The great union boom of the postwar era came about because labor was relatively the scarcest factor of production. Millions of people had been killed by WW2; billions more were locked up behind the iron curtain or stuck in third-world post-colonial nations, and hence unable to contribute to the global economy. Meanwhile, the U.S. had a huge capital stock leftover from WW2, and plenty of new innovations to develop. High supply of capital + high demand for products + low supply of labor = rising wages.

The nifty thing about this model is that it can explain virtually all economic history from the past millenia. For example:

Around A.D. 1000, the population of Europe began rising, marking a slow trend out of the Dark Ages. As labor became more abundant, land became scarcer (capital was not much of a factor in those days). This led to the glory days of feudalism: serfs would be bound to the feudal estate, since land was dear and labor cheap.

This continued until 1347, when Black Death hit. Within a few years, 1/3 of Europe's population was wiped out, leading to large-scale chaos in the social order. When people recovered, wages started rising. Feudalism collapsed, as there were not enough workers left to work the field, and surviving laborers began demanding more rights. The new entrepeneurial spirit led to innovations, particularly the development of modern finance, Medici-style banking. As capital became progressively more important and labor more abundant, returns to capital increased (the speculative booms in the late 1600s) and wages dropped.

Colonialism also opened up large new land areas during this time period, dropping the returns to land and increasing the returns to labor and capital. This sounded the final death knell of feudalism: you really don't hear about many knights in shining armor after the 1600s.

As labor expanded across the new continents, it eventually reached a point of diminishing returns. It's no coincidence that the industrial revolution kicked into high gear just as the Americas and European-habitable parts of Africa and Australia became fully settled. With no more land for the taking, people had to turn to machinery to increase their returns. And once the machinery had been invented, wages dropped as labor became less necessary.

This reached a head during the Great Depression, when capital outpaced what labor could buy. The immediate cause of the Great Depression was a major contraction in the money supply. This, in turn, was caused by the bursting of a major credit bubble that had inflated throughout the 1920. Credit is a way for rich people to give poor people money, so that poor people can continue to buy the products that rich people make. Unfortunately, creditors generally expect to be paid back, so it sucks when people find out that's impossible.

The Depression led to the political unrest that eventually led to World War 2. WW2 had four major effects: it killed a lot of people, it made the U.S. build up a huge industrial base for war production, it destroyed the capital stocks of most European countries, and it led to the Cold War and rise of communism. The net effect is detailed above: labor became scarce, capital became abundant, and that lead to a large increase in wages and general prosperity.

That changed in the 1980s. People generally attribute the change to Ronald Reagan and Margaret Thatcher, but it's worth asking how they came to power. In the 1980s, the peak of the baby boom generation was just entering the workforce. The increased labor supply drove wages down ("jobless recovery", anyone?) and returns to capital up.

The pendulum should've started swinging the other way around 1990, when the relatively small Gen-X started entering the workforce and the 1920s-born Silent Generation started retiring. And that's what happened among skilled professionals: wages for the top 20% of the population have increased significantly lately.

But the end of the Cold War put a kink in a more broad-based prosperity. When Communism collapsed, lots and lots of additional workers entered the global labor pool. And with Y2K and outsourcing and the Internet, we found out how to put them to use. So the global supply of labor has been increasing and increasing fast, which keeps real wages down and returns to capital up. Hence the booming stock market of the last 10 years, amidst fears that Main Street USA is missing out on the party.

In the last 3-4 years or so, a new wrinkle has been added. The new Asian workers are voracious savers, which means that the supply of financial capital has been high along with the supply of labor. That's why real interest rates are fairly low, and stocks are trading at valuations higher than their historical norms.

It also means the relatively scarce factor of production is innovation: the ability to take available capital and make something people want. That's why the returns to entrepreneurship have been so high for these past couple years, and why so many people have been starting startups. We're attempting to fill a supply/demand imbalance and turn all that free money floating around into useful products for people. When YouTube gets bought for $1.6B despite having little revenues and no profits, it's not because Google is stupid. It's because Google stock has been bid up to stratospheric heights by large influxes of money, and so the rational thing to do is trade it away to make life a bit better for its customers.

So PG's wrong when he says unions are a historical anomaly. (Well, the particular organization of a "union" is a historical anomaly, but the general phenomenom of labor making greater demands in times of scarcity is not.) Labor will have its day again, when a war or famine or plague kills off large numbers of people. Similarly, the startup ecosystem isn't a brave new world that'll last forever: rather, it's a reaction to the particular economic conditions that exist on earth at this time. As long as capital and labor both remain abundant, though, startups will continue to be a profitable career path.