Larry Summers has been making some of the loudest arguments in favor of unions

Two years after organized labor helped shoot down his chances at becoming Fed chair, he says it’s the best ally the middle class ever had.

By Lydia DePillis

Correction: An earlier version of this article incorrectly said that only in recent years did Lawrence Summers evolve his views about the role of labor unions in the economy. This article has been revised to more accurately reflect Summers’ history on the issue, which goes back many decades.

Two years after unions and progressive groups helped torpedo his chances at becoming the most important person in the world economy — chairman of the Federal Reserve — former Treasury secretary Larry Summers has been making some of the loudest arguments in favor of organized labor.

The latest: remarks at a think tank event on a new report that ties union density with economic mobility, in which Summers tied a direct line from the health of organized labor to the fortunes of the middle class.

“If there’s one thing that characterizes our politics now, it is a sense amongst almost everyone in the middle class that there’s someone who speaks for everybody except for them,” Summers said. “Traditionally in America, the people who spoke for the broad middle class were the union movement. And if they are able to speak with less force because they have fewer members, if they are pushed towards the margins, the damage done at each employment unit is the smaller part of the damage. The larger part of the damage is what it does to our broad political dialogue.”

In his talk, Summers also offered an explanation for why unions have declined so drastically over the past half-century. Policy changes and lackluster enforcement of organizing protections had allowed companies to step up their resistance to unionism, he said, and unions themselves haven’t always adapted very well to a workplace environment in which employees aren’t often collected together in large factories (or aren’t employees at all).

More broadly, though, Summers argued that unions excelled in representing workers at large, monopolistic businesses that extracted significant economic rents, which organized workers were able to ensure they shared. The breakup of some of those very dominant businesses — and the rise of others, where unions are not as strong — weakened labor’s economic power (a trend that’s also evident in workers’ decreasing share of corporate income over time).

“It’s not that we don’t have rents in the economy anymore,” Summers explained. “But instead of the rents being in places like AT&T and General Motors, and U.S. Steel, where there also huge numbers of workers who are well set up to be unionized, today’s rents are in places like Apple, Pfizer and Goldman Sachs, which have an order of magnitude fewer of the kind of less highly professionalized workers, who have been the bread and butter of unions.”

New research is giving us a better understanding of what effect that decline has had on America’s economic landscape. Using data from the landmark study that mapped the geographical areas where children were most likely to earn more than their parents, Harvard professor Richard Freeman and Center for American Progress scholar David Madland found that the presence of unions in a given area was correlated with a higher likelihood that local children would earn more than their parents — and kids of union families specifically had better prospects, as well.

That could be due to a number of reasons: Perhaps union members are more likely to push for more spending on education, for example, which might help the community’s young people transcend their economic circumstances. Or maybe places with greater opportunity for lower-income people are also more friendly to union organizing.

Whatever the explanation, Summers took away from the study that it probably couldn’t hurt to find some policy levers that would help unions regain their foothold — nor would encouraging companies to allow for some degree of employee ownership and voice be a bad idea.

“Putting the thumb on the scale a bit in favor of profit sharing seems like the right thing to do,” Summers said. “Could you do it too much? Yes, you could. And I could lose too much weight. But starting from where I am, that is not the most pressing problem.”

Summers has been asked about his views about unions in the past, given the existence of an online encyclopedia article, first written in 1993 and republished in 2007, where he discussed the job losses that can be caused by unions in some sectors. In 2009, at an event where he said higher wages would stimulate the economy through increased demand, he was asked about his earlier comments, according to a 2009 Huffington Post article. He responded, “I don’t see how anyone who looks at the consolation of facts can’t see the need for some adjustment in an environment that has proven so problematic for labor union organizing.”

Still, in recent years labor criticized him, and the AFL-CIO opposed his potential nomination to chair the Fed in 2013.

Commentators and economists have argued that Summers has moved further left on economic policy, as he has raised major concerns about the problem of inequality and wage stagnation and favored forceful measures to address them. Earlier this year, he co-authored an “inclusive prosperity” manifesto for the Center for American Progress, the ideas of which are being broadly borrowed by Democratic presidential candidates. One of the ideas was increased unionization, which he has mentioned in other public contexts over the past year as well.

He also rejected one explanation for rising inequality — that the workforce is inadequately educated — in favor of the more liberal economist’s argument that businesses simply aren’t creating enough jobs and that technology has allowed profits to accumulate in the hands of the top 1 percent. He reiterated that point of view yesterday, as well.

“There’s a view that I think was a plausible view to hold in 1995, which I would call ‘preserve my carried-interest tax break, the market’s great, yes, there are a lot of people left behind, we need to give them better education, I’m really involved in a charter school, it’s all going to be okay,'” Summers said. “That is not a credible response to the challenges of the American economy in 2015.”

Summers’ comments are closely watched because he has long been a top Democratic strategist, has not been seen as a union favorite, and could certainly be a candidate for a senior post in a future Democratic administration. Change can come quickly, he pointed out, after Freeman expressed pessimism that Congress could see through meaningful changes to labor law that might help boost unionization.

“The transition from inconceivable to inevitable can be surprisingly rapid, and it depends on the climate of opinion,” Summers said. “That changes in response to events, and it changes in response to analysis. Things that look quite unlikely today could look quite different 18 months from now.”

[Source]: Washington Post