Scott Walker's economic mess: How worker wages were gutted in Wisconsin

A depressed workforce. Median household income down. Empty union halls. Here's Scott Walker's real 2016 problem

Published February 24, 2015 4:30PM (EST)

Scott Walker                               (Reuters/Yuri Gripas)
Scott Walker (Reuters/Yuri Gripas)

I was in Wisconsin for the labor uprising of 2011. Faced with the threat from newly elected Gov. Scott Walker of eviscerated collective bargaining protections, unions and their allies brought hundreds of thousands of workers into the streets in protest. They fought like their lives depended on it. Four years later, we now know that they did.

The Washington Post returned to Wisconsin this past weekend to empty union halls and a depressed workforce. The public employee union law – which barred contract negotiations on everything but base wages and limited annual salary increases to the rate of inflation, forced most unions to collect their own dues rather than having them deducted automatically by the state and mandated annual recertification of affiliates – has been more successful than even its supporters hoped.

In the state where public employee unions got their start, public workers see no need to stay enrolled, since unions cannot by law effectively advocate on their behalf. Membership in the Wisconsin affiliate of the National Education Association is down one-third; the American Federation of Teachers dropped by one-half; the state employees union fell 70 percent.

There are fewer public employees working, too, even though Gov. Walker claimed that the passage of the anti-union law would save jobs. The Wisconsin Budget Project finds that the ratio of public employees to total population is at its lowest level in at least two decades.

Overall, union membership in Wisconsin has fallen to 11.7 percent, down from 16 percent 10 years ago, according to the Bureau of Labor Statistics, suggesting a spillover into the private sector labor force as well. That will only continue if Walker gets his wish to turn Wisconsin into a right-to-work state, an effort being undertaken right now in the state Legislature.

Local unions are decreasing dues charges and walking door-to-door to persuade workers to return, but it hasn’t worked so far. The tables have been turned, from non-union workers coveting the good pay and decent benefits of their union counterparts, to demonizing them as greedy leeches that must get dragged down like everyone else. “I don’t see the point of being in a union anymore,” one ex-member told the Washington Post.

In many respects, the point of Walker’s anti-union crusade was to destroy the electoral muscle of the main opposition to his conservative agenda. But the most important impact of the creeping death of public unions in Wisconsin may be on take-home pay.

The Washington Post didn’t take note of this, but according to the Census Bureau’s American Community Survey, median household income in Wisconsin is $51,467 a year, nearly $800 below the national average. And it has fallen consistently since the passage of the anti-union law in 2011, despite a small bounce-back nationally in 2013. The Bureau of Economic Analysis puts Wisconsin in the middle of the pack on earnings growth, despite a fairly tight labor market with a headline unemployment rate of 5.2 percent.

This actually undercounts the problem a bit, because it doesn’t cover total compensation. For example, in the wake of the anti-union law, public employees lost the equivalent of 8-10 percent in take-home pay because of increased contributions to healthcare and pension benefits.

Moreover, the meager earnings growth that has come to Wisconsin has mostly gone to the top 1 percent of earners. Another Wisconsin Budget Project report shows that the state hit a record share of income going to the very top in 2012, a year after passage of the anti-union law. That doesn’t include the $2 billion in tax cuts Walker initiated in his first term, which went disproportionately to the highest wage earners. (This is precisely the agenda Walker is likely to run on in his presidential campaign.)

The trends mirror those in the country at large, where labor has similarly stumbled. Real hourly wages fell for almost everyone nationwide in 2014, according to the Economic Policy Institute, except for the low-wage sector, bolstered by minimum wage increases at the state and local level. Wisconsin has not joined that movement, with its minimum wage still consistent with the federal floor, at $7.25 an hour.

You can argue that squashing unions in Wisconsin had no bearing on income stagnation in the state. But you would have to ignore how the labor market works. If public employees cannot bargain for wages and benefits, they stay depressed. And employers who compete for well-educated workers, like those who take jobs in teaching and government administration, similarly don’t have to increase wages to attract their services. Blunting worker power in one sector has ripple effects everywhere else; as Larry Mishel wrote in the New York Times yesterday, “the erosion of collective bargaining is the single largest factor suppressing wage growth for middle-wage workers over the last few decades.” And Wisconsin provides a salient example of that.

Collective worker action was behind the biggest wage announcement in the past several years: Wal-Mart’s move to increase entry-level pay to $9 an hour this year, and $10 an hour by 2016. This will act like Wisconsin’s wage depression in reverse: retailers will be forced to compete with Wal-Mart’s slightly higher wages, and the entire wage floor will push upward. And while an improving economy, tighter labor markets and the need to retain personnel may have factored into Wal-Mart’s decision, you cannot deny the role of the United Food and Commercial Workers’ campaign to organize Wal-Mart workers. “This is not an act of corporate benevolence,” said Marc Perrone, president of UFCW, in a statement on the Wal-Mart announcement. “Walmart is responding directly to calls from workers and their allies to pay a living wage.”

In fact, the last time Wal-Mart faced significant labor unrest in 2006, it raised wages as a direct result, according to Federal Reserve minutes. It, like most businesses, makes changes that benefit workers only when its reputation is threatened and poor publicity ensues. That means that worker voices play a powerful role in wage growth.

Scott Walker has taken that voice away from public unions, and effectively the entire Wisconsin labor movement, which finds itself crippled. That has real consequences for middle-class wages. Since Walker wants to bring this policy menu to the rest of the country in 2016, people on Main Streets outside of Wisconsin should take note.

By David Dayen

David Dayen is a journalist who writes about economics and finance. He is the author of "Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud," winner of the Studs and Ida Terkel Prize, and coauthor of the book "Fat Cat: The Steve Mnuchin Story." He is an investigative fellow with In These Times and contributes to the Intercept, the New Republic and the Los Angeles Times. His work has also appeared in the Nation, the American Prospect, Vice, the Huffington Post and more. He has been a guest on MSNBC, CNN, Bloomberg, Al Jazeera, CNBC, NPR and Pacifica Radio. He lives in Los Angeles.

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2016 Election Economy Gop Governor Jobs Labor Presidential Election Scott Walker The Right Unions Wages Wisconsin