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News from EPI Declining unionization a key cause of growth in wage inequality since 1973, new EPI report finds

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For Immediate Release: Wednesday, August 29, 2012
Contact: Phoebe Silag or Donte Donald, news@epi.org 202-775-8810

Declining unionization a key cause of growth in wage inequality since 1973, new EPI report finds

Declining unionization was responsible for roughly a third of the growth of wage inequality among men from 1973 to 2007, a new Economic Policy Institute report finds. Declining unionization can explain roughly a fifth of the growth of wage inequality among women over the same time period. The report, Unions, inequality, and faltering middle-class wages by EPI President Lawrence Mishel, previews data from the forthcoming book “The State of Working America, 12th Edition.”

The share of the workforce represented by unions declined from 26.7 percent to 13.1 percent from 1973 to 2011. The decline in union representation has lowered wages for middle-class workers both directly, as fewer benefit from a union wage advantage, and indirectly, as unions have less of an ability to set labor standards for all workers in occupations and industries. From 1973 to 2007, the direct impact of declining unionization accounted for 20.2 percent of the growth of overall male wage inequality, and the indirect impact accounted for 13.7 percent, for a total of 33.9 percent, or roughly one-third. For women, declining unionization’s direct impact accounted for 9.2 percent of the growth of wage inequality, and the indirect impact explained 11.2 percent, for a total of 20.4 percent, or roughly one-fifth. Declining unionization has hurt male workers more than female workers because men were more likely to have been represented by unions when unions were strong.

The decline of unions was also the primary driver of the growing wage gap between white- and blue-collar male workers and a significant factor in the growing wage gap between college- and high-school-educated male workers from 1978 to 2011. The white-collar/blue-collar wage gap grew 10.1 percentage points between 1978 and 2011, and the lessened effect of unionism accounted for 76.1 percent of the increase. The college/high-school wage gap grew 23.9 percentage points between 1978 and 2011, and the lessened effect of unionism accounted for 21.2 percent of the increase.

“Unions reduce wage inequalities because they raise wages more at the bottom and in the middle of the wage scale than at the top,” said Mishel. “It is unsurprising that efforts to weaken unions have exacerbated both wage inequality and the divergence between overall productivity and the compensation of the typical worker.”

The union wage advantage—the percentage-higher wage earned by those covered by a collective bargaining contract—is currently 13.6 percent overall. Male workers have a union wage premium of 17.3 percent, and women have a union wage premium of 9.1 percent. Hispanic and African-American workers have union wage premiums of 23.1 percent and 17.3 percent, respectively, while the white union wage premium is 10.9 percent. A union wage premium exists in every dimension of the compensation package—unionized workers are 28.2 percent more likely to be covered by employer-provided health insurance and 53.9 percent more likely to have employer-provided pensions than nonunionized workers, and unionized workers receive 14.3 percent more paid time off.

EPI will release “The State of Working America, 12th Edition” to the media on September 4, embargoed until September 11. The authors of the book—Mishel, Josh Bivens, Elise Gould and Heidi Shierholz—will hold a press call on September 11. Reporters who wish to receive access to the electronic version of the book or who would like more information about the call should contact news@epi.org.

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