New Research Highlights Role of Declining Unionization in Growing Income Inequality

It’s no secret that unions have become a much diminished economic and political force in the US over the past four decades.  Between 1973 and 2007, union membership in the private sector fell from 34 percent to 8 percent among men in the US and from 16 to 6 percent among women.

A new study by economists Bruce Western and Jake Rosenfeld demonstrates that this substantial decline in unionization in the US has played a much bigger role in growing income inequality than previously thought.  In fact, the researchers found that,

…deunionization explains a fifth of the inequality increase for women, and a third for men. The decline of organized labor among men contributes as much to rising wage inequality as the growing stratification of pay by education.

Previous research focused almost exclusively on the role of unions in lifting the wages of unionized workers, but Western and Rosenfeld found that the decline in unionization resulted in depressed wages for nonunion workers as well.  One reason is that “nonunion employers may raise wages to avert the threat of union organization.”

Perhaps the bigger reason for the indirect effect, the researchers argue, was that:

In the early 1970s, when 1 in 3 male workers were organized, unions were often prominent voices for equity, not just for their members, but for all workers. Union decline marks an erosion of the moral economy and its underlying distributional norms. Wage inequality in the nonunion sector increased as a result.

What this research makes clear is that improving access and outcomes in education and ending tax breaks for the wealthy, while important, will not alone suffice for stemming the destructive rise of income inequality in the US.  Policies that strengthen the bargaining power of workers will have to play a critical role.

4 Comments

  1. Alex

    August 5, 2011 at 10:28 am

    Unfortunately, globalization has rendered unions obsolete. At one time, the world would buy our overpriced low quality goods that were the hallmark of unions. The rest of the world can now produce higher quality goods at a lower price, so companies can longer afford the higher labor and benefit cost of unions in this country. It’s sad, but that’s a fact of life.

  2. Ed McLenaghan

    August 5, 2011 at 10:43 am

    Fortunately, countries like Germany and Sweden have shown that you can have strong unions, high productivity, and an export-oriented manufacturing sector.

    http://www.ip-global.org/2011/02/22/economic-powerhouse-germany/

    http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20070620/

    It’s a dangerous myth that unions are obsolete and irrelevant in a global economy.

    http://www.sharedprosperity.org/bp181.html

  3. Alex

    August 5, 2011 at 11:24 am

    Both are doing high-tech precision manufacturing which we do not have the type of skilled workers available. We would have to invest in both the infrastructure and vocational training with a complete revamping of our educational system which requires money we don’t have. It doesn’t hurt that both of the countries mentioned have their financial house in order , and strong leadership at the top.

  4. Ed McLenaghan

    August 5, 2011 at 12:15 pm

    I think you’re right about both countries doing a much better job of having their fiscal houses in order, but I think you underestimate the skills capacity of American workers while also underestimating the importance of “economic democracy” in both countries that makes for a much more symbiotic relationship between business owners and workers. Plus, if we didn’t spend nearly twice as much per person on health care compared to both countries, we’d have plenty of money to spend on vocational training and education.

    http://www.washingtonpost.com/blogs/ezra-klein/post/the-hard-truth-about-health-care-government-works/2011/05/19/AGcE95KH_blog.html#pagebreak