The Antidote to Income Inequality? Workers Standing Together

Earlier this month, President Obama called rising income inequality the “defining challenge of our time.”  The gap between the rich and everyone else is now the largest since the Great Depression. But many people still view income inequality in the abstract, because it can be tough to put a finger on how it impacts our everyday lives.

In a new Associated Press report, leading economists spell it out clearly. The income gap hurts us all and poses a major threat to the United States economy.

A key source of the economists' concern: Higher pay and outsize stock market gains are flowing mainly to affluent Americans. Yet these households spend less of their money than do low- and middle-income consumers who make up most of the population but whose pay is barely rising.

“What you want is a broader spending base,” said Scott Brown, chief economist at Raymond James, a financial advisory firm. “You want more people spending money.”

In other words, more money flowing to the top hits us all — consumers, workers and businesses — square in the pocketbook.

Income inequality is at record levels. A September New York Times report detailed just how serious the problem has become.

The top 10 percent of earners took more than half of the country’s total income in 2012, the highest level recorded since the government began collecting the relevant data a century ago, according to an updated study by the prominent economists Emmanuel Saez and Thomas Piketty.

The top 1 percent took more than one-fifth of the income earned by Americans, one of the highest levels on record since 1913, when the government instituted an income tax.

The figures underscore that even after the recession the country remains in a new Gilded Age, with income as concentrated as it was in the years that preceded the Depression of the 1930s, if not more so.

One of the primary drivers of income inequality is the declining bargaining power of workers. When unions were at their strongest, working people were standing together to bargain with their bosses for decent wages and fair benefits. As a result, consumer spending increased, people bought homes and cars with the middle-class wages they earned and the economy hummed.

But since the late 70s, union membership has been on the decline, in large part due to an aggressive campaign by corporate bosses to erode the ability of workers to stand together. And guess what? The decline in union membership tracks almost perfectly with the rise of income inequality.

Economic Policy Institute:

To a remarkable extent, the level of inequality—which fell during the New Deal but has risen dramatically since the late 1970s—corresponds to the rise and fall of unionization in the United States.

Pointing out that the decline in workers’ bargaining power causes inequality doesn’t fit with the right-wing, corporate agenda. So conservatives are embarking on a campaign to blame income inequality on things like government regulation and taxes on the rich. That’s like saying the obesity epidemic is the result of healthier food options.

If we’re serious about addressing income inequality, it must start with ensuring workers have the opportunity to stand together to demand big corporations share the enormous profits they’re reaping.

Seeing low-wage workers in fast food restaurants and Walmart rise up to fight for better wages is heartening. Immigrant workers in many industries are doing the same.  Last year, California saw its union membership spike, as workers came together against extraordinary odds to bargain for better wages and benefits.

But more must be done.  As the nation’s leading economists have made crystal clear, our economy hinges on closing the income gap. And closing the income gap won’t happen without workers having the ability to stand together in unions to bargain for a better life.