator is Joseph E. Stiglitz, a Nobel laureate in economics, a Columbia professor and a former chairman of the Council of Economic Advisers and chief economist for the World Bank.