Long-term declines in union membership and the ascendance of neoliberal government policies may have weakened the potential for unions and government employment to reduce income inequality. Using data on 160 metropolitan statistical areas (MSAs) from the 2000 census, this research examines how quintile shares of size-adjusted family income are impacted by union density and federal, state, and local government employment. Importantly, the use of quintile shares of income allows this study to reveal a more nuanced picture of how unions and government employment influence the distribution of income. The principal findings of this study are: (1) union density has a progressive effect that benefits middle and upper-middle income families, (2) federal government employment has a strong progressive effect on the entire income distribution, (3) state government employment has a progressive effect on middle and upper-middle income families, and (4) local government employment mainly impacts families in the bottom forty percent of the income distribution. Although there have been long-run declines in regulatory labor market institutions, unions and government employment are still important components of the political economy of social stratification in U.S. metropolitan areas.
The institutional arrangements around which U.S. labor markets are organized have undergone a dramatic change in the last thirty years. A capital-labor accord in which workers received higher wages, seniority rights, pensions, and employment security in exchange for relinquishing control over the labor process has given way to a neoliberal climate characterized by the deregulation of labor markets, public disinvestment, and increased capital mobility (Bluestone & Harrison, 1982; Grant, 1995; Brady & Wallace, 2000; Campbell & Pedersen, 2001; Fantasia & Voss, 2004; Kotz, 2003 and Prasad, 2006). These changes have left labor in a weakened position and capital in a more powerful position.
One of the central manifestations of the declining of the capital-labor accord is the vanishing share of labor union membership in the United States (Bowles, Gordon, & Weisskopf, 1990; Clawson, 2003, Lippit, 1997 and Nelson, 1995; Wallace, Leicht, & Raffalovich, 1999). Union membership declined from a high of 35.5 percent of the labor force in the 1940s to about 14 percent by the end of the 1990s (Cornfield & Fletcher, 2001) and to about 12.5 percent by 2005 (c.f. Hirsch & Macpherson, 2003). Such declines signify the ascendancy of capital over labor in the U.S. labor market and are likely to have profound consequences for the distribution of income.
In this same neoliberal climate, business-friendly tax policies and widespread public disinvestment have also become more prevalent. Given such a state of affairs, government employment, one of the largest fractions of public expenditure, may be less effective at reducing income inequality than it was in the past (Zipp, 1994 and Lobao and Hooks, 2003). The “social equity function” promoted by government employment may have been subverted by the neoliberal assault on big government beginning in the late 1970s and early 1980s (Stever, 1988). Given the decline of labor market institutions and the rise of neoliberal approaches to the labor market, labor unions and government sector employment may be less effective at reducing income inequality than in the past.
This paper attempts to answer the basic question of whether or not the rise of neoliberalism has undermined the ability of these regulatory labor market institutions, unions and public employment, to reduce income inequality. To determine if such institutions remain effective, I examine the effects of union membership and government sector employment at the federal, state, and local level on the distribution of income in 160 U.S. metropolitan statistical areas (MSAs) with 2000 census data. While this is an historical claim, I use cross-sectional data to test whether the relationships hold at the end of the 1990s, a point of significant union decline and government privatization.
A novel aspect of the research design is the use of quintile shares of size-adjusted income as the dependent variables. This research design allows for a more complex, but precise, illustration of the effects different factors have on the income distribution in MSAs. In the next sections, I discuss literature on union decline and theoretical reasons for why unions and government sector employment promote a more equitable distribution of income.
