Unions and the Middle Class

Although my own personal experience left me with little admiration for the UAW, I've always been sympathetic to the argument that unions helped create our large middle class and allowed it to prosper for many years. Writing in The New Republic, Jonathan Cohn reminds us of this in the context of the fall of the American auto industry.

But, for all of Detroit's mistakes, it is also a victim of something it did right: ensuring a middle-class lifestyle for bluecollar workers. When the carmakers, pushed by unions, agreed to provide workers with a steady level of purchasing power, comprehensive health benefits lasting into retirement, and various forms of workplace rights, they were promising something that all Americans covet.

Cohn goes on to argue that the wages and benefits that were negotiated by the UAW and that ultimately added a devastating cost penalty on the automakers amounted to the creation of a private welfare state that would have been avoided had America opted instead for a system in which middle class benefits had been assured by taxpayers rather than private employers:

In a more enlightened society, after all, government would have made those promises and extended them to all workers, thereby spreading the burden of financing them to all taxpayers. That's how it's done in Europe and in Japan--which, not coincidentally, is the home of Detroit's most successful competitors. But the U.S. government never took that step. So, instead of a public welfare state, we got a private one, administered for only some workers and paid for by their employers. Sooner or later, this arrangement was bound to fail.

Ironically, the current venting and fuming at the generous compensation packages of the UAW reflects a tacit agreement that highly paid union workers should be brought down, when one would think we would be looking for ways to bring everyone else up.

But is the problem that UAW members get too much? Or that everybody else gets too little? There's a broad consensus that, over the last 30 years, real wages for the typical American worker have stagnated--in contrast to the 30 years before that, when unions thrived and real wages doubled.

Is it possible that this trend could be reversed? Cohn thinks so, calling for an approach that a year ago, I might have expected to hear from the farthest fringes of the left, but which I expect will become increasingly mainstream:

It's a model for the welfare state that already exists in other parts of the world and that, as it happens, has been getting a lot of international attention in the last few years. It's the Nordic or Scandinavian model, so named for the part of Europe where it's practiced, and its philosophy is simple. In these countries, government guarantees everybody, even blue-collar workers, most of the things Detroit once guaranteed its workforce--like middle-class wages, full health benefits, and subsidized day care. The government also guarantees nearly full incomes for the unemployed.