Most every morning this winter, starting at around 3:30 a.m., pro-union workers having gathered on a stretch of public sidewalk in front of the massive one-year-old Amazon warehouse in Bessemer, Alabama. They stand near a traffic light. They are waiting for the light to turn red – and the opportunity to urge their fellow Amazon workers to vote ‘yes’ in the postal vote that will decide whether they all get a union.
Amazon currently employs over half a million workers in the United States. None of these employees benefit from the protections of a union contract. Workers at the Amazon Bessemer center get up early every morning to change that. Having a union at Amazon, they deeply believe, could make a real difference in their future.
But it’s not just Amazon workers who stand to benefit from the outcome of the Bessemer poll that ends later this month. The votes cast by Amazon workers in Bessemer could change the economic trajectory that has made the United States – over the past half century – the richest nation in the world. Nothing that happens the rest of the year is likely to have more of an impact on America’s excessively wide divide between rich and poor than how the Bessemer vote plays out.
What makes the union vote at Amazon so crucial in bridging the vast U.S. economic divide? Let’s start with the size. Amazon dominates the US economy because no other company has dominated since General Motors led our nation’s economy in the mid-20th century.
In the late 1930s, the American labor movement successfully organized GM with a dramatic sit-down campaign, and this inspiring success sparked a huge increase in the union share of the American workforce. In the mid-1950s, some 35 percent of the country’s workers held a union card. Union contracts came to set the wage standard, with many large non-union employers – like the Sears retail chain – paying workers at prevailing union rates.
Companies like Sears were making good business judgment. In a unionized work environment, companies that don’t pay at levels that at least approach union rates simply can’t hire and keep all the workers they need. A dynamic labor movement, in fact, directly and indirectly “levels” the incomes of the working population of a society.
But “leveling” will not really reduce a society’s gap between rich and poor if the rich get richer and richer. Significantly unequal societies only become substantially more equal if they are both at the bottom of the scale and level down. In the mid-twentieth century United States, that is exactly what the unions did.
This role of unions in reducing America’s richest in the mid-twentieth century has remained largely ignored. Commentators generally attribute the credit for this egalitarian achievement to the progressive income tax, and progressive taxes as a whole have certainly done an egalitarian duty, as economists like Emmanuel Saez and Gabriel Zucman have so carefully detailed. Gradual tax rate increases, their work shows, have gone hand in hand with a decline in the wealth share of America’s richest.
In 1940, Americans in the richest 0.1% of the country held 22% of the country’s wealth. By the early 1970s, this share had fallen to around 7%. Since then, the wealth share of the richest 0.1% in the country has tripled to the level of 20%.
The tax rates for the rich have been on the same roller coaster ride. They began to increase in the 1930s, increased dramatically in the 1940s, and then remained important for a generation. But then the decline began, and today’s rich ended up sitting on record personal fortunes and paying very little in taxes. In 1951, Saez and Zucman calculate, Americans in the richest 0.1% of the country paid 61% of their income in local, state, and state taxes. By 2018, their effective tax rate had fallen to just over 30%.
Numbers like these help us understand how lowering tax rates have helped our rich become insanely richer. But they don’t tell us why the tax rates of the rich fell so sharply – or why they hit robust levels before sinking. And that’s where America’s unions come in. Throughout the 1930s and 1940s, the strength and expertise of the growing American labor movement gave President Franklin Roosevelt the political base he needed to distribute the nation’s tax burden fairly according to its ability to pay, so that the few do not benefit from the sacrifices of the many.
The best example of this union role? Perhaps the sharp WWII hike in the federal income tax rate on the top income bracket in the country. The big push for this hike began in April 1942 when FDR demanded what amounted to a “maximum wage,” a 100 percent tax rate on individual income above $ 25,000, roughly $ 400,000 in dollars. today.
Where did the idea for FDR come from? The New York Times gave that credit to the United Auto Workers, the fastest growing affiliate of the most progressive wing of labor, the CIO. Other press reports would simply call the top 100% tax rate the IOC’s proposal.
Conservative congressional leaders and influential economists would quickly balk at Roosevelt’s bold call. The “only logical stopping point” for the FDR push, accused Harley Lutz of Princeton, would be “a completely Communist income equalization.”
But FDR would continue to push. In the end, he wouldn’t get his maximum rate of 100%, but he did get a maximum rate of 94% on income over $ 200,000, and the country’s highest tax rate on income from the top bracket would be around 90% for the next two decades. . The unions, in particular the new CIO industrial unions, would play a key role in this success of the tax rich. In 1943, for example, the CIO rallied a broad coalition – including the NAACP and half a dozen other national groups – to denounce conservatives in Congress for failing to properly tax “high personal incomes.”
This era of the tax on the rich, unfortunately, will not last. Egalitarians had assumed that “redistribution” through progressive taxes would always “fix” the inequalities generated by our economy. But the rich, in real life, refused to cooperate in fixing. In the last third of the 20th century, they fought back against high tax rates – and the labor movement that had done so much to enforce those high rates. Since 1963, the highest tax rate on the pocket of the rich in U.S. dollars has fallen from 91% to 37%, and a myriad of loopholes are causing the richest of our rich to pay less than 20% of their income in taxes.
The American labor movement has suffered an equally devastating statistical collapse. The share of private sector workers holding a union card has now fallen to less than 7%. In large areas of the United States, the labor movement has virtually no pulse.
What lesson should we learn from all of this? Redistribution alone can never be enough. We must fight for an economy that generates less inequality in the first place. And that means working to identify the institutions and policies that channel – that “predistribute” – excessive rewards to the already rich. For starters, it means going after big American companies.
In the mid-20th century, CEOs of large corporations averaged no more than two or three dozen times what their employees brought home. Today’s top business executives regularly “earn” several hundred times what their employees earn. Outrageously lush rewards like these inspire executives to behave outrageously, to do whatever they see fit to win the corporate jackpot. They will reduce their numbers. They will outsource. They will even turn millions of Americans into opioid addicts.
Without a meaningful union presence in American life, our gap between the rich and the rest has reached levels unimaginable half a century ago. Compensation for CEOs in large companies, the Economic Policy Institute points out, has skyrocketed 1,167% since 1978. Over the same four decades, typical worker compensation has increased slightly by 13.7%, in average just a fraction of 1% per year.
Today, unions are highlighting this widening gap between the wages of business leaders and workers. They support proposals that would penalize companies that overpay their executives excessively more than their workers, for example by levying higher taxes on companies whose pay gaps between CEOs and employees exceed 50 or 100 to 1. Others Related proposals would grant companies with modest pay gaps between managers and workers preferential treatment in public procurement tenders.
A number of states now have pending legislation calling for these kinds of changes. Two cities – Portland and San Francisco – have in fact adopted “wage report” plans in this direction. Major progressives in Congress support similar bills.
Could measures like these one day become economically necessary? They certainly could – if the labor movement here in the 21st century regained a vigorous national presence. This presence could begin in Bessemer.
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