Abacus: An Old Solution to a Modern Problem

sarote pruksachat

It is no secret that the wealth gap is growing in the United States. In fact, the US has the highest level of income inequality of any G7 nation as shown in a recent PEW research study. This issue is one that, in the eyes of many, could be solved with regulatory or re-distributive policy; specifically, higher taxes on the wealthy or a higher minimum wage. However, there is much political contention around either of these options. Republicans, hesitant to create a welfare state or to increase the size of the federal government generally, are opposed to taxing the rich. At the same time, they see an increase to the minimum wage as a regulatory policy that would increase unemployment. This contention to both ideas creates a problem, as according to the Institute of Politics at the Harvard Kennedy School 64% of adults under 30 believe the wealth gap has grown since they were born. So, what then is the solution?

The goal of any policy aimed at reducing income inequality should be to put money in the hands on the middle class. But minimum wage updates or progressive bipartisan tax reform is looking as unlikely as ever.  As former secretary of labor, and professor of economics at UC Berkeley Robert Reich puts it, “The real job creators are the vast middle class and the poor—when they have enough money in their pockets. That’s the only way out of the vicious cycle we’re now in.” Yet, the minimum wage, as described by Oren Levin Waldman in Challenge, has been stagnating for years. In 2008 the federal minimum wage was 6.55 an hour, which when adjusted for inflation is no higher than what it was in 1960. When the government is constantly offering tax cuts to the wealthy (as seen in 2017 tax cuts) and are also unwilling to raise the minimum wage there needs to be a solution that fits the ideological differences of both sides.

This is where the effects of unions could help fight income inequality in a way that is agreeable to both sides of the isle. There is a clear correlation between the erosion of union power and increasing income inequality. According to Heidi Shierholz of the Economics Policy Institute, the number of workers that are part of a collective bargaining agreement has dropped by about 15% since 1979. That drop can be associated with a large share of the growth in income inequality, “around 13-20% for women and 33-37% for men” She goes on to mention that this drop in coverage can largely be associated to the corporate opposition that has limited workers freedoms to unionize. So, while unionization has been an enemy to corporations, it could become a friend to politicians and the people on both sides who are looking to fight income inequality. Important to note is that this might already be coming to fruition , as according to a recent Gallup Poll, public approval of unions is up 68%, the highest figure in almost 50 years, while party support of unions has also risen in each group by 16 to 17 points.

Unionization works as a solution because it creates an environment for collective bargaining. Where conservatives are concerned about a minimum wage increase because of unemployment, or over-regulating business, collective bargaining allows for these issues to be handled at an industry or business specific level. At the same time progressives are pleased by the bettering of worker benefits and possible wage increases that are agreed upon through collective bargaining. These increases should also come with more minimal fears of unemployment by allowing firms to agree on a point that protects their bottom line. Further, according to Marcus Dittrich and Andreas Knabe in the Journal of Institutional and Theoretical Economics, increases to the minimum wage under union coverage have trickle up effects for those wages already above the line. Increasing minimum wage because of unionization has the potential to raise tax revenues as well. One benefit to this policy is that it offers an alternative to a tax and spend approach that keeps the money away from the government. By passing legislation that protects workers right to unionize, income inequality could be fought for at the grassroots level.  

However, this isn’t the whole story, unions have often been controversial in the US because of a commitment to free and open markets. Unions often create real barriers for people looking to work. Dues and fees that are collected by unions, and are required for membership, are inherently regressive (meaning they effect the poorer members more dramatically) and create barriers to entry that eliminate the right to work on merit alone. Beyond this, unions create market inefficiency, as collective bargaining agreements make it harder to fire and hire workers. This can often create glaring inefficiency as the least productive workers end up sticking around longer than they should. These barriers often raise costs and have real negative impacts of the work that can get done. The heyday of union power in the early 1940s and 50s is long gone and for many, the prospect of joining or even forming a union simply does not carry the weight it used to. This is especially true when unions have lost so much bargaining power. That said, legislation regarding workers right to organizer has become even more important recently in the face of public anti-union spouts by some of the nation’s largest corporations.

Amazon has been under fire for not only doing everything in their power to suppress unionization, specifically in Alabama, including the hiring of anti-union consultants to make sure their facilities would remain compliant. Even in the face of the dehumanizing, wildly publicized work conditions. Allowing Amazon to stomp out perceived dissent, going as far as out right firing workers who tried to organize and physically tracking workers while on the job to understand coalitions,  even in the face of these conditions speaks to the power corporations have accumulated as opposed to the position of workers and even the government. As the wealth gap grows, addressing the troubling work conditions, lack of benefits and stagnating wages is essential to correcting this downslide. Unionization offers a real solution, but has time and time again been quelled and buried by corporations looking to preserve their bottom line. With politicians on both sides beginning to recognize this troubling reality for workers, a more unionized and equitable future seems to be in the cards. specifically in Alabama