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Opinion Editorial
Monday, September 6, 1999
What Is Behind Increasing Income Inequality?	In a few weeks, the Census Bureau will be releasing its annual report on poverty and income distribution. It will probably show a further increase in income inequality. This is trend that was trumpeted on page one by liberal journalists during the Reagan years. But it has been completely ignored during the Clinton years, even though the trend has accelerated. Among the reasons often given for increasing income inequality is the decline of unionization. That is because union workers historically have had higher wages than nonunion workers. Last year, median weekly earnings for union workers were $659 and $499 for nonunion. Thus the decline in unionization as a share of the labor force from 23 percent in 1968 to 13.9 percent in 1998 may explain some of the slow growth in incomes by those at the lower end of the distribution. A 1991 study by economist David Card estimated that deunionization had reduced the incomes of those in the lowest 20 percent households by 4.3 percent between 1973 and 1987. But a new study from the Federal Reserve Bank of Atlanta finds that deunionization "played at most a minor role" in slow wage growth between 1974 and 1994. The conflicting findings may be explained by the fact that the union wage premium has declined significantly in recent years. In 12 of the last 19 years, nonunion workers have seen greater increases in compensation than union workers. The latest data from the Bureau of Labor Statistics show that in the 12 months through June, nonunion workers have seen their compensation rise 3.4 percent, while that for union workers has risen just 2.7 percent (see figure). There are two reasons for this. First, unionization crippled the ability of many manufacturing industries, such as autos and steel, to survive in the increasingly globalized economy. They had a harder time reducing wage costs, closing uneconomic plants and making managerial decisions that would have helped them compete. Thus it is not surprising that some of the biggest employment losses have been in the most heavily unionized industries. Second, much of the growth in the U.S. economy in recent years has been in the high-tech sector, which has been hostile to union organizing efforts. When workers in this industry already have valuable stock options, flexible hours and excellent medical plans, there is little motivation for them to unionize. Furthermore, the nature of high-tech industry fosters a greater sense of individualism that clashes with the collectivism of labor unions. High-tech workers want to be rewarded for their own output, and see no reason why they should risk their jobs to give less productive workers a raise. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, September 6, 1999. The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C. For more information: Julie Hillrichs, Dallas, TX 972-386-6272 Sean Tuffnell, Dallas, TX 972-386-6272 Joan Kirby, Washington, DC 202-220-3082 Internet: http://www.ncpa.org Home |  Support Us |  All Issues |  Social Security Debate Central |  Contact Us