Summer of labor: Why unions win pay hikes and new clout

Every once in a while, events conspire to upend Americans’ views on the economy.

It happened in the 1970s, when postwar confidence in the United States’ industrial might was shattered. Energy shortages, soaring inflation, and relentless foreign competition smashed the view of the American workforce as superior and powerful. Now, though, such thinking may be shifting in the opposite direction. 

A labor shortage of historic proportions, coupled with longer term trends, has allowed workers to win big pay raises this year. From pilots to delivery drivers, union members are getting better contracts. Even nonunion workers are making gains, so that those at the bottom of the pay scale are actually reversing some of the income inequality that has yawned since the 1980s.

“With the tight labor market, we’ve seen this extraordinary phenomena where ordinary workers have been able to get good wage increases,” says Dean Baker, economist and co-founder of the Center for Economic and Policy Research, a research and public education nonprofit based in Washington. But “they have a long way to go. I mean, we’ll have to make up 40 years of losses.”

The question is whether this era is a rare blip in the economy or an inflection point where low-paid workers begin to make gains relative to higher-paid workers. The economics suggest it’s a blip, which will disappear once unemployment rises and jobs become scarce again. But some labor experts point to longer-term trends that could lead to a historic re-balancing of the labor market between the