Economics, Pethokoukis

Has the decline of unions caused an explosion in income inequality? Not so much

12.11.12 Union Membership

With heavily-unionized Michigan about to become a “right to work” state, I expect to soon see a blizzard of blog posts and news stories about how the decline in unionism has caused stagnant wages and rising income inequality. But the data don’t support that conclusion. Economist David Card of U-C, Berkeley:

My results suggest that the decline in unionization is a small but noticeable part of the overall increase in inequality for men over the past 30 years—maybe 10 to 20 percent of the total. It was most important for workers at the middle of the wage distribution.

Typically, a unionized worker is not somebody at the bottom of the distribution, but somebody at the middle. In the 1970s, unionization was pushing this group a little closer to the top and narrowing the degree of wage variability across jobs. As unionization has gone away, there has been some downward drift in the level of wages (relative to the top skill groups) and an opening up of wage inequality in sectors like trucking and manufacturing. Both effects are important, but they’re only a small part of the overall trend.

And within the female labor force, there’s really no effect because unions don’t really equalize wages much for women.

There is a bigger story here concerning education and technology and globalization. And let me also point out that incomes have not stagnated over the past few decades. Median market incomes are up about about 21%, as measured by economist Richard Burkhauser and his team of researchers at Cornell University. And once you add in income transfers, taxes, and health benefits, income rose by 37%.


2 thoughts on “Has the decline of unions caused an explosion in income inequality? Not so much

  1. How did wrecking, destroying and bankrupting huge industries, like the steels and autos, contribute to income equality.

    And look what the school teachers union did to narrow the “income gap” and contribute to income equality when only 7% of 8th grade public schoolers in Detroit are proficient readers.

    Unions wreck everything that they touch.

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