Photo : AP

The United States of America—known everywhere as The Greatest Country in the World—ranks near the bottom of developed nations on measures of income inequality and government support for working people. Fortunately there is a solution that everyone knows will work.


The Organization for Economic Cooperation and Development’s new annual Employment Outlook report is a particularly useful tool for gauging how the United States measures up to the rest of the developed world in terms of economic policies and outcomes. In this context, we have a lot of work to do: “The low-income rate in the U.S. [defined as the share of the working-age population living with less than 50% of median household disposable income] is one of the highest in the OECD,” the report says. “The rate in the U.S. is 14.8% compared to an OECD average of 10.6%. The lowest rate is found in the Czech Republic at just 5.8%.”

The US, of course, could never hope to measure up to glorious land of equality that is the Czech Republic. The macro-level view is also dismal; the labor share of income in the US—the portion of all income that goes to wages, rather than to capital, making it a fair assessment of which side is winning the class war—fell by about 8% between 1995 and 2013, compared to an average decline of only about 3% in other developed countries. If only there were some formal mechanism by which nations could ensure a better balance of power between labor and capital while also promoting greater income equality...


Image : OECD

That mechanism is called collective bargaining, and the new report delves into it at length. There are great differences between how nations engage in collective bargaining. In some places, negotiations take place at the level of entire industries or business sectors; elsewhere, as in the US, unions representing workers engage primarily in bargaining at the level of individual companies (known as firm-level bargaining.



“Workers are paid more with firm-level bargaining,” the report notes, “while sector-level bargaining is not associated with relatively higher pay on average.” It also finds that the greater the presence of unions, the happier the workplaces: “Employee representation at the workplace can play a significant role in improving job quality, in particular by reducing work intensity and increasing training opportunities and prospects for career advancements.”

In other words, we know exactly what the economic problems are that make the US a shameful outlier in the developed world, and we know the mechanism that has been proven to address these problems effectively. All we need are (many) more unions representing (tens of millions) more workers. Though this will certainly take a lot of work, the sheer logic of this path indicates that it will, indeed, happen. Barring any crazy new laws against it, ha.


[The full OECD report]