All the empirical evidence suggests that minimum wage increases in the range that is likely to take place do not lead to significant job losses. True, an increase in the minimum wage to, say, fifteen dollars an hour would probably cause job losses, because it would dramatically raise the cost of employment in some industries. But that’s not what’s on—or even near—the table.
Meanwhile minimum wage increases can have fairly significant effects on wages at the bottom end of the scale. The Economic Policy Institute estimates that the worst-paid 10 percent of the U.S. labor force, 13 million workers, will gain from the just-enacted minimum wage increase. Of these, 5.6 million are currently being paid less than the new minimum wage, and would see a direct benefit. The rest are workers earning more than the new minimum wage, who would benefit from ripple effects of the higher minimum.
The minimum wage, however, matters mainly to low-paid workers. Any broader effort to reduce market inequality will have to do something about incomes further up the scale. The most important tool in that respect is likely to be an end to the thirty-year tilt of government policy against unions.
I argued in chapter 8 that the drastic decline in the U.S. union movement was not, as is often claimed, an inevitable result of globalization and increased competition. International comparisons show that the U.S. union decline is unique, even though other countries faced the same global pressures. Again, in 1960 Canada and the United States had essentially equal rates of unionization, 32 and 30 percent of wage and salary workers respectively. By 1999 U.S. unionization was down to 13 percent, but Canadian unionization was unchanged. As I discussed in chapter 8, the sources of union decline in America lie not in market forces but in the political climate created by movement conservatism, which allowed employers to engage in union-busting activities and punish workers for supporting union organizers. Without that changed political climate, much of the service economy—especially giant retailers like Wal-Mart—would probably be unionized today.
A new political climate could revitalize the union movement—and revitalizing unions should be a key progressive goal. Specific legislation, such as the Employee Free Choice Act, which would reduce the ability of employers to intimidate workers into rejecting a union, is only part of what’s needed. It’s also crucial to enforce labor laws already on the books. Much if not most of the antiunion activity that led to the sharp decline in American unionization was illegal even under existing law. But employers judged, correctly, that they could get away with it.
The hard-to-answer question is the extent to which a newly empowered U.S. union movement would reduce inequality. International comparisons suggest that it might make quite a lot of difference. The sharpest increases in wage inequality in the Western world have taken place in the United States and in Britain, both of which experienced sharp declines in union membership. (Britain is still far more unionized than America, but it used to have more than 50 percent unionization.) Canada, although its economy is closely linked to that of the United States, appears to have had substantially less increase in wage inequality—and it’s likely that the persistence of a strong union movement is an important reason why. Unions raise the wages of their members, who tend to be in the middle of the wage distribution; they also tend to equalize wages among members. Perhaps most important, they act as a countervailing force to management, enforcing social norms that limit very high and very low pay even among people who aren’t union members. They also mobilize their members to vote for progressive policies. Would getting the United States back to historical levels of unionization undo a large part of the Great Divergence? We don’t know—but it might, and encouraging a union resurgence should be a major goal of progressive policy.
A reinvigorated union movement isn’t the only change that could reduce extreme inequalities in pay. As I mentioned in chapter 8, a number of other factors discouraged very high paychecks for a generation after World War II. One was a change in the political climate: Very high executive pay used to provoke public scrutiny, congressional hearings, and even presidential intervention. But that all ended in the Reagan years.
Historical experience still suggests that a new progressive majority should not be shy about questioning private-sector pay when it seems outrageous. Moral suasion was effective in the past, and could be so again.
The Great Compression, the abrupt reduction in economic inequality that took place in the United States in the 1930s and 1940s, took place at a time of crisis. Today America’s state is troubled, but we’re not in the midst of a great depression or a world war. Correspondingly, we shouldn’t expect changes as drastic or sudden as those that took place seventy years ago. The process of reducing inequality now is likely to be more of a Great Moderation than a Great Compression.
Yet it is possible, both as an economic matter and in terms of practical politics, to reduce inequality and make America a middle-class nation again. And now is the time to get started.
13 THE CONSCIENCE OF A LIBERAL
One of the seeming paradoxes of America in the early twenty-first century is that those of us who call ourselves liberal are, in an important sense, conservative, while those who call themselves conservative are for the most part deeply radical. Liberals want to restore the middle-class society I grew up in; those who call themselves conservative want to take us back to the Gilded Age, undoing a century of history. Liberals defend long-standing institutions like Social Security and Medicare; those who call themselves conservative want to privatize or undermine those institutions. Liberals want to honor our democratic principles and the rule of law; those who call themselves conservative want the president to have dictatorial powers and have applauded the Bush administration as it imprisons people without charges and subjects them to torture.
The key to understanding this paradox is the history I described in this book. As early as 1952—and, it turned out, somewhat prematurely—Adlai Stevenson declared that
The strange alchemy of time has somehow converted the Democrats into the truly conservative party in the country—the party dedicated to conserving all that is best and building solidly and safely on these foundations. The Republicans, by contrast, are behaving like the radical party—the party of the reckless and embittered, bent on dismantling institutions which have been built solidly into our social fabric.[1]
What he meant was that the Democrats had become the defenders of Social Security, unemployment insurance, a strong union movement—the New Deal institutions, which created and sustained a middle-class society—while the Republicans were trying to tear those institutions down.
Stevenson’s characterization of the Republicans was off by a few years. In the years that followed his speech Eisenhower’s “modern” Republicans took control of their party away from the old guard that was still fighting the New Deal, and for the next two decades the GOP was mostly led by men who accepted the New Deal’s achievements. With the rise of movement conservatism, however, the assault on those achievements resumed. The great domestic policy struggles of the last fifteen years—Newt Gingrich’s attempt to strangle Medicare, George W. Bush’s attempt to privatize Social Security—were exactly what Stevenson described: the party of the reckless and embittered trying to dismantle institutions that are essential parts of modern America’s social fabric.
And the struggle has been about preserving our democracy as well as our social fabric. The New Deal did more than create a middle-class society. It also brought America closer to its democratic ideals, by giving working Americans real political power and ending the dominant position of the wealthy elite. True, the New Deal relied on an alliance of convenience with Southern segregationists—but in the end, inevitably, the New Deal ethos turned the Democrats into the party of civil rights and political rights. The Social Security Act of 1935 led, by a natural progression, to the Voting Rights Act thirty years later. Liberalism, in other words, isn’t just about the welfare state: It’s also about democracy and the rule of law. And those who call themselves conservative are on the other side, with a political strategy that rests, at its core, on exploiting the unwillingness of some Americans to grant equal rights to their fellow citizens—to those who don’t share their skin color, don’t share their faith, don’t share their sexual preferences.