According to data released this week by the Census Bureau, America’s middle class continued to struggle to regain its economic footing in 2013 as its share of the nation’s total income remained effectively stagnant at historically low levels. Among the most frequently overlooked contributors to the middle class’ declining share of the economic pie is the weakening of labor unions, whose membership as a share of the national population also sat stagnant at a historic low in 2013. Strong unions are necessary to maintain a robust middle class, and if action is not taken to prevent their further erosion, the middle class’ share of America’s economic gains may continue to shrink as the nation becomes more unequal.
The middle 60 percent of American households took home an estimated 45.8 percent of the nation’s total income in 2013—statistically indistinguishable from the 45.7 percent of income they earned in 2011 and 2012, which was the lowest level measured since data collection began in 1967. This share was a full 7.4 percentage points below what the middle class took home in 1968, when it hit a record high of 53.2 percent. To place this figure in perspective, if middle-class households were taking home the same percentage of total income today as in 1968, they would have earned an additional $661 billion dollars, or approximately $9,000 per middle-class household, in 2013.
The majority of the money that previously went to the middle class is now going to the wealthiest households. The share of income going to households in the top 20 percent of the income distribution increased from 42.6 percent in 1968 to 51.0 percent in 2013. The share of income going to the top 5 percent of households alone grew from 16.3 percent to 22.2 percent over the same period. Contributing to this trend is the fact that incomes at the top have grown far faster over this time period than incomes in the middle. While the average income of households in the middle 60 percent increased only 22.0 percent in real terms between 1968 and 2013, the average income of the top 20 percent and top 5 percent of households increased 69.5 percent and 93.0 percent, respectively.
A number of forces are responsible for this unequal growth, including rapid globalization that undermined some middle-class wages and increasing returns to education that disproportionately increased the earnings of workers toward the top. When examining these trends, however, the role played by the decline of organized labor is often overlooked. Multiple academic studies have shown that unions help reduce economic inequality and that a significant share of the recent increase in inequality can be attributed to falling union membership.
Figure 1 illustrates the strong correlation between the decline in the nation’s union membership rate and the share of national income going to the middle class. As the middle class’ share of total income declined, the share of Americans who are members of a union fell from 28.3 percent of all workers in 1967 to 11.3 percent in 2013—a membership decrease of 60 percent. As shown in Figure 2, unionization rates fell in every single state during that period, with particularly severe percentage declines in the South, West, and Midwest. Notable, however, is that the decline in the absolute number of union workers was more substantial in the Midwest, as states such as Indiana, Ohio, and Pennsylvania were significantly more unionized to begin with than most Southern and Western states.
Weakening unions lead to a feebler middle class because unions are critical supporters of middle-class-friendly policies, both in the workplace and in the political arena. Unions fight for better wages and essential benefits for their members and help ensure that the nation’s democracy works for the entire middle class by encouraging greater worker participation in the political process and defending crucial programs such as Social Security and the minimum wage. A testament to the effectiveness and importance of these union activities, numerous studies find that that union members have higher wages and better access to health care and retirement benefits than non-union members, and other research shows that unions are one of the only large interest groups in the United States that actually represent the stated interests of the middle class.
If the trends apparent in this week’s Census data are to be reversed, unions will clearly have to play an important role. A prosperous economy requires a strong middle class to drive growth, and a strong middle class requires strong unions to fight for their interests and ensure their voices are always heard.
Keith Miller is a Research Associate with the Economic Policy team at American Worker Project. David Madland is the Director of the American Worker Project at American Progress.