Contrary to Michigan’s Governor’s claims, economists have been concluding that the wealthiest Americans spend a smaller share of their income than their middle-class counterparts. And reputable economists understand that unions provide the fuel for a stable middle class and economic growth.
This means that as income disparity widens, economic demand wanes proportionately.
Whether the middle class has enough income to spend on basics is at the center of a body of economics research pointing to the direct connection between the level of inequality and economic fragility. This body of this research is the result of studies from economists questioning whether the fact that the Great Depression and the Great Recession both followed decades of rising inequality was coincidence or whether there is a connection between inequality and economic instability.
Worldwide Proof That Politics and Economics Don’t Mix
According to The Council on Foreign Relations and International Monetary Fund economists “countries with more equal income distributions tend to have significantly longer growth spells.” In fact, inequality had a much more dramatic effect than any other aspect in their investigation of the how long periods of positive economic growth lasted across 174 countries. It had an even stronger factor of the quality of economic growth than most other commonly studied factors that also integrated in their model. The other factors included foreign demand, rapid price increases, its openness to trade, and its macroeconomic strength.
By promoting a stable middle class and less income disparity, unions can help economies avoid the instability linked to a hollowing out of the middle class. University of Chicago Booth School of Business economist Raghuram Rajan indicate to rising inequality as a key fault line that led to the recent economic crisis precisely because it increased debt, mostly through mortgages.
The same reports show that a strong middle class creates conditions for families to invest in children, for stable workers to demand more and higher priced goods and services, and for firms to get the most out of their workers. While unions support productivity at a particular firm, a stronger middle class overall encourages investments in education which also grows the economy through innovation.
The middle class demands efficient and honest delivery of government services, as well as forward-looking public investments. When the middle class declines, education spending is lower than it would be otherwise.
Forty years ago the United States ranked second among high-income countries in education spending as a share of gross domestic product with only Canada outspending us, according to the World Bank. In 2008, the most recent year data are available, we ranked 11th—and Canada, whose middle class has also shrunk significantly, dropped to 16th, as countries with stronger middle classes like Sweden and New Zealand edged ahead.
In states across the country, a similar dynamic has played out as well. Since the Great Recession began, most states have cut education spending. Yet in those states with a stronger middle class, education spending has not been cut by nearly as much on average. Moreover, of the five states that cut education spending the most, the middle class in four is weaker than the national average. And of the five states that increased education spending the most, four had stronger middle classes than the average.
Unions support a strong middle class and, increasingly, economists are exposing evidence that a strong middle class is not only good for the workers and their families who directly benefit, but for the economy overall. We know that if workers cannot afford basics, ultimately the overall economy that suffers along with these individuals. So when you take political ideology as your mantra and oppose the unions of this country, unless you are in the top 2% of wealthy Americans you are taking a stance contrary to your own benefit.
This so-called right-to-work legislation will make it harder for unions to do their job: improving wages and working conditions. That, in turn, will push our economy toward more weakening of the middle class, which will, in the end, lower our nation’s economic competitiveness.
This is class warfare alright, but the GOP, anti-union billionaires are selling you a plate of crap and calling it chipped beef.