EPI: Union decline lowers wages of nonunion US workers

112114-13682

Executive summary:

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.

In the debates over the causes of wage stagnation, the decline in union power has not received nearly as much attention as globalization, technological change, and the slowdown in Americans’ educational attainment. Unions, especially in industries and regions where they are strong, help boost the wages of all workers by establishing pay and benefit standards that many nonunion firms adopt. But this union boost to nonunion pay has weakened as the share of private-sector workers in a union has fallen from 1 in 3 in the 1950s to about 1 in 20 today.

While we avoid strict causal claims about wage determination, the analytical approaches summarized in this report enable us to assess the independent effects of union decline on wages and lend confidence to our core contention that private-sector union decline since the late 1970s has contributed to substantial wage losses among workers who do not belong to a union. This is especially true for men. And 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.

Key findings from our report include the following:

  • For nonunion private-sector men, weekly wages would be an estimated 5 percent ($52) higher in 2013 if private-sector union density (the share of workers in similar industries and regions who are union members) remained at its 1979 level. For a year-round worker, this translates to 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), weekly wages would be an estimated 8 percent ($58) higher in 2013 if union density remained at its 1979 levels. For a year-round worker, this translates to an annual wage loss of $3,016. As a benchmark, consider that the wage loss from increased trade with low-wage nations (Bivens 2013) among non–college graduates is estimated to be 5 percent.
  • For nonunion private-sector men with a high school diploma or less education, weekly wages would be an estimated 9 percent ($61) higher if union density remained at its 1979 levels. For a year-round worker, this translates to an annual wage loss of about $3,172.
  • 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 2 to 3 percent higher if union density remained at its 1979 levels 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 private-sector men (by two-thirds, from 34 to 10 percent), among women (by more than one-half, from 16 to 6 percent), and especially among non–college degree men (by more than two-thirds, from 38 to 11 percent).
  • As unions have receded from the private sector, their effects on the wages of nonmembers (per percent of unionization) have declined. In recent years, these effects have fallen to between one-half and two-thirds of their late-1970s levels.
  • 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 (Western and Rosenfeld 2011) 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.

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 spheres, nonunion employers may also follow the standards that unions help establish through 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. (For example, highly unionized states helped lift minimum wages above the levels of states where labor was comparatively weak.) Higher pay in organized establishments 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.

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