Tuesday, January 27, 2009

Want A Thriving Middle Class?

Robert Reich has a post over at TPM Cafe where he advocates strong unions as a means of reviving the long-term prosperity of the American economy.

Why is this recession so deep, and what can be done to reverse it?

Hint: Go back about 50 years, when America's middle class was expanding and the economy was soaring. Paychecks were big enough to allow us to buy all the goods and services we produced. It was a virtuous circle. Good pay meant more purchases, and more purchases meant more jobs.

At the center of this virtuous circle were unions. In 1955, more than a third of working Americans belonged to one. Unions gave them the bargaining leverage they needed to get the paychecks that kept the economy going. So many Americans were unionized that wage agreements spilled over to nonunionized workplaces as well. Employers knew they had to match union wages to compete for workers and to recruit the best ones.

Fast forward to a new century. Now, fewer than 8% of private-sector workers are unionized. Corporate opponents argue that Americans no longer want unions. But public opinion surveys, such as a comprehensive poll that Peter D. Hart Research Associates conducted in 2006, suggest that a majority of workers would like to have a union to bargain for better wages, benefits and working conditions. So there must be some other reason for this dramatic decline. But put that question aside for a moment. One point is clear: Smaller numbers of unionized workers mean less bargaining power, and less bargaining power results in lower wages.

It's no wonder middle-class incomes were dropping even before the recession. As our economy grew between 2001 and the start of 2007, most Americans didn't share in the prosperity. By the time the recession began last year, according to an Economic Policy Institute study, the median income of households headed by those under age 65 was below what it was in 2000.Typical families kept buying only by going into debt. This was possible as long as the housing bubble expanded. Home-equity loans and refinancing made up for declining paychecks.

But that's over. American families no longer have the purchasing power to keep the economy going. Lower paychecks, or no paychecks at all, mean fewer purchases, and fewer purchases mean fewer jobs.

I would add: Dr. Reich didn't mention the provisions of Taft-Hartley that allow states to ban closed shops (in so-called "right to work" states), but repealing those parts of Taft-Hartley would go a long way to getting Southern workers into unions.

Bonus: Unionizing the South, where most of the "right to work" states are, would get Southern working-class voters voting for the Democrats, reliably, every single election.

Imagine grateful Alabamans, Georgians, Mississippians all voting gratefully for the party that helped them organize and improve their lot in life.

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