Could Politics Trump Economics As Reason for Growing Income Inequality?

http://news.osu.edu/news/2014/06/16/could-politics-trump-economics-as-reason-for-growing-income-inequality/

By: Jeff Grabmeier
Published on June 16, 2014

COLUMBUS, Ohio – Most research examining growing income inequality in the United States has focused on economic causes, for seemingly obvious reasons.

But a new study suggests that a different cause – the politically induced decline in the strength of worker unions – may play a much more pivotal role than previously understood.

In fact, the role that union decline has played in growing income inequality may actually be larger than many of the favorite explanations offered by economists, such as the education gap in the United States.

Among their contributions to income equality: unions reduce pay differences within companies and use their influence to lobby on behalf of the working and middle classes, the researchers say.

“The effect that unions used to have on protecting the incomes of middle class and working Americans has been underestimated,” said David Jacobs, co-author of the study and professor of sociology at The Ohio State University.

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Although the decline in union memberships began in the early 1950s, this decline accelerated after the election of President Ronald Reagan,whose policies and appointments to the National Labor Relations Board severely weakened unions, Jacobs said.

Since then, Republican presidents and one Democratic president (Bill Clinton) have followed policies that continued to weaken unions.

According to Jacobs, the effects on inequality have been considerable.

In the 12 years before Reagan’s presidency, from 1970 to 1981, income inequality grew by 4.53 percent. But it expanded by 11.2 percent in the 12 Reagan-Bush years from 1981 to 1992, or by 2.5 times as much.

Inequality grew as much during the Clinton administration, which also implemented policies that hurt unions, Jacobs said.

Of course, a lot happened during this period that may conceivably affect income inequality. But Jacobs and Myers controlled for more than 20 other factors that economists andothers connect to growing inequality. Still, the decline in union strength remained the most important explanation for the increasing income gap.

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“Even education wasn’t nearly as important as union decline.”

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They concluded that unions likely would have lost members inthe 1980s even if there had been presidents supportive of their cause, but the losses would have been less severe.

“After the Reagan turning point, unions no longer had the influence to help contain the acceleration in inequality,” Jacobs said.

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“Unions were also the most effective political advocates for the less affluent before Congress, the president and other elected officials,”Jacobs said. “They ended up helping less prosperous families even if they weren’t union members.”