Income gap grows as unions decline

To judge from the news, you might think that organized labor was alive and well.

On the West Coast, the slowdown at the nation’s largest ports is coming to an end after lengthy negotiations between unions and employers.

In northern New England, a settlement has been reached between Fairpoint, the telephone company, and its striking workers. A weak company and an underfunded union finally collapsed into one another’s arms.

On the Gulf Coast, refinery workers have been on strike most of February.

In most cases, the unions seem to be fighting off concessions to management rather than pressing for major improvements in wages and working conditions. They also must oppose the increased use of outside, non-union workers.

Unions are not nearly as powerful as they are made out to be. When commentators talk about the financial power in the political arena of big companies and big labor, they give the impression of an equal match, but the facts show employers have far more resources than unions.

And some governors, notably Republicans Scott Walker in Wisconsin and Chris Christie in New Jersey, are cutting back on unions.

About half the states have some form of “right to work” laws, which prevent a union from collecting payment from non-members, even if those people get the benefit of the collective bargaining carried out by the union. Such laws are meant to weaken unions.

The discussion of government raising the minimum wage is a sign of the waning power of unions. Over recent decades, labor gains have been made more by legislation than by collective bargaining.

A lot of attention is paid these days to two issues: the income gap between workers and top corporate executives and the minimum wage.

Thomas Piketty, the French economist who has become the leading critic of the growing income gap, suggests that one way to close it is by imposing taxes that would cap executive pay. That idea is unlikely to gain political traction in the United States, especially with GOP control of Congress.

An alternative is to pull up the bottom by increasing the minimum wage. This move has nothing directly to do with increasing taxes, though its opponents claim that it would increase companies’ costs, thus reducing their sales and costing jobs.

There’s almost no solid evidence to support that view. And the minimum wage – $7.25 an hour – has not increased in more than five years, though corporate profits gained 20 percent a year.

The theory may get it backwards. A higher minimum wage may turn out to cut employer costs. Higher wages reduce employee turnover, which otherwise imposes heavy costs for training and integrating new workers into a company. Low pay also encourages workers simply not to show up.

Studies show that better paid workers are better motivated workers. They do a better job and that can lead to more sales for quality products and services.

Even though Washington seems unable to recognize both the need to keep the minimum wage up to date and the value in improved pay for millions, some states, cities and corporations get the point.

All other New England states, except New Hampshire, have minimum wages above the national level and above Maine. Many other states have higher minimums.

Walmart, one of the countries’ largest employers, has announced it is raising pay. Its CEO said, “We’ll raise our starting pay, and we’ll provide opportunities for further raises based on performance.” New employees will get $9 an hour. Next year, employees will get $10.

Aetna, a major insurer, recently announced big increases for its employees. Trader Joe’s and Costco reportedly pay good wages.

An argument could be made that the market will produce wage increases, so no change in the law is needed. But many companies believe their goal must be to keep wages and benefits as low as possible to enhance profits. With that view, it might take decades for wage increases to be given.

In an interview with the New Yorker magazine, Aetna CEO Mark Bertolini said, “Companies are not just money-making machines. For the good of the social order, these [pay increases] are the kinds of investments we should be willing to make.”

The deep political divisions existing in the U.S. today reveal that Mr. Bertolini’s views are not accepted by many conservatives. But real wages – pay in terms of purchasing power – have barely changed in many years, a sign the private sector acting on its own, without a government-set minimum or effective collective bargaining, is not the solution.

Gordon L. Weil

About Gordon L. Weil

Gordon L. Weil is a former local, state, national and international organization official. He is an author and newspaper columnist.