Last year the middle class received the smallest share of the nation’s income since these data were first reported, according to U.S. Census Bureau numbers released today. The middle 60 percent of households received only 45.7 percent of the nation’s income in 2011, down from the historical peak of 53.2 percent in 1968.
The declining share of income received by the nation’s middle class has been driven by stagnant incomes for middle-class earners coupled with rapidly rising incomes for the highest earners. It’s a major shift brought about by many factors—factors that have either led to slower growing middle-class incomes, such as increased globalization, and factors that increase the pay of those at the top, such as the increasing financial benefit of a college education.
And then there is another often overlooked dynamic: the decline of labor unions. As the following chart shows, over the past several decades, the decline in the unionization rate tracks almost perfectly with the decline in the share of income going to the middle class.
According to the latest Census figures, the average income for the top 5 percent of households increased by 5 percent in 2011 to $311,444, while the median household income fell to $50,054, leading to a decrease of 0.8 percentage points in the share of income going to the middle class compared to 2010. Since 1979 the top 5 percent of households have increased their share of the nation’s income from 16.9 percent to 22.3 percent, according to Census figures.
Unions are crucial to reversing this trend. By advancing the interests of the middle class in the workplace and in our democracy, unions help build and strengthen the middle class.
In the workplace, workers who join together in unions are able to negotiate on a more equal footing with their employers. Unionization not only helps increase wages and benefits for union members but also can set a standard for employers who aren’t working with unions to follow when union density is sufficiently high.
In the political arena, union involvement is central to boosting voting rates by enlisting members in registration and get-out-the-vote efforts, and unions are champions of economic programs that create a strong, robust, and expanding middle class. Unions pushed for and have defended Social Security, the minimum wage, and more recently the Affordable Care Act. By acting as a lobbyist for workers, organized labor helps create a democracy that works for the middle class.
According to our previous research, a 10 percentage point increase in union membership would translate into an extra $1,479 per year for the average middle-class household, whether or not that household includes union members—about the same effect as boosting college graduation rates by the same margin. Similarly, sociologists Bruce Western and Jake Rosenfeld of Harvard University and the University of Washington, respectively, have calculated that approximately one-third of the increase in male wage inequality from 1973 to 2007 was due to decreasing unionization—about the same amount they ascribed to the increasing payoff of a college education.
Unfortunately, unions, both in the private and public sector, find themselves under attack. The past two years have seen conservative governors attack the collective bargaining rights of public-sector workers. This past February, Indiana became the 23rd state to pass a “right-to-work” law, and at its recent national convention, the Republican Party passed a party platform that is hostile to organized labor.
Today’s Census numbers show that the worrying trend of middle-class stagnation and increasing income inequality is continuing. We can begin to rebuild the middle class in many ways, including these 35 policies CAP outlined last month. But in order to truly build an economy and a democracy that works for the middle class, we need a strong and thriving union movement. Ensuring that we have a robust middle class is important not only for those in it but for the entire country, as a strong middle class is the foundation of strong economic growth.
David Madland is the Director of the American Worker Project and Nick Bunker is a Research Assistant at the Center for American Progress Action Fund.