05 September 2006

Unions and Income Inequality In Colorado

Colorado was once a national labor movement hotspot, known particularly for its mine worker's unions. Today, Colorado has one of the weaker private sector union movements in the country. There were about 5,900 fewer labor union members in Colorado in 2004 than there were in 1983 (Table 649), despite the fact that the state's population went from about 2.9 million in the 1980 census to an estimated 4.6 million in 2004 (Table 17). This small drop masks an even larger one in private sector unionization, as public sector unions have thrived, while private sector unions have stumbled.

The decline of the union movement in Colorado has coincided with a sharp rise in income inequality in the state. In Colorado, the rich have gotten richer relative to the poor in the past couple of decades.
Just 5.2% of private sectors workers in Colorado (and 8.4% of all workers) were labor union members in 2004, down from 11.2% in 1983 (13.6% of all workers).

According to a 2006 study by Thomas Volscho at the Department of Sociology at the University of Conecticut, entitled "Measures of Income Distribution in the United States, 1970-2000.", income inequality in Colorado has shot up between 1980 and 2000 by most accepted measures of income inequality, after actually bucking he national trend and growing more egalitarian from 1970 to 1980.

The best known measure of income inequality (i.e. the extent to which the rich are richer than the poor) is the Gini index. It measures the extent to which income distributions in an economy differ from a hypothetical economy in which everyone has equal incomes.  In that perfectly equal economy the Gini index would be zero. In an economy where one person had all the income, and everyone else had zero income, it would be one.

In 1970, Colorado's Gini index 0.375, in 1980 it was 0.366, in 1990 it was 0.397, and in 2000 it was 0.427. Other well known measures of income inequality such as the mean logarithmic deviation, Theil's Entropy Index, and the square root of the squared coefficient of variation, show identical trends.

In 1980, Colorado had an economy that was more egalitarian in result than most U.S. states and was more egalitarian in result than any U.S. state today, except Alaska. Now, it is the median state for income inequality. Thus, the divide between the rich and the poor has grown more rapidly in Colorado since 1980 than it has in the nation as a whole.

As an aside, Alaska, the only U.S. state with more equal incomes than Colorado had in 1980, has a Gini index of .333 and, like Colorado of the early 1980s, has an oil dominated economy. Not coincidentally, Alaska is on of the top five states in terms of the percentage of its work force that is in a union.

For comparison purposes, in 1980, Colorado has a level of income inequality comparable that found in the United Kingdom, Italy and New Zealand today. In contrast, in 2000, Colorado had a level of income inequality comparable to that found today in countries like the Dominican Republic, Madagascar, and Venezula. The developed economies of Japan, South Korea and Europe all have far more egalitarian economies than that of the United States.

Nationally, income inequality in the United States has been increasing steadily since 1970. But, in Colorado, the period from 1970 to 1980 was marked by strong expansion in the heavily unionized (at the time) oil and gas industry in Colorado, and declining income inequality.

Since then, in the two decades since the oil bust in the early 1980s, the unionized private sector in Colorado's economy has fallen to less than half the percentage of the work force that it was in 1983, as Colorado's economy has diversified into the service sector, which also tends to be non-unionized, and income inequality has increased.

While correlation is not causation, given what we know about the larger pattern of economic development in Colorado over the past couple of decades, there is good reason to believe that the decline of Colorado's labor movement is intimately intertwined with rising income inequality in the state. Either the decline of labor is producing greater income inequality, or the two developments have a common cause, or both.

Cross Posted at Colorado Confidential.

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