The role of Unions in our economy

There is a very thought provoking opinion piece by Robert Reich in the San Francisco Chronicle today.  His thesis is that Unions have been central to the strength of our economy and the Republican efforts to undermine the power of unions are not good economic policy.


He notes that from 1945 to 1975 (roughly) America had strong unions and a strong economy in which  middle class working folks saw the same increases in wealth (percentage wise) as the wealthiest persons (thereby funding the middle class ability to consume).  From 1975 forward the growth of wealth by middle class workers began to slip as Unions lost favor and power.  The middle class managed to maintain its overall standard of living first as mom started joining the workforce, then we started working longer hours, and finally we went into debt using our homes as collateral to finance our lifestyle.  But in terms of the actual benefits of increased productivity that occurred during that period, it went to the wealthiest workers.  He says "...now all these coping mechanisms are exhausted - and we are living with the consequences"  


He anticipates that some will say you can't compare the post WW II era with today's global economy which is much more competitive.  His response is to cite Germany.  Germany has had strong labor unions for decades, currently has strong labor unions,  and continues to experience strong growth and relatively low unemployment.  In Germany the top 1% of German households earns about 11% of all income, and has for 4 decades.  In the US by contrast the top 1% took home 9% in 1970, but today take home more than 20%.


My first thought after reading Mr Reich's piece is why did the US turn against Labor unions?  I immediately remembered Jimmy Hoffa, and the other union bosses of that time period that basically ran their unions a lot like Ghadafi runs Libya.  I remember hearing sensational stories of businesses being put out of business by excessive labor contracts.  Unions were poorly regulated, glorified gangs in many cases, it was easy to think they were bad and turn away from them.  But it appears they also contributed mightily to the strength of our economy, and it appears Germany has found a way to regulate unions and minimize the bad conduct.


I understand why a lot of business people don't like unions, and support Republican efforts to undermine union power.  Life is always easier and less stressful when you have unrestrained control over your business.  But that is exactly the thinking of most of the dictators in the world.  It is an illusion to think that depriving people of power to exert some control over their work circumstances will be beneficial in the long run.


Instead of undercutting unions Republicans should either look at countries like Germany to see what formula they have devised that has allowed strong unions to work in partnership with business for decades, or find some other way to make business share the wealth they generate with workers to a greater extent, like linking the level of corporate taxation to the degree the corporation spreads its gains throughout the corporation.


Here is a link to the online version of Robert Reich piece:  http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/06/26/INRJ1K0LIL.DTL