Tyler Cowen has a thoughtful response to the meme that "[m]any intelligent Democrat bloggers are converging upon," namely, that income inequality and the ever-increasing share of productivity gains wrested by the rich are related to the increasing power of the upper class, and solutions will lie in increasing the power of the working class. Tyler takes a limited view of what that might mean, focusing his reply on the inadequacies of German unions and noting the general decline in union density across the industrialized world. I've got to a run to an event -- appropriately enough -- on challenges to America's growth, but a few quick points:
• It seems to me that Tyler elides the relevant issue, which is that the top 10 percent have captured virtually all the recent gains in productivity, and wages have stagnated for the middle class. Some attribute this in whole or in part to so-called "superstar economics", deunionization, globalization, immigration, redistribution policies, chutzpah, divine right, skills-biased technical change, education differentials, and any other number of fully, partially, or not-at-all plausible culprits. But few doubt that it's happening, and it seems like something economists and political thinkers should be trying to address.
• Tyler's undoubtedly right that unions are in steep decline. Organized Labor in the US has borne the worst of it, but that doesn't obviate the trend. In Europe, however, those density declines have come without large, correspondingly steep increases in inequality. Not so here. Nevertheless, unions may well not be the answer. It certainly seems they should be given a fair chance to compete and workers should be freed from the current system of heavily-corrupted NLRB elections, but it's certainly possible that once that's done, it'll turn out that they've no answers.
• On Germany more specifically, it's worth saying that the Social Democrat leanings of Germany and their expansive safety net make unions somewhat less important than they are here, simply because they've less benefits to wrest or guarantee. When most benefits are centrally guaranteed, unions don't need to grab them in piecemeal negotiations with individual employers or industries. Further, as one of Tyler's links (pdf) points out, the structure of German bargaining means that while only one out of five employees is in a union, two out of three work in an establishment covered by employer bargaining.
• Tyler also makes reference to Germany's coming two-tiered economy that's evading areas of union density. His supporting link (pdf) doesn't appear to offer much evidence for that, but I'll grant him the premise. What's also true is that America is moving into just such an economy, and doing so without Germany's expansive safety net. The Bureau of Labor Statistics expects the next ten years to see the most job growth in retail sales, followed by nursing, postsecondary teachers, customer service reps, janitors, waiters and waitresses, food preparation and serving, home health aides, nursing aides and orderlies, and managers. Only postsecondary teachers require advanced degrees. The rest of those jobs are all low wage, low paid, few benefits, and largely non-union. This doesn't strike me as a reassuring future for our economy, and if it's one we're comfortable predicting, it's one we should spend more time thinking about how to prepare for.
