Global Policy Forum

Massive Inequality is Unexamined Fault Line Behind GM Walk-Out


By Sam Pizzigati*

October 2, 2007

No one expected last week's United Auto Workers strike against General Motors -- the first national walkout against GM since 1970 -- to last long. And no one is expecting the problems that prompted the walkout to end any time soon either. Perhaps the most basic problem of all: Trade unions in America's private sector no longer have the clout that's needed to make sure the wealth working Americans create gets shared, not concentrated. Only 7.4 percent of private sector workers in the United States currently belong to unions, about one-fifth the labor market presence the labor movement held a half-century ago. In the auto industry, once American labor's cutting-edge bastion, less than 23 percent of workers now hold union cards.

What difference does this make?

Back in the mid twentieth century, organized auto workers -- and the American labor movement as a whole -- didn't just successfully battle to improve the wages, hours, and working conditions of average Americans. Unions back then, and particularly the UAW, also helped cut America's rich down to a more democratic size. In 1942, for instance, UAW urgings helped convince President Franklin D. Roosevelt to call for a 100 percent tax -- the equivalent of a maximum wage" -- on individual income over $25,000, about $330,000 in today's dollars. Congress didn't buy FDR's 100 percent plan, but lawmakers did set the nation's top marginal tax rate at 94 percent, and that rate would hover around 90 percent for the next two decades, years that would see the emergence of the first mass middle class the world had ever seen.

In those mid twentieth century years, high taxes on high incomes kept wealth -- and political power -- from concentrating at America's economic summit. Charles E. Wilson, GM's powerful president a half-century ago, took home $586,100 in 1950, the equivalent of about $4.5 million today. He paid $430,350 of that, or 73.4 percent, in tax. Last year, by contrast, GM CEO Rick Wagoner took home $10.2 million in total pay. We don't know exactly how much in taxes Wagoner paid on that income. But we do know that in 2005, the most recent year with data available, Americans who reported over $10 million in income paid, on average, just 20.9 percent of that income in federal income tax.

In short, GM's current top executive is now enjoying, after taking taxes and inflation into account, about seven times more personal income than GM's top executive back in 1950. Union strength, equality, and economic security for average Americans, in the meantime, have been headed south for over a generation now. Auto workers want that flow reversed. Their walkout last week, Bloomberg News notes, essentially amounted to a call on GM to "share the wealth." The UAW, as 54-year-old Detroit autoworker Art Ellsworth puts it, "is bargaining on behalf of the entire middle class of the United States."

America's beleaguered middle class needs that help -- and plenty more.

About the Author: Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.



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