In recent years, academics and policymakers in the United States have struggled with an economic mystery. Why, even as the U.S. economy has grown in the past few decades, have wages remained relatively stagnant? Many scholars have landed on one reason in particular: the decline in the bargaining power of U.S. workers due to shrinking union membership and the rise of subcontracting. Workers have benefited less from economic growth as their ability to bargain for higher wages has withered. Instead, major gains have gone to investors and managers, and inequality in the United States has soared.
Other industrialized countries have also seen rising inequality, but the decline in worker power is particularly acute in the United States. From the 1980s to the late 2010s, the labor share of income in the United States—essentially, the percentage of overall income that ends up going to workers—fell by four percentage points, in effect a decline of hundreds of billions of dollars per year. Over the same period, U.S. workers lost key protections: collective-bargaining agreements cover less than 12 percent of workers (and only seven percent of private-sector workers) in the United States, compared with 98 percent in France, 80 percent in Italy, and 56 percent in Germany.
