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How Unions Could Stimulate the Economy

by Sarah Thorngate 


Tags: Politics, EFCA, unions,

DissentCoverA bill known to few outside of organized labor and big business lobbies could be a key player in reinvigorating America’s economic activity, writes Michael Payne in Dissent. The Employee Free Choice Act, which was introduced to Congress on March 10, would make it easier for workers to form unions. By doing so, it could help restore the financial viability of the struggling middle class, making it an integral part of the solution to the economic crisis. And it wouldn’t add a dime to public spending.

During the middle of the 20th century, unions brought us the middle class whose spending allowed our economy to expand. But now the middle class is shrinking; wages for the two-thirds of Americans paid by the hour have been stagnant for the past three decades. Payne pins the housing collapse on this trend.“This is not a generation of selfish materialists trying to live higher on the hog than their station in life warrants. It is, rather, a generation of Americans unable to reproduce even the modest lifestyle of their parents and turning to unsustainable debt and untenable mortgage terms as a last-gasp attempt to hold on to a modest standard of living.”

Wage stagnation correlates strongly with the decline in the percentage of workers represented by a union. This decline is not for lack of interest in unionization; according to the AFL-CIO, sixty million non-union workers want a union (business lobbies put the number at a still substantial twenty-five million). The high demand is unsurprising, since union workers make 30% more in total compensation than their non-union counterparts.

The reason union membership has stagnated in spite of demand is that the unionization process is heavily weighted in management’s favor, as T.A. Frank demonstrates in the Washington Monthly. This is where the EFCA comes in. The bill would restore some balance to the employer-employee relationship by increasing penalties for illegal union-busting tactics, allowing for binding arbitration if negotiations stall and letting workers choose the system for electing a union.

Citing unions' ability to increase middle class incomes, several economists support the EFCA. Lawrence Mishel, president of the nonpartisan Economic Policy Institute, says, “The president has said that we need to go from ‘borrow and spend’ to ‘save and invest.’ I think we need to go to ‘earn and spend.’” Economists like unions because, unlike federally mandated, one-size-fits-all labor standards, collective bargaining is a flexible, situation-specific tool—workers have a vested interest in negotiating a compensation package that will ensure the companies' financial success as well as their own.

A new report from the Center for American Progress found that just a 5% increase in the number of union workers would inject 49 billion dollars into the economy. “There is another sector that is really too big to fail,” writes Terence Samuel for The American Prospect. “The people who will rebuild the economy are workers with enough money in their pockets to take care of all their needs without going into huge debt.”

Sources: Dissent, The Washington MonthlyReutersCenter for American ProgressThe American Prospect