By: Charles Lamberton The level of inequality — which fell during the New Deal but has risen dramatically since the late 1970s — corresponds to the rise and fall of Unions in the United States. Take a look at this graph showing union membership and the income share claimed by the richest 10 percent of Americans over time. […]
The level of inequality — which fell during the New Deal but has risen dramatically since the late 1970s — corresponds to the rise and fall of Unions in the United States. Take a look at this graph showing union membership and the income share claimed by the richest 10 percent of Americans over time. As union membership has fallen to around 1920s levels, economic inequality has worsened substantially.
Unions help workers achieve higher wages. Union members in the United States earn significantly more than non-union workers. Over the four-year period between 2004 and 2007, unionized workers’ wages were on average 11.3 percent higher than non-union workers with similar characteristics. That means that, all else equal, American workers that join a union will earn 11.3 percent more — or $2.26 more per hour in 2008 dollars — than their otherwise identical non-union counterparts. Unions help ensure that American workers’ wages grow with their productivity. Workers helped the economy grow during this time period by becoming ever more productive, but they received only a small share of the new wealth they helped create. Throughout the middle part of the 20th century when unions were stronger, American workers generated economic growth by increasing their productivity, and they were rewarded with higher wages. But this link between greater productivity and higher wages has broken down. Prior to the 1980s, productivity gains and workers’ wages moved in tandem: as workers produced more per hour, they saw a commensurate increase in their earnings. Yet wages and productivity growth have decoupled since the late 1970s. Looking from 1980 to 2008, nationwide worker productivity grew by 75.0 percent, while workers’ inflation-adjusted average wages increased by only 22.6 percent, which means that workers were compensated for only 30.2 percent of their productivity gains. The cost of benefits — especially health insurance — has increased over time and now accounts for a greater share of total compensation than in the past, but this increase is nowhere near enough to account for the discrepancy between wage and productivity growth. For example, according to analysis by the Center for Economic and Policy Research, between 1973 and 2006 the share of labor compensation in the form of benefits rose from 12.6 percent to 19.5 percent. If American workers were rewarded for 100 percent of their increases in labor productivity between 1980 and 2008 — as they were during the middle part of the 20th century — average wages would be $28.53 per hour —42.7 percent higher than the average real wage in 2008. Slow wage growth has squeezed the middle class and contributed to rising inequality. But increasing union coverage rates could likely reverse these trends as more Americans would benefit from the union wage premium and receive higher wages. If unionization rates were the same now as they were in 1983 and the current union wage premium remained constant, new union workers would earn an estimated $49.0 billion more in wages and salaries per year. If union coverage rates increased by just 5 percentage points over current levels, newly unionized workers would earn an estimated $25.5 billion more in wages and salaries per year. Non-union workers would also benefit as employers would likely raise wages to match what unions would win in order to avoid unionization.Today, the Treasury Department released a first-of-its-kind report on labor unions, highlighting the evidence that unions serve to strengthen the middle class and grow the economy at large. Over the last half century, middle-class households have experienced stagnating wages, rising income volatility, and reduced intergenerational mobility, even as the economy as a whole has prospered. Unions can improve the well-being of middle-class workers in ways that directly combat these negative trends. Pro-union policy can make a real difference to middle-class households by raising their incomes, improving their work environments, and boosting their job satisfaction. In doing so, unions can help to make the economy more equitable and robust.
Why Are Americans Afraid Of Unions When Some Countries Have Over 50% Of People Unionized And Living Good Lives?
Over the last century, union membership rates and income inequality have diverged, as shown in Figure 1. Union membership peaked in the 1950s at one-third of the workforce. At that time, despite pervasive racial and gender discrimination, overall income inequality was close to its lowest level since its peak before the Great Depression, and was continuing to fall. Over the subsequent decades, union membership steadily declined, while income inequality began to steadily rise after a trough in the 1970s. In 2022, union membership plateaued at 10 percent of workers while the top one percent of income earners earned almost 20 percent of total income.
Source: Union membership data through 1994 from Farber et al. (2021) and Freeman (1998). After 1995, union membership data is from the CPS and they reflect percent of employed civilian labor force aged 16+ that are a member of a union. Top Income Share is from World Inequality Database, wid.world
While the overall U.S. economy has grown over the past few decades, the rise in inequality can be a proxy for the experience of many middle-class households. The income of the median family rose only 0.6 percent per year, in contrast to average personal income per household which rose 1.1 percent per year, as seen in Figure 2. And, notably, other markers of middle-class stability have deteriorated since the 1970s. Income has become more volatile, [1] the amount of time spent on vacation has fallen, [2] and middle-class Americans are less prepared for retirement.[3] Intergenerational mobility has declined—90 percent of children born in the 1940s earned more than their parents did at age 30, while only half of children born in the mid-1980s did the same.[4]
Union Value: For Your Benefit
Source: Real median weekly wages from Bureau of Labor Statistics; nominal personal income from Bureau of Economic Analysis; real median household income from Census. All series are deflated by the Consumer Price Index
So, how could unions help? Treasury’s report shows that unions have the potential to address some of these negative trends by raising middle-class wages, improving work environments, and promoting demographic equality. Of course, unions should not be the only solution to these structural trends. But the evidence below and in the report suggests that unions can be useful in building the economy from the middle out.
One of the most oft-cited benefits of unions is the so-called “union wage premium”—the amount that union members make above and beyond non-members. While simple comparisons of the wages of union workers and nonunion workers find that union workers typically make about 20 percent more than nonunion workers, [5] economists turn to other types of analysis to capture causal effects of unions on wages. The first approach controls for many worker and occupation characteristics with the goal of comparing the wages earned by two similar workers that differ only in their union status. The other empirical approach is “regression discontinuity analysis, ” which compares the wages in workplaces which just barely passed a vote to unionize against wages in workplaces that barely failed to pass the unionization vote. All in all, the evidence from these two approaches points to a union wage premium of around 10 to 15 percent, with larger effects for longer-tenured workers.[6]
Trade Unions Foster Education And Uproot Ignorance. Shorten Hours And Lengthen Life. Raise Wages And Lower Usury .... Make The World Better. All Wage Workers Should Be Union Men. Their Progress Is Limited
Worker wellbeing is greatly affected by non-wage benefits. Some benefits, such as healthcare benefits and retirement benefits, are a part of the compensation package and have substantial monetary value. Other features of the work environment, like flexible scheduling or workplace safety regulations, may not have direct monetary value but could still be highly valued by workers. For example, one study estimated that the average worker is willing to give up 20 percent of wages to avoid having their schedule frequently changed by their employer on short notice.[7] Another study, co-authored by Secretary Yellen, found that 80 percent of people who like their jobs cite a non-wage reason as the primary cause of their satisfaction and, conversely, 80 percent of people who
There is strong evidence that unions improve both fringe benefits and non-wage features of the workplace. Figure 3 shows how much more likely it is for a union worker to be offered certain amenities than a nonunion worker. While these simple comparisons reflect correlations only, studies that use more robust empirical approaches find the same: unions have had a large hand in improving work environments on many dimensions and, in doing so, raise the wellbeing of workers and their families.[9]
Source: Bureau of Labor Statistics. UI data from 2018. Other data from March 2021. Offered benefits describe whether an employee has access to the benefit through their employer, no the take-up thereof. UI values include non-member workers represented by a union. UI recipiency rate is the percent of unemployed workers who received UI, irrespective of whether they are eligible for UI payments.
Factsheet: How Strong Unions Can Restore Workers' Bargaining Power
The diverse demographics of modern union
Worker wellbeing is greatly affected by non-wage benefits. Some benefits, such as healthcare benefits and retirement benefits, are a part of the compensation package and have substantial monetary value. Other features of the work environment, like flexible scheduling or workplace safety regulations, may not have direct monetary value but could still be highly valued by workers. For example, one study estimated that the average worker is willing to give up 20 percent of wages to avoid having their schedule frequently changed by their employer on short notice.[7] Another study, co-authored by Secretary Yellen, found that 80 percent of people who like their jobs cite a non-wage reason as the primary cause of their satisfaction and, conversely, 80 percent of people who
There is strong evidence that unions improve both fringe benefits and non-wage features of the workplace. Figure 3 shows how much more likely it is for a union worker to be offered certain amenities than a nonunion worker. While these simple comparisons reflect correlations only, studies that use more robust empirical approaches find the same: unions have had a large hand in improving work environments on many dimensions and, in doing so, raise the wellbeing of workers and their families.[9]
Source: Bureau of Labor Statistics. UI data from 2018. Other data from March 2021. Offered benefits describe whether an employee has access to the benefit through their employer, no the take-up thereof. UI values include non-member workers represented by a union. UI recipiency rate is the percent of unemployed workers who received UI, irrespective of whether they are eligible for UI payments.
Factsheet: How Strong Unions Can Restore Workers' Bargaining Power
The diverse demographics of modern union
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