The Union Difference: A Case Study

8 Things About The Conscience of a Liberal #5
What I Learned from Paul Krugman's The Conscience of a Liberal

The decline during the Great Divergence in union membership is largely based on the decline of membership within the manufacturing sector from a healthy 39% in 1973 to just 13% in 2005. That said, the importance of manufacturing to our economy has eroded in the face of globalization. We are now a largely service based economy. These workers are underrepresented by union and their unionization could be a key component in an economic recovery. The highlight the potential of increasing the unionization of the service sector, Krugman compares GM in 1968 with Wal-Mart in 2005.

Facts About General Motors in 1969
(All dollar amounts have been inflation adjusted.)

• The CEO was paid 4.3 million dollars.
• Production line workers averaged around $40,000 a year.
• Benefit packages were generous and included health and retirement benefits.
• The workers were considered solidly middle class.
  

Facts About Wal-Mart in 2005

• The CEO was paid 23 million dollars, more than five times what the GM CEO made in 1969.
• The pay of your typical, non-supervisory Wal-Mart employee is around $18,000, less than half what the line workers were making at GM in 1969.
• Very few workers at Wal-Mart receive benefit packages, and most packages are stingy.
• Many Wal-Mart employees live in near poverty condition, if not in outright poverty.

As Krugman says ...

(A) company like Wal-Mart, which doesn't face foreign competition, should be an even better target for unionization than are manufacturing companies. Think how that would change the shape of the U.S. economy: If Wal-Mart employees were part of a union that could demand higher wages and better benefits, retail prices might be slightly higher, but the retail giant wouldn't go out of business - and the American middle-class would have several hundred thousand additional members. Imagine extending that story to other retail giants, or better yet to the service sector as a whole, and you can get a sense of how the Great Compression happened under FDR.