Without Strong Unions, Middle-Class Families Bring Home a Smaller Share

Union leaders speak to protesters of Kentucky H.B. 1 in the Kentucky Capitol rotunda, January 7, 2017.

New data from the U.S. Census Bureau show that in 2016, the median U.S. household earned $59,039, a 3.2 percent increase from the previous year. Seven years after the end of the Great Recession, the median household’s income has approximately recovered to its pre-recession level, when adjusted for inflation, but has effectively remained stagnant since the late 1990s.

Middle-class households are not seeing the high levels of income growth that are being enjoyed by America’s highest-income earners. Furthermore, the share of income that is earned by the middle 60 percent of households, by income, has fallen to record lows. A revitalized union movement could help reverse the decades-long trend of growing inequality and a shrinking middle class. But anti-union attacks at the state and national levels threaten to further tilt our nation’s economy against workers.

Strong unions make for a strong middle class

The fate of the middle class is directly tied to the strength of American unions. Figure 1 shows how union membership rates have fallen over the past 49 years, along with the share of income that goes to the middle 60 percent of American households. In 1968, this group of households brought home 53.2 percent of national income. That same year, 28.2 percent of American workers were union members. As union membership rates began to slide downward, so too did the share of income accruing to the middle class. In 2016, just under 11 percent of American workers were unionized, and the middle 60 percent of households now earn just 45.4 percent of national income. Over this same time period, the share of income earned by the richest households climbed dramatically. The richest top 20 percent of households now earn a majority of U.S. income—51.5 percent—while in 1968 they earned just 42.6 percent. The top 5 percent of households have seen their share grow from 16.3 percent to 22.6 percent. And these estimates may actually underestimate inequality. For example, Emmanuel Saez and Thomas Piketty’s analysis of tax data found that the top 1 percent of households alone brought home 22 percent of the national income in 2015.

This growth in inequality cannot be entirely attributed to falling unionization rates. Low- and middle-income Americans have faced challenges on a variety of fronts. In the years after 1980, the U.S. economy has reached full employment less than half as often as it did from 1949 to 1979, resulting in decreased worker bargaining power. Increased global competition and corporate consolidation have also made it harder for the typical worker to get ahead. Still, the evidence is clear that reduced union membership contributes to greater inequality. A study from the International Monetary Fund found that a 10 percentage-point drop in union density was associated with a 5 percent increase in the income share earned by the top 10 percent.

Both union and nonunion workers benefit from union strength

Unions help workers on many fronts. When workers join together in a union, they increase their bargaining power in the workplace and are able to negotiate for higher pay and better benefits. The typical union worker earns nearly 14 percent more than a similar nonunion worker and is more likely to have important benefits, such as employer-provided health insurance, a workplace retirement plan, and paid time off. Increased pay premiums from unionization are even larger among people of color and non-college graduates. But unions don’t just help their members: Higher union wages also help to bring up the pay of nonunion workers whose companies must compete with better-paid unionized employers. Research from the Economic Policy Institute found that had union membership rates stayed at their 1979 levels, the average nonunion man working year-round in the private sector would earn about $2,700 more each year.

Unions also fight for workers in the political arena. Mobilization efforts by unions boost voter turnout. Unions are among the only interest groups that fight for the interest of middle-class households, working against wealthy special interest groups attempting to rig the nation’s economy against workers. The union-backed Fight for $15 movement has successfully pushed states and local governments across the country to raise the minimum wage. These wage increases have helped to contribute to the 7.5 percent increase since 2010 in the incomes of the bottom 20 percent of households.

Corporate interests have intensified their attacks against unions

As a result of their ability to raise workers’ pay and fight for pro-worker policies, unions and their members have been targeted by corporate interests. This is not a new phenomenon; the decline of unions over the past 40 years has been driven by increased corporate efforts to break unions in the private-sector workplace, and many workers face incredible opposition when attempting to form a union at their job. However, attacks on unions have been intensifying in recent years after Citizens United v. Federal Election Commission eased limits on corporate political spending.

Since 2010, six states have passed right-to-work laws, which prohibit unions from requiring fair-share fees that ensure that workers who benefit from collective bargaining pay for bargaining costs. The total number of right-to-work states now stands at 28. Wisconsin effectively eliminated collective bargaining rights for most public-sector employees in 2011. As a result, the share of Wisconsin public sector workers in a union fell by more than half from 2010 to 2016. Iowa passed a similar law this year, and the U.S. Supreme Court may strike another blow against public sector unions by outlawing fair-share fees in the public sector.

Conclusion

Strong unions are essential to guarantee that working- and middle-class families receive a proper share of the country’s economic growth. Policymakers must stand with workers and against the corporate agenda that seeks to destroy unions, fighting harmful bills that serve to make it even harder for workers to join together. They should also take bolder steps to modernize our labor law system and move our nation toward industry-wide bargaining so that more workers can share in the benefits of collective bargaining. Without renewed dedication to rebuilding worker power, low- and middle-income Americans will continue to be left behind by our economy.

Alex Rowell is a research associate for Economic Policy at the Center for American Progress Action Fund. David Madland is a senior fellow and the senior adviser to the American Worker Project at CAP Action.