Opinion

Weakened Labor Movement Leads to Rising Economic Inequality

The basic facts about inequality in the United States — that for most of the last 40 years, pay has stagnated for all but the highest-paid workers and inequality has risen dramatically — are widely understood. What is less well-known is the role the decline of unionization has played in those trends. The share of workers covered by a collective bargaining agreement dropped from 27 percent to 11.6 percent between 1979 and 2019, meaning the union coverage rate is now less than half where it was 40 years ago. 

Research shows that this de-unionization accounts for a sizable share of the growth in inequality over that period — around 13–20 percent for women and 33–37 percent for men. Applying these shares to annual earnings data reveals that working people are now losing on the order of $200 billion per year as a result of the erosion of union coverage over the last four decades — with that money being redistributed upward, to the rich. 

The good news is that restoring union coverage — and strengthening workers’ abilities to join together to improve their wages and working conditions in other ways — is therefore likely to put at least $200 billion per year into the pockets of working people. These changes could happen through organizing and policy reform. Policymakers have introduced legislation, the Protecting the Right to Organize (PRO) Act, that would significantly reform current labor law. Building on the reforms in the PRO Act, the Clean Slate for Worker Power Project proposes further transformation of labor law, with innovative ideas to create balance in our economy. 

How is it that de-unionization has played such a large role in wage stagnation for working people and the rise of inequality? When workers are able to join together, form a union and collectively bargain, their pay goes up. On average, a worker covered by a union contract earns 13.2 percent more than a peer with similar education, occupation and experience in a non-unionized workplace in the same sector. Furthermore, the benefits of collective bargaining extend well beyond union workers. Where unions are strong, they essentially set broader standards that non-union employers must match in order to attract and retain the workers they need and to avoid facing an organizing drive. The combination of the direct effect of unions on their members and this “spillover” effect to non-union workers means unions are crucial in fostering a vibrant middle class — and has also meant that as unionization has eroded, pay for working people has stagnated and inequality has skyrocketed. 

Unions also help shrink racial wage gaps. For example, black workers are more likely than white workers to be represented by a union, and black workers who are in unions get a larger boost to wages from being in a union than white workers do. This means that the decline of unionization has played a significant role in the expansion of the black–white wage gap.

But isn’t the erosion of unionization because workers don’t want unions anymore? No — survey data show that in fact, a higher share of non-union workers say they would vote for a union in their workplace today than did 40 years ago. Isn’t the erosion of unionization due to the shifts in employment from manufacturing to service-producing industries? No again — changing industry composition explains only a small share of the erosion of union coverage. 

What has caused declining unionization? One key factor is fierce corporate opposition that has smothered workers’ freedom to form unions. Aggressive anti-union campaigns — once confined to the most anti-union employers — have become widespread. For example, it is now standard, when workers seek to organize, for their employers to hire union avoidance consultants to coordinate fierce anti-union campaigns. We estimate that employers spend nearly $340 million per year hiring union avoidance advisers to help them prevent employees from organizing. 

And though the National Labor Relations Act (NLRA) makes it illegal for employers to intimidate, coerce or fire workers in retaliation for participating in union-organizing campaigns, the penalties are grossly insufficient to provide a meaningful disincentive for such behavior. This means employers often engage in illegal activities, such as threatening to close the worksite, cutting union activists’ hours or pay, or reporting workers to immigration enforcement authorities if employees unionize. In at least 1 in 5 union elections, employers are charged with illegally firing workers involved in organizing. 

In the face of these attacks on union organizing, policymakers have egregiously failed to update labor laws to balance the system. Fundamental reform is necessary to build worker power and guarantee all workers the right to come together and have a real voice in their workplace. 

Restoring the right to representation on the job will likely put at least $200 billion in the pockets of working families each year, reducing income inequality and racial wage gaps, building a vibrant middle class and creating an economy that works for all, not just the privileged few.

 

Heidi Shierholz is senior economist and director of policy at the Economic Policy Institute.

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