Nine years have passed since the official conclusion of the Great Recession. At first glance, the New Jersey economy appears to be running on full steam, having recouped all the jobs lost in the recession and then some more. Wage employment is hovering around 4.2 million, a new high level. With the unemployment rate declining to 4.2 percent in July, it is at its lowest level since July 2007.
Traditional economic models would have us believe that wages would be rising in such a tight labor market. Recent data indicate otherwise. A Bureau of Labor Statistics release shows that average weekly wages in New Jersey rose just 1.8 percent between the fourth quarter of 2016 and the fourth quarter of 2017 — not only trailing the nation’s 3.9 percent increase but lower than all other states in the country, except Alaska.
The market is not making the correction that’s badly needed for so many New Jersey workers struggling to make ends meet. Yet, nationally, the institutions and policies that bolstered wages, improved workplace benefits and upgraded labor standards are being dismantled or whittled down.
Numerous studies have demonstrated that unions, especially when they were strong, have been crucial in raising wages not just for union members but for non-unionized workers as well. Undermining the power of labor unions and diminishing their share of the workforce works to the detriment of all workers.
No impediment to economic growth
Recent research published by the National Bureau of Economic Research, using new data going back to 1936, shows that unions have played a far more significant role than previously understood raising wages not only for union members but for all workers. During periods of expanding union membership, income inequality declined without impeding economic growth. Most important, both at the national and state levels, less educated unskilled workers as well workers of color enjoyed relatively larger wage gains.
Similar conclusions emerge from research conducted by the University of California Berkeley Center for Labor Research and Education. Collective bargaining undertaken by unions benefitted all working people in California, both union and non-union members, raising earnings and increasing access to health and retirement benefits. Those workers, who earned the least in non-union workplaces — women, people of color, and immigrants — gained the most. Although union membership did not eliminate wage disparities, equity in the workplace improved with the narrowing of gaps between races and genders.
Research produced under the auspices of the Economic Policy Institute reinforces these findings. It showed that wage losses and reduced benefits are associated with declining membership not only for union members but also for non-unionized workers. Non-unionized men who did not complete college or go beyond high school were most likely to suffer wage decreases, exacerbating wage inequality. In subsequent research, the same researchers found that non-union private-sector workers would be earning substantially more if unions were as strong today as they were in the 1970s.
A weakened labor movement is also associated with rising poverty rates among the working poor at the state level. Research published in the American Sociological Review shows that the decline in unionization among the working poor at the state level has more significant influence on individual working poverty rates than the economic performance or the social policies of the state. Increased unionization reduces working poverty for both unionized and non-unionized households without reducing employment.
Supreme Court’s ‘fair share’ ruling
Union membership in New Jersey has been eroding steadily. In 2000, unions represented 807,000 workers in New Jersey, the equivalent of 22.4 percent of all employed workers. Of these, 741,000 were union members. In 2017 the number of workers represented by unions had declined to 665,000, or 17.1 percent of employed workers, while union membership dropped to 630,000 workers.
These numbers predate the U.S Supreme Court’s ruling in Janus v. AFSCME, which is likely to prompt a decline in public-sector union membership in New Jersey and further corrode the economic security of working people. The Court’s decision denies public unions the ability to collect agency or “fair share” fees from workers who choose not to join public unions, although these unions are required to represent these workers. They will, however, still benefit from agreements reached between public-worker unions and their employers.
The Economic Policy Institute estimates that 66.1 percent of all state and local government workers in New Jersey were represented by a union in 2017, compared to just 9.2 percent of private-sector workers. A recent study by the Illinois Economic Policy Institute estimates that the Janus decision could reduce the number of state and local government union workers in New Jersey by 50,000 members — more than in any other state except California and New York — and reduce the average annual wage of state and local government workers (wage and salary income only) by $2,234, or 3.7 percent. The net effect on New Jersey’s gross state product would be a reduction of $792 billion.
This year in New Jersey, more than ever, we need to recall that the union movement has been crucial not only in raising wages for union workers but for all workers. Unions have been instrumental in reducing income equality as well as reducing earnings’ differentials between racial and ethnic groups, men and women, and less educated and more educated workers. These achievements did not impede economic growth.