The United States faces large wealth divides, particularly by race and ethnicity. The median white family has about 10 times the wealth of the median Black family and more than eight times the wealth of the median Hispanic family. Wealth is also much more unequally distributed than income, with the top 5 percent of families holding about 250 times as much wealth as the median family. Unions play a key role in redressing these large wealth gaps. They increase wealth for all households—no matter their race or ethnicity—and tend to provide larger increases for Black and Hispanic households than for white households.
Unions help households by raising incomes, increasing benefits, and improving the quality and stability of jobs. All these things lead to both direct and indirect increases in wealth. When workers earn more money through union contracts, for example, they are able to set aside more of their paychecks and enjoy the additional tax incentives that come with saving. Moreover, benefits such as pension plans grow wealth, while others such as health or life insurance reduce the amount union members need to spend from their own savings during periods of illness or income loss. This helps cushion families’ savings against downturns like the recent COVID-19-induced recession, and additional savings can be put toward a child’s college education or the purchase of a home. Finally, strong union contracts create more stable jobs, with protections such as dispute resolution giving workers the ability to stay with a single employer for a longer period of time. Such stability leads to greater wealth generation, as finding a new job can be costly—and many benefits are not available to employees with shorter tenure in a position. Unions’ ability to increase household wealth may explain why they help boost economic mobility for future generations.
The above excerpt was originally published in Center for American Progress.
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