The NewsHour historians examine the history of economic insecurity and economist Harris Sussman on coping with the modern workplace. Less than 15 percent of the American workforce now labor under union contract. In Europe the equivalent figure is 50-75 percent. Wal-Mart stores tend also to be in small towns where there is little trade union presence or traditions of unionism and the American trade union movement itself has been slow to organize service workers. Differential productivity of workers at K-Mart and UPS explains their pay differential.
Firms pay workers according to their contributions to the bottom line.
While artificially lifting wages through legislation like the minimum wage, or unionization, can squeeze higher pay from employers in the short-run, this comes at a price. Wage demands from unions and governments not withstanding, companies still will hire workers only if it is worth their while to do so. A higher wage than that determined by the market leads companies to shed employment. The contemporaneous existence of higher pay and high unemployment rates in Europe bears this out. This projection contrasts sharply with the strong showing of the U.S. labor market where unemployment has been about 5 percent during the current recovery and shows no signs of increasing.