Tommy Mottur & Mac Pitts
The Great Depression and two world wars in the beginning of the 20th century served as stabilizers for the United States economy. In the early 1900's, the bottom 90% of earners only received 50% of total income, whereas the top 1% earned almost 25% (Emmanuel Saez, UC Berkeley). This inequality was rapidly diminished through the 1930's and 40's, leading to a middle of the century period of relative economic equality. However, today the top 1% of earners in the US economy again earn >20% of total income, with the bottom 90% only receiving 49%. So what happened?
This was brought on by a variety of factors. Increased globalization and technological advancement has given large corporations an alternative to simply hiring high-wage demanding Americans. Additionally, tax rates for the top income recipients have declined since the 40's, allowing them to accumulate more wealth. However, another factor that shapes this trend is the decreased unionization membership since this time of relative equality.
Here is a graph showing the share of the labor force that are members of a workers union as well as the share of income going to the top 10%. We can see a sharp increase in unionization followed by a slow decline that is mirrored in opposite by the share of income received by the top 10%.
Then conversely, we have this graph:
This could be presented as a converse point, seeing as if our point (That the decrease in unionization is an underrepresented trend that is hurting American workers) holds true, then we should see other negative effects brought on by the decrease in unionization. However, here we have a negative correlation, with the decreased unionization occurring simultaneously with increased minimum wage rates. Is this caused by economic factors, or is it brought on by social and ideological progress?
- Why were the lines so similar in the 1940’s? What caused them to diverge?
- How has the minimum wage graph affected Union Membership over the years?
- What are some economic policies that can be implemented to close the gap between the union membership and share of income going to the top 10%?
The correlation here is clear, and with income inequality being a heated and well debated topic, why is this trend not getting more attention?