Virtually all the economists who came out of the Great Recession with their credibility in tact agree that the slow recovery and persistent unemployment is a matter of too little "aggregate demand." This is just a wonkish way of saying that the middle class wasn't spending enough to keep everyone working. The obvious reason why they are not spending enough is that they don't have the money to spend. A big reason they don't have enough money is that their wages have stagnated for decades.
One can get into a grand argument over why wages have stagnated. But one thing that has consistently accompanied the stagnation of wages has been the decline of the labor movement. There is a huge amount of evidence showing that in its heyday labor was in effect, bargaining for the wages of the whole middle class. As labor unions pushed up their members' wages, there was a positive effect on wages throughout the economy. Correspondingly, as union membership and bargaining power declined, wages in general suffered. Now the entire middle class is in a rapid decline.
The inescapable conclusion, reached by almost all of the economists left standing after 2008, is that a revival of the union movement is vital to the survival of the middle class and a revival of the economy. If the middle class is to stop losing ground it needs the support of a strong labor movement. There are, however, a couple of major obstacles.
The progressive elements in the middle class are not predisposed to look to the labor movement for help. Indeed, if they think about unions at all, they most likely have a rather unfavorable attitude towards them. Words such as "corruption," "bosses," and "extortion" are far more likely to be associated with unions than any benefit to the middle class. The glory days of the '50s and '60s are in a far distant past. The union contribution to the middle class has been long forgotten. Ronald Reagan famously said that "government is not the solution government is the problem." But right after the government as an enemy of progress came the labor unions. They were vilified as greedy "special interests"- who put their interests ahead of the general public. The incessant drumbeat of anti-labor rhetoric used to promote right-to-work legislation drowned out most middle class sympathy for the labor movement.
At this point, the more progressive elements of the middle class have absorbed a great deal of what the liberal economists have argued. Indeed it is almost impossible to discuss economic policy without mentioning the work of such economists such as Dean Baker, Paul Krugman, or Christina Romer. However, the middle class in general has not focused on the implications of their work regarding the role of labor in the larger economy. It has largely gone unnoticed -- particularly by the political leaders who purport to be concerned about the decline of the middle class.
On the other hand, much of the labor leadership showed until very recently little appreciation of the relevance of current economics. One can hardly blame them. In conventional terms, many economics departments have been citadels of conservative thinking. The world dominated by an extreme free market ideology is not where a labor leader would look for shelter and comfort - much less help. The notion that events have turned this world upside-down does not seem to have had an impact on labor's thinking. The exception to this is the leadership coming from Richard Trumka, president of the AFL-CIO. Mr. Trumka clearly understands the role labor must play in the broader economy. His efforts to reach out to other kinds of organizations that share labor's economic values has great potential.
If the middle class is to pull out of its nose-dive, it needs to understand the essential role that labor must play. Equally important, it is essential that the leadership of organized labor step beyond its rear-guard actions and reach out to the broader middle class. None of this will be easy. It requires a lot of people from very different backgrounds to talk to each other. But unless the intellectual opinion-makers of the middle class can join forces with a revitalized labor movement, all of us are in a lot of trouble.