When there was more value in firm-specific capital there was also a bigger return on union membership. Workers had less power since much of their value was tied to one employer, whereas now there is a high return to changing jobs. Unions worked by having all employees band together for similar pay and benefits in exchange for more security, meaning that highly productive employees subsidized less productive ones. When there were fewer gains to being an above-average worker, the extra stability was worth it. Now this is less true, which is one reason why many union drives are failing. In 1983, more than 20% of workers were members of a trade union. In 2021 it was just 10.3%, and most of them worked for the government.
These days there are also more gains to being a contract worker than one tied to a single employer. Many workers value flexibility, especially after they experienced remote work during the pandemic. Yet the current administration is also fighting this trend, pushing to classify gig workers as employees in another attempt to make jobs more like they used to be.
In fairness, Trump and Biden both attempted to address real problems in a transitioning economy that works for the well-educated or skilled, but leaves many others behind. Trade and technology destroyed the way of life for many, but the solution is not a return to the unionized manufacturing past. Giving all types of workers the chance to thrive will take some experimentation in policy and markets. This requires creativity and leadership that is open to the future, rather than set on trying to bring back the past.
Allison Schrager is a Bloomberg Opinion columnist covering economics. A senior fellow at the Manhattan Institute, she is author of An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.