The trend of stagnant and declining wages for low- and moderate-wage workers coincides with the decline of union membership, as demonstrated in the first part of this article. Both of these trends also coincide with a long-term pattern of anemic economic performance. Reversal of these trends will involve a restoration of workers’ rights to organize and collectively bargain for better wages and benefits.
Workers who are members of unions or represented by unions typically have significantly higher wages and benefits than their non-union counterparts. This is particularly true for low-wage workers. Among forty categories of occupations tracked by the Bureau of Labor Statistics (BLS), union members benefited from higher wages and salaries in all but five categories—and the difference between union and non-union wages in those five categories was small. The chart below shows union and non-union median weekly earnings for some of the largest categories of occupations based on 2015 BLS data.
For the two highest wage categories listed above, the gap between union and non-union earnings is modest, but for construction workers, the gap is huge, with union members earning 47.9 percent more than non-union workers. The gap between union and non-union wages is much smaller for manufacturing workers, although workers involved in the manufacture of non-durable goods make 10.5 percent more than their non-union counterparts, while the union/non-union gap for durable goods manufacturing is just 2.1 percent. Union members in office/administrative support occupations and service occupations make 30 percent and 54 percent more, respectively, than their non-union counterparts. While there are some exceptions to the rule, there is a clear tendency for union membership to be of greatest benefit for workers in lower wage occupations.
The wages and salaries of private sector union members have also increased more rapidly over time, growing by 25.1 percent from 2007 to 2015, compared to just 18.9 percent for non-union workers, based on BLS hourly employee compensation data. The higher rate of wage growth over time holds for both goods-producing industries and service-providing industries.
While the advantage of union membership in terms of higher wages and salaries is great, the advantage in terms of benefits—including paid leave, vacations, health insurance, and pensions—is even greater. Furthermore, the advantage of union membership in terms of better benefits once again tends to be greatest in low-wage occupations.
The benefit of union membership for workers is further demonstrated by a comparison of average annual pay in so-called “right to work” (RTW) states (i.e., states in which workers can opt out of paying fair share dues) versus non-RTW states. Based on 2015 BLS data, average annual pay for private sector workers in non-RTW states—such as Minnesota—was $52,300—over $7,000 greater than in RTW states. Average annual pay for private sector workers in Minnesota was $53,947—$8,700 greater than in neighboring “right to work” Wisconsin ($45,230). Even after controlling for demographic, socio-economic, and macro-economic differences between states, a 2015 report from the Economic Policy Institute (EPI) found that wages in RTW states are 3.1 percent lower than in non-RTW states.
The difference between RTW and non-RTW states does not end with wages. Workers in RTW states are more likely to be uninsured and, when they do have insurance, pay a larger share of their premiums than in non-RTW states. In addition, workers in RTW states tend to have a higher rate of workplace fatalities than their counterparts in RTW states.
Given that unions have been critical in terms of raising the wages and benefits of workers—especially in lower wage occupations—the fact that the erosion of union membership over the last several decades has coincided with wage stagnation among lower- and moderate-wage workers and increasing wage inequality should come as no surprise.
A critical step in reversing the trends of wage stagnation and wage inequality is to increase the ability of workers to collectively bargain for better wages and benefits. This will allow workers to share in increased workplace productivity, thereby boosting the purchasing power of lower- and moderate-wage households, who comprise the bulk of the consumer base. This will in turn spur greater production, economic expansion, more jobs, and even higher wages. A virtuous cycle ensues. As noted in the EPI report:
Analyses of the union effect on firms and the economy have generally found unions to be a positive force, improving the performance of firms and contributing to economic growth.
The decrease in union membership has coincided with wage stagnation, wage inequality, and a long-term cycle of disappointing economic performance. One of the keys to reversing these trends will be to strengthen the ability of workers to organize and collectively bargain for better wages and benefits.