Union decline lowers wages of nonunion workers

The overlooked reason why wages are stuck and inequality is growing

By Jake Rosenfeld, Patrick Denice, Jennifer Laird

Private-sector union decline since the late 1970s has contributed to wage losses among workers who do not belong to a union.

This decline in union power has not received nearly as much attention as globalization, technological change, and the slowdown in Americans’ educational attainment.

This is the not-so-surprising conclusion of a new report from the Economic Policy Institute.

Here is an excerpted summary of this new report.

OVERALL CONCLUSIONS

• Pay for private-sector workers has barely budged over the past three and a half decades. In fact, for men in the private sector who lack a college degree and do not belong to a labor union, real wages today are substantially lower than they were in the late 1970s.
• This union boost to nonunion pay has weakened as the share of private-sector workers in a union has fallen from one in three in the 1950s to about one in 20 today.
• Where unions are strong, they help boost the wages of all workers by establishing pay and benefit standards that many nonunion firms adopt.

SPECIFIC IMPACTS

• Those most hurt by the decades-long decline in the nation’s Labor Movement are those nonunion men who did not complete college, or go beyond high school — groups with the largest erosion of union membership over the last few decades.
• Union decline has exacerbated wage inequality in the United States by dampening the pay of nonunion workers as well as by eroding the share of workers directly benefitting from unionization.
• Earlier research shows that union erosion can explain about one-third of the growth of wage inequality among men and about one-fifth of the growth of wage inequality among women from 1972 to 2007.

At least for middle-wage men, the impact of the erosion of unions on the wages of both union and nonunion workers is likely the largest single factor underlying wage stagnation and wage inequality.

IMPACT OF LOWER UNIONIZATION

Because unionization is not at its 1979 level:

FOR MEN

• Nonunion private-sector men have seen an annual wage loss of $2,704. For the 40.2 million nonunion private-sector men the loss is equivalent to $2.1 billion fewer dollars in weekly paychecks, which represents an annual wage loss of $109 billion.
• For nonunion private-sector men without a bachelor’s degree or more education (non–college graduates), their annual wage loss is $3,016.
• For nonunion private-sector men with a high school diploma or less education have experienced an annual wage loss of about $3,172.
• The degree of nonunion wage decline reflects how much unionization has declined since 1979 among private-sector men — by two-thirds, from 34 to 10 percent.

FOR WOMEN

The effects of union decline on the wages of nonunion women are not as substantial because women were not as unionized as men were in 1979.

• Weekly wages would be approximately two to three percent lower for all nonunion women: nonunion, non–college graduate women, and nonunion women with a high school diploma or less education.

However the cumulate effects are still sizable. For 32.9 million full-time nonunion women working in the private sector, weekly pay would be a total of $461 million more (and roughly $24.0 billion more per year) in 2013 if unions had remained as strong as they were in 1979.

• The degree of nonunion wage decline reflects how much unionization has declined since 1979 among women — by more than one-half, from 16 to six percent.

NON-UNION BENEFIT

Nonunion workers benefit from a strong union presence in their labor market in many ways:

• Strong unions set pay and benefits standards that nonunion employers follow. Those employers may raise pay for some workers to forestall an organizing drive, which leads to an upward adjustment in wages of workers above them, to maintain relative pay differentials (similar to the effects of minimum-wage increases).
• Even absent organizing activities in their plants, nonunion employers may also follow the standards that unions help establish through the unions’ politicking for labor-friendly policies, instituting informal and formal rules governing labor conditions, and generally serving as a cultural force arguing for a “fairer share” for working men and women.
• Higher pay in organized businesses increases competition for labor so that nonunion firms lift wages to prevent their employees from leaving for higher, union wages. And in setting wages, new market entrants often look to what industry leaders are doing; when Organized Labor was strong, many of these leaders were unionized.

Rebuilding our system of collective bargaining is an important tool available for fueling wage growth for both low- and middle-wage workers and ending the era of persistent wage stagnation.

(Jake Rosenfeld is associate professor of Sociology at Washington University-St. Louis, the author of What Unions No Longer Do (Harvard University Press, 2014). Jennifer Laird is a Postdoctoral Research Scientist at Columbia University, School of Social Work. Patrick Denice is a Research Analyst and Ph.D. graduate student, Department of Sociology at the University of Washington.)