Imagine union membership tripling in the United States. It may sound radical—if you’ve forgotten history. In fact, more than 1 in 3 private-sector workers belonged to a union in the 1950s. The results? Wages grew in tandem with the economy. The middle class thrived. Black-white wage gaps shrank. Broadly shared economic growth was a reality, not an aspiration. That’s because when workers have bargaining power, they win better wages, benefits, and working conditions. This report shines a light on what we stand to win if we rebuild union power.

Over the last four decades, big corporations and the billionaires who run them have waged a relentless campaign against unions. And they have largely succeeded in reshaping the U.S. economy. By making it harder and harder for workers to organize and bargain collectively, the rich seized more and more income and wealth, destroying the U.S. middle class. Now the wealth of the richest Americans has exploded: The richest 0.1% own more than five times the combined wealth of the entire bottom half of the country.

And yet, workers haven’t given up. In 2025, unionization ticked upward. Public approval of unions has reached some of its highest levels in decades, and more than 50 million nonunion workers say they’d join a union tomorrow if they could. That’s because they know what unions deliver. In an economy that has been rigged against working people for decades, unions serve as a counterweight to corporate power—reducing inequality and building the kind of middle class that underpins a strong and inclusive economy.

It will take serious policy change to reverse nearly 50 years of deliberate attacks on working people and their institutions. It will require that politicians stand up to the superrich and corporate interests. It will require that workers continue to build power. But, as this report shows, we have much to gain from stronger unions. An organized and empowered workforce has powerful and far-reaching economic benefits.

Nearly four decades ago, I helped found the Economic Policy Institute because working people needed a voice in the economic debates that shape their lives. This report is exactly the work we envisioned: rigorous research that puts workers at the center of economic policy, and that arms all of us with the facts to fight for them. At a time when our economy is held in relatively few hands, we need this work—and we need unions—more than ever. 

Robert Reich
Professor, writer, and former Secretary of Labor

Executive summary

Union membership in the U.S. ticked up in 2025, breaking a decades-long trend of declining unionization. But today’s unionization rate doesn’t reflect the tens of millions of workers who want a union but can’t get one. This report examines what we stand to gain if we triple current union membership to 30%—restoring it to 1950s levels, when union strength delivered rising wages, narrowing racial wage gaps, and a thriving middle class.

Tripling union membership would:

• Deliver a 14.5% raise for the median worker—amounting to more than $7,700 annually, or nearly $270,000 over a 35-year career. These life-changing increases would benefit union and nonunion workers alike.
• Shift $1.2 trillion to workers annually. This would reverse a third of the increase in inequality experienced since 1979.
• Significantly narrow racial wage gaps. Because unions tend to boost wages more for Black and Hispanic workers than for white workers, tripling union membership would close racial wage gaps by more than one-third.
• Boost the number of people with health insurance. Since unions increase other forms of compensation, like health insurance benefits, the number of nonelderly people without health insurance would fall by about 25%. Unions further reduce uninsured rates by advocating for increased public benefits like Medicaid.
• Strengthen communities. States with high union density invest more in public education, have higher unemployment insurance recipiency rates, and have all adopted Medicaid expansion.
• Protect democracy. Unions boost voter turnout, equip workers with civic skills, and actively defend voting rights. States with high union density have passed far fewer voter restriction bills than low-density states.

Download the factsheet

Roadmap for tripling union density

Reversing decades of political neglect that has stealthily undermined workers’ rights to unions and collective bargaining will require comprehensive reform that weaves together tested approaches with bold new ideas, at both federal and state levels.

Two bills with bipartisan support could help restore collective bargaining

• The Protecting the Right to Organize Act would restore private-sector workers’ right to organize and bargain collectively. It would streamline the union formation process, establish penalties for labor law violations, override so-called “right-to-work” laws, and ban “captive audience” meetings.
• The Public Service Freedom to Negotiate Act would be the first federal law that guarantees all public-sector workers at the federal, state, and local levels the right to organize and collectively bargain.

Two bold new proposals could expand the benefits of collective bargaining and help tackle the affordability crisis

• Guaranteed annual raises for newly unionized workers. Legislation providing that newly unionized workers can use arbitration to achieve a first contract (if an employer fails to negotiate in good faith) should set a minimum standard that such contracts include a cost-of-living adjustment (COLA). For the typical worker, a 3% COLA means roughly $2,000 extra a year.
• Default collective bargaining when CEO-to-worker pay ratios exceed 100:1. Declining unionization and the stratospheric rise in CEO pay are deeply connected. Strengthening the bargaining power of workers in severely imbalanced companies would enable them to capture a larger share of the wealth their work creates.

States can remove anti-union laws and protect collective bargaining

Removing so-called “right-to-work” laws and restrictions on public-sector bargaining alone would increase union density nationally from 9.9% to 14.4%. Beyond removing those unionization barriers, states can also:

• Extend collective bargaining rights to workers currently excluded from federal law (in-home child care, home health care, agricultural, and gig workers);
• Protect workers’ right to refuse mandatory, anti-union “captive audience” meetings; and
• Extend unemployment insurance eligibility to workers on strike.

Introduction

In 2025, 14.7 million workers—10% of all wage and salary workers—were union members, an increase from 9.9% in 2024.1 Though small, the increase marks a departure from prior years’ downward trend in union density and coincides with record high public favorability of unions.2

This report examines what the U.S. might look like if union membership were to triple to 30%, restoring it to roughly its 1950s peak. We analyze the economic, social, and democratic impacts of this increase; examine the potential impact on state union density rates if all states were to remove anti-union policies; and offer policy recommendations to expand union membership.

While tripling union membership is an ambitious goal, it is fully consistent with workers’ own demand for unions. Recent survey data show that 43% of nonunion workers would vote to unionize if given the opportunity—the equivalent of about 56 million wage and salary workers (Ahlquist, Grumbach, and Kochan 2024; McNicholas, Poydock, and Shierholz 2026). If all these workers unionized, union density would rise from 10% to 48.7%—well above the 30% goal we examine in this paper.

Union decline, wage suppression, and affordability

As union membership has declined, workers’ wages have been suppressed and inequality has skyrocketed. The gap between typical workers’ pay and economy-wide productivity is at a historic high.3 Since 1979, productivity has grown 2.7 times as much as pay for typical workers (Figure A). This divergence reflects both rising wage inequality—high earners experiencing much stronger wage growth than typical workers—and a shrinking share of the economy’s income going to workers overall. Between 1979 and 2023, real (inflation-adjusted) earnings for the top 0.1% grew 354% (from $618,000 to $2.8 million), while earnings for the bottom 90% of households grew just 44% (from $30,000 to $43,000) (EPI 2026a). And workers are now taking home a historically low share of corporate-sector income—meaning shareholders and other capital owners are capturing more than ever before (EPI 2026b).

Figure A

Inequality has grown since 1979 because of intentional policy choices that suppressed wages for typical workers to accelerate income growth at the top. If pay for typical workers had kept pace with productivity over the past nearly five decades, their paychecks today would be more than 40% larger (EPI 2026c). Though affordability pressures are often framed as a problem of high prices, the real problem is this wage shortfall—and reversing that shortfall must be central to any serious affordability agenda. Collective bargaining is the most effective mechanism workers have to raise their wages and secure their fair share of economic growth. Expanding union membership and collective bargaining is central to addressing the affordability squeeze.

Unions raise wages for all workers

One of the most well-studied benefits of unions is the ability of collective bargaining to raise pay—resulting in a “union wage premium.”4 Historically, that premium has fluctuated around 15–20% (EPI 2026d). Unions also reduce inequality by compressing the wage distribution within firms, with the largest benefits going to workers at the bottom and middle. This is one reason the union wage premium is typically larger for those with less education, and for Black and Hispanic workers relative to white workers (Bivens et al. 2023).

Less appreciated is that unions also boost wages for nonunion workers. Higher wages at unionized firms make those jobs more attractive to nonunion workers, indirectly pressuring nonunion firms to raise wages to keep their workers. Nonunion firms may also raise wages to avoid unionization, especially when union density is already high in the relevant sectors and occupations.

Finally, unions also advocate for progressive changes in the tax and benefit system—indirectly raising pre-tax pay for low- and middle-wage workers. This happens in two main ways: First, when taxes on top incomes are higher, corporate executives have less incentive to maximize their own income at the expense of workers’ wages.5 Second, more generous social benefits like SNAP and Medicaid increase the bargaining power of lower-paid workers by making them less economically vulnerable and better able to reject low-quality jobs (Bivens 2026).6

These “spillover” effects of unions on the nonunion sector are significant and increase when union density is high. Rosenfeld, Denice, and Laird (2016) and Farber et al. (2021) find strong evidence that unions raise the wages of nonunion workers. Consistent with this, Fortin, Lemieux, and Lloyd (2021) estimate that between 1979 and 2017, declining unionization was responsible for 37% of the increase in inequality between the 90th and 50th percentiles of male workers—and more than half of that impact occurred because, as unions weakened, nonunion employers faced less pressure to offer higher wages.

Tripling union density would shift $1.2 trillion a year to working people

Our analysis of the relationship between union density and state median wages finds that for every 10 percentage point difference in union density, real median wages are about 7.2% higher.7 If we tripled union density from 10% to 30%, the real median wage for all workers (including both union and nonunion workers) would rise from $25.67 in 2025 to $29.39 per hour—a 14.5% increase.8 A full-time, full-year worker earning that wage would see annual pay rise by more than $7,700.

To put this into perspective, consider the substantial growth in the gap between pay and productivity between 1979 and 2025. A full-time, full-year worker at the 2025 median wage was paid about $53,400 per year—but would have earned about $76,400 had their pay kept pace with productivity growth (EPI 2026e). Through direct wage increases for union members and unionization’s spillover effects on nonunion workers, tripling union density would close roughly one-third of the productivity-pay gap, increasing annual pay to $61,100.

To contextualize the gain in another way, consider that the median annual cost of a mortgage in the U.S. is $18,252. An additional $7,700 per year would cover more than 40% of that cost.9

Perhaps more strikingly, consider that an extra $7,700 a year adds up to nearly $270,000 (in today’s dollars) over the course of a 35-year career—a life-changing increase for a working family. Adjusting the USDA’s latest estimate of the cost of raising a child to 2025 dollars yields a current cost of roughly $317,000 to raise a child from birth through age 17, including food, housing, transportation, health care, clothing, child care, education, and other expenses (USDA 2017). The additional $270,000 in career earnings that a typical worker would receive if union density were tripled would cover 85% of that cost.

Or, according to the College Board, the average annual cost of attending a four-year in-state public college, including room and board, is about $31,000 (Ma, Pender, and Hu 2025). Over four years, that comes to $124,000 per student—so the additional $270,000 in career earnings would more than cover the cost of sending two children to college.

Yet another way to show how transformational these effects would be for the U.S. economy and the economic security of typical families: Assuming the 14.5% wage boost we estimate from a tripling of union density applies to the bottom 80% of the U.S. workforce, this would raise these workers’ combined pay each year by $1.2 trillion.10 

Several useful reference points help illustrate the scale of this $1.2 trillion increase in workers’ annual pay. First, the increase would be nearly three times as large as the $430 billion U.S. families received in “COVID checks”—and unlike those one-time checks, these gains would be permanent and recurring.11 Second, the $1.2 trillion that tripling union density would shift to workers slightly exceeds the Pentagon’s 2025 budget—a redistribution of income on a scale comparable to the entirety of the U.S. military-industrial complex.12 Third and most revealingly, this increase would claw back a full third of the increase in income inequality since 1979. Between 1979 and 2022, the share of market income going to the richest 20% of households rose by 12.0 percentage points (with nearly all of that increase—10.1 percentage points—accruing to the richest 1%). A $1.2 trillion increase in the incomes of the bottom 80% of households would reverse a third of that shift, 4.0 of the 12.0 percentage points.13

Our estimates likely underestimate future gains

It’s worth noting that while our estimates show large wage gains to workers from tripling union density, they are likely being significantly held down by the fact that union density in the U.S. is starting from such a low level (10%). Our estimates therefore likely understate the wage gains workers will experience once the labor market reaches a higher level of union density. Fortin, Lemieux, and Lloyd (2021) find that the wage payoff to union density is much larger where density is already high, and this shows up clearly in our analysis as well: Below 15% union density, a one percentage point increase in density is associated with just a 0.2% increase in the median wage; above 15%, the median wage increases by 0.9%—a wage response more than four times as large (see Figure B).14

The economic intuition behind this 15% threshold is that a minimum scale of unionization is needed for collectively bargained wages to exert a strong influence on pay scales—both union and nonunion—throughout the broader economy. While every additional percentage point of unionization gives another 1% of workers the union pay premium, it has a more limited effect on wage-setting throughout the broader labor market until overall union density reaches around 15%.

Today’s typical state has a union density of about 10%, which means the wage gains from each additional percentage point of unionization—while still significant—are muted relative to the gains that occur once union density exceeds 15%. In essence, the policy assault on unions in recent decades has pushed density so low that we need a 50% increase—from 10% to 15% union density—just to start realizing the “normal” gains unions can bring to a high-road economy. Raising density from 10% to 30% would carry the labor market across that 15% threshold and well into the higher-density regime, where each additional percentage point increase in unionization delivers substantially larger gains for the median worker. This is why a transformational policy effort is needed: We must rebuild union density from the depressed levels created by decades of political neglect to the point where the full wage benefits of widespread collective bargaining can be realized.

Unions reduce racial wage gaps

Because unions increase wages for Black and Hispanic workers more than for white workers, unions reduce racial wage gaps. And this dynamic is not new—research shows that the union premium was already higher for Black workers than for white workers by the mid-20th century, meaning that the spread of unionization in that era was one of the country’s greatest forces for racial justice (Farber et al. 2021; Bivens et al. 2023). But with the decline in unionization over the past 45 years, racial wage gaps have widened and are now substantially worse than they were in 1979—damage that restoring union power would more than reverse. In 2025, the median Black or Hispanic worker earned 76.5% of the median white worker wage—a wage gap of 23.5%. Tripling union density would close more than one-third of that gap, reducing it to 14.6%.15

Unions boost benefits, not just pay

Unions also increase other forms of compensation, like health insurance benefits. In 2025, 95% of union workers had employer-sponsored health insurance, relative to 71% of nonunion workers. In addition, as discussed later, unions further reduce uninsured rates by advocating for increased public benefits like Medicaid. Figure C shows that nonelderly uninsurance rates are substantially lower in states with higher union density. To do this analysis, we divided the 50 U.S. states plus the District of Columbia into three equally sized groups based on their current (2023–2025) level of union density.16 Most low-union-density states have double-digit uninsured rates, but these rates typically fall to the single digits in medium- and high-union-density states. If union density tripled and all states were high-density states, the national nonelderly uninsured rate would fall by about a quarter, from 9.8% to 7.3%.

Figure C

Unions benefit communities

Unions don’t just improve workers’ pay and benefits—they give workers a voice in shaping the social fabric of their communities, lifting standards for union and nonunion workers alike. The data reveal a strong correlation between higher levels of unionization and a range of economic and personal well-being measures. When more workers are in unions, states have more equitable economic and social structures (McNicholas et al. 2025). Meanwhile, states with anti-union policies have lower union density and consistently worse outcomes across these measures.

Economic well-being

We first examine economic well-being—broadly defined as working people having the means to support themselves—using two indicators: the gap between productivity and pay, and unemployment insurance recipiency rates.

As discussed earlier, there has been a growing gap since 1979 between productivity—the value of the output generated by a worker in the U.S. economy in an hour of work, on average—and typical workers’ hourly compensation. Far from accidental, this divergence stems from deliberate policy choices in the U.S. beginning around 1980 that allowed the gains from economic growth to be increasingly captured by the highest earners, shareholders, and other capital owners—rather than being broadly shared across low-, middle-, and high-income households (Shierholz 2024).

The degree to which productivity gains have translated into higher pay for typical workers varies widely across states. Figure D shows that in states with smaller declines in unionization since 1979, a larger share of productivity gains translated into higher pay for typical workers. In other words, in places where unions remained stronger, it wasn’t just those with high incomes and wealth who benefited from economic growth—working people, both unionized and nonunionized, saw a bigger share of the gains.

Figure D

Unemployment insurance (UI) recipiency rates also offer insight into economic well-being. When a worker is laid off and their household income falls, unemployment insurance supports them and their family until they find another job. UI is a joint federal-state program that relies on state UI systems to effectively deliver benefits to unemployed workers. States differ in their rules and approaches under the federal UI framework, leading to wide variation in the share of unemployed workers receiving UI benefits (the UI recipiency rate).

Studies show a strong correlation between higher UI recipiency rates and high union density (Clegg et al. 2022); Figure E illustrates this strong positive relationship. In recent years, the average UI recipiency rate in high-union-density states was 36%, double the 18% rate in low-union-density states.

Unions fight to increase UI eligibility, ease of access, benefit levels, and benefit duration—to the benefit of all workers, union and nonunion (Hertel-Fernandez and Gould-Werth 2020). The strong correlation between union density and state UI recipiency rates suggests that expanding unionization by removing anti-union policies would result in higher UI recipiency rates.

Figure E

Personal health and well-being

Next we examine personal health and well-being—which we define as an individual’s physical and mental health—using one indicator, Medicaid expansion.

As we noted earlier, almost all union workers (95%) have access to health insurance, and uninsured rates are lower in high-union-density states. To show how unions influence health care coverage beyond explicitly bargained workplace plans, we examine whether a state has expanded Medicaid under the Affordable Care Act to broaden eligibility. The Medicaid public insurance program provides critical health coverage to families and individuals with low incomes. Research has found that Medicaid expansion has expanded access to health care; improved health outcomes, including fewer premature deaths; lowered uncompensated costs; bolstered financial security; and boosted economic mobility (CBPP 2020). While the Medicaid program has broad federal guidelines, it is administered by states—and a 2012 Supreme Court decision gave them the power to decide on eligibility and expansion. Since 2014, 40 states plus the District of Columbia have adopted Medicaid expansion; 10 states have not (Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming).

Figure F shows a stark divide between high- and low-union-density states in terms of Medicaid expansion. All 17 high-union-density states have expanded Medicaid. Out of 17 medium-union-density states, 14 have adopted Medicaid expansion (Alabama, Kansas, and Wisconsin are the only medium-union-density states that have not adopted expansion). Just 10 out of 17 low-union-density states have adopted Medicaid expansion (Florida, Georgia, Mississippi, South Carolina, Tennessee, Texas, and Wyoming are the low-union-density states that have not adopted expansion).

There is a strong correlation between union density and Medicaid expansion. If states removed anti-union policies and became high-union-density states, they would be joining a group of states in which Medicaid expansion is currently universal, potentially helping to close the Medicaid coverage gap that currently leaves 1.5 million adults uninsured (Zhang 2026).

Figure F

Spending on public education

Union density also intersects with public education investment. Investment in public education helped make the U.S. the richest country in the world in the 20th century. The benefits of universal education are many—including a more productive workforce, and a more informed and engaged democratic society equipped to think critically. Unions play a key role in negotiating public spending on education. At the school district and state level, education unions advocate for increased funds for schools. 

We can measure the relationship between union density and public education investment by looking at states’ level of per-pupil spending. Adequate levels of per-pupil spending are crucial to maintaining quality education; low per-pupil spending limits the support students receive toward achieving their learning goals and makes it harder for districts to retain teachers and staff by offering competitive salaries or benefits. Increased per-pupil funding pays off for students. Research has consistently shown that increased funding for schools improves educational attainment, student achievement, and economic outcomes in adulthood (Jackson and Mackevicius 2023). In one study, researchers examined the impact of school finance reforms between 1972 and 2010 and found that a 10% increase in school spending for 12 years leads to increased high school graduation rates, 7% higher wages, and 10% higher family incomes in adulthood for children from districts that saw the spending increase (Jackson, Johnson, and Persico 2016).

Figure G shows that states with higher rates of unionization spend substantially more per pupil on education—demonstrating the impact of union advocacy on education investment and building a more educated society.

Figure G

Voting rights and democratic participation

Many states disproportionately disenfranchise people of color (Johnson and Feldman 2020), and the number of voter suppression laws enacted across the country is high and rising. These restrictions threaten democratic participation and the stability of our democracy.

Unions strengthen democracy by encouraging civic engagement and helping workers become informed voters. Unions communicate with their members about issues and candidates to make sure workers have the information they need when they go to the polls. And as democratic institutions where members elect leaders and ratify contracts, unions serve as “schools of democracy,” equipping workers with civic skills that carry over to public life (Andrias and Hertel-Fernandez 2026). More broadly, because many organizations that shape policy represent elite or corporate interests, unions are a countervailing force, bringing working people’s voices into legislative debates and building coalitions that can win against well-resourced opposition.

Research shows that these effects translate into greater political participation. Union members are more likely to vote than the general public, and voter turnout is higher in states with greater unionization (EPI 2021). Conversely, turnout is lower in states with “right-to-work” (RTW) laws, which weaken unions and in turn the civic engagement they foster. Feigenbaum, Hertel-Fernandez, and Williamson (2018) found that RTW laws reduced presidential election turnout by 2%, a substantial effect given the narrow margins that often decide presidential elections.

We build on this evidence by examining the relationship between union strength and laws that restrict voting. Figure H shows that there is a strong correlation between union density and voter suppression legislation. A large majority of low- and medium-union-density states passed at least one voter restriction bill between 2023 and 2025, while a large majority of high-union-density states passed none. Among high-union-density states, 14 out of 17 did not pass any voter restrictions during this period, while only eight of the medium-union-density states and three of the low-union-density states can claim this distinction.

These results are consistent with evidence that unions actively defend voting rights. Unions have long mobilized members to oppose voter suppression laws, educated communities about their rights, and turned out to vote despite increasing barriers (Bondy 2025). Unions have also expanded access to voting: Dean, McCallum, and Grumbach (2023) found that county-level union density was associated with greater access to ballot drop boxes—a highly secure way to increase access to voting—during the 2022 midterm elections. Together, these findings suggest that stronger unions not only increase voter participation but also help preserve and expand access to the ballot.

Figure H

State policy and union density

Increasing union density across all states—including those where anti-union policies have historically suppressed unionization—is essential to strengthening both the economy and democracy, improving all workers’ wages, and expanding access to public goods like health care, retirement, and education.

As the previous section made clear, residents of high- and low-union-density states face starkly different economic and social realities. These wide variations in union density across states—and highly variable economic outcomes—are strongly correlated with variations in state labor policies. For example, the union rights of millions of public-sector, agricultural, and domestic workers (including home health care and in-home child care providers) vary by state because workers in these occupations are excluded from coverage under federal law. And even for private-sector workers whose union rights are covered under federal law, collective bargaining rights are limited by anti-union “right-to-work” laws in many states. Research shows that anti-union state policies result in lower union density. Union density averages 6.2% in states with anti-union RTW laws compared with 15.8% in non-RTW states, and states that limit or prohibit public-sector collective bargaining have lower overall union density than other states (Sherer and Gould 2024; Sherer and Morrissey 2026).

Here, we consider what union density would be if states with certain anti-union laws adopted the policies of states that better protect workers’ rights to unionize and collectively bargain. We consider two policy changes: 1) requiring state and local governments to bargain with public-sector workers who choose to unionize; and 2) repealing so-called “right-to-work” laws that limit collective bargaining rights of private-sector workers. These are two of many policies that states can adopt to remove barriers to unionization, but we focus on them because of their clearly documented, large-scale impact on large numbers of workers across much of the country. At present, roughly half of U.S. states have RTW laws in effect and do not require public employers to bargain with unionized public employees. Modeling changes to these two policies lets us estimate what would happen to union density if we removed large state-by-state labor policy disparities and created a stable “floor” for collective bargaining for workers across all states. This provides an important starting point for considering how additional, stronger state labor policies might affect union density, worker wages, and democracy.

Public-sector workers face wide disparities in bargaining rights across states

Variations in collective bargaining rights for public-sector workers are rooted in history, notably in Southern states where systemic racism drove the enactment of anti-union policies (Childers 2023; Dixon 2007; Kaufman 2018; Stelzner, Hoyt, and Ramchurn 2019). By the 1980s, most states had enacted public-sector collective bargaining policies, though these statutes varied in strength and coverage (Freeman and Ichniowski 1988). In more recent decades, many states have repealed or harshly limited formerly robust public-sector collective bargaining statutes, while a few states have expanded them. A key distinction is whether state and local government employers have a legal duty to bargain with unionized employees over pay and working conditions, rather than being merely permitted to bargain—or outright banned from doing so.

Sherer and Morrissey (2026) classify state public-sector bargaining rules across five categories of workers: teachers, police officers, firefighters, other local government employees, and other state government employees. States vary widely in which categories they cover and how strongly, and that variation maps closely onto union density. In states with strong, uniform duty-to-bargain rules across all five categories, public-sector union density can be close to 50% or higher, while in states that ban bargaining across most categories, state and local density can fall as low as the single digits. Pay consequences track these differences. Across the country, public-sector employees earn less than their private-sector counterparts with similar experience and education. This public-sector pay gap is smaller when bargaining rights are strong: Sherer and Morrissey (2026) estimate that in states with robust duty-to-bargain rights, public-sector workers earn 14.3% less than private-sector workers; the gap widens to 19.6% in states where bargaining is only permitted, and to 22.5% in states where it is banned.

“Right-to-work” laws weaken union density and suppress wages for all workers

“Right-to-work” laws prohibit unions and employers from negotiating over union security—the contract terms under which workers covered by a union contract either join the union or pay an agency fee covering their share of representation costs. State RTW laws first emerged as part of anti-union industry campaigns to suppress multiracial worker organizing and maintain Jim Crow labor relations in Southern states following the passage of the National Labor Relations Act (Pierce 2017). By making union finances more unpredictable and leaving unions more vulnerable to ongoing employer interference, these laws weaken unions’ stability, suppress union density, and limit workers’ bargaining power. As a result, RTW laws generate negative outcomes for all workers—with or without a union. States with RTW laws have lower unionization rates and higher income inequality, and workers in RTW states on average have lower wages and benefits (Fortin, Lemieux, and Lloyd 2022). Sherer and Gould (2024) document that workers in RTW states earn 3.2% less than otherwise comparable workers in non-RTW states—about $1,670 per year for a full-time worker.

There are currently 27 states with RTW laws in place—including Colorado, which is not a traditional RTW state, but whose law has, since 1943, effectively imposed RTW conditions. By barring unionized workers from negotiating over union security unless they first win a second, state-administered election by a 75% supermajority of those voting or 50% plus one of all eligible workers—whichever is higher—Colorado’s anti-union policy has produced RTW-like outcomes, so we group it with RTW states.

Removing state anti-union policies would raise national union density from 9.9% to 14.4%

We estimate that these two policy changes—1) requiring state and local governments to bargain with public-sector workers who choose to unionize, and 2) repealing RTW—would substantially increase unionization in states that currently have more anti-union policies in place, as shown in Table 1.17 In the 24 states without a duty to bargain with public-sector employees, establishing that duty would raise public-sector union density from 16.7% to 46.7%. In the 27 RTW states, repealing RTW would increase private-sector density from 3.4% to 8.8%. Overall, removing these anti-union policies would increase union density in 27 states from 5.4% to 14.3%. Nationally, union density would rise from 9.9% to 14.4%.18 This is a conservative national estimate reflecting changes in union density only for the 27 states undergoing hypothetical policy changes and not including likely impacts on the 23 states and D.C. where stronger union policies are already in place. These states would likely also see some level of increased union density under this scenario, given that removal of anti-union state policies across the country would strengthen worker bargaining power and union organizing resources in all states.

Table 1

Removing state-level anti-union policies would increase median wages by up to $4,900 a year

Were the 27 RTW states to increase unionization to estimated levels, overall annualized median wages would rise by $1,600 to $4,900 for full-time, full-year workers, depending on the state. Table 1 shows that if Virginia’s density rose from 4.9% to 15.5% because of the removal of state-level anti-union policies, annual pay for full-time, full-year workers at the state median wage would increase by about $4,500. Removing these anti-union policies in Texas could cause a similar increase in density, raising annual pay by $3,400.

Of course, were workers in all states able to achieve 30% union density, the effects on median pay would be even larger. These impacts are shown in Figure I. The 23 percentage point increase in density in Alabama, for example, would increase annualized median pay there for full-time, full-year workers by about $8,500.

Figure I

Recent state policy changes show that anti-union laws lower union density

Recent “natural experiments” in states that have changed one or both of these labor policies also show the impact on union density. For example, in states that adopted new RTW laws since 2010, union density fell 3.8 percentage points between 2010 and 2023. By comparison, union density declined only 2 percentage points during this same period in non-RTW states (Sherer and Gould 2024).

Wisconsin is an example of a state that both repealed a previous duty to bargain with public employees (in 2011) and enacted a new RTW law (in 2015). Since adopting these anti-union policies, between 2011 and 2024, Wisconsin’s union density has fallen by half, from 14% to 7%. Over this same period, national union density declined just 2 percentage points, from 13% to 11%. With both a RTW law in place and no public-sector duty to bargain, Wisconsin’s union density is plummeting in comparison with national and regional trends (Dresser, Rogers, and Vasquez 2025). Other studies show that Wisconsin’s adoption of anti-labor policies and declining union density have generated a wide array of harmful outcomes for the state’s economy and democracy, including sharp decreases in public education spending, declining worker wages, widening public-sector pay gaps (including stark increases in gender pay gaps for teachers), and declining voter participation (Nack et al. 2019; García and Han 2021; Biasi and Sarsons 2022; Feigenbaum, Hertel-Fernandez, and Williamson 2018).

States have other policy options to enable workers to increase union density

Beyond these two policy changes, states have numerous other opportunities to increase union density by removing obstacles to unionization and ensuring more workers have full rights to collectively bargain (Sherer 2026). A few examples that have not yet been adopted in most states include:

• Creating pathways to collective bargaining for all workers in occupations not currently covered by federal labor law, including in-home child care and home health care workers, agricultural workers, and rideshare or delivery drivers treated as “independent contractors” by digital platform companies;
• Protecting workers’ freedom to refuse mandatory “captive audience” meetings on political or religious topics not related to work duties, including mandatory anti-union meetings employers typically hold when attempting to block workers from unionizing;
• Ensuring workers whose paychecks stop due to a strike or lockout are eligible to apply for unemployment insurance; and
• Establishing or expanding state agency capacities and public labor education programs that ensure workers can easily learn about their union rights.

We do not model the specific impacts of all possible state policy changes in this report. But our conservative, baseline estimate of increases in union density likely to result from removing two of the largest state obstacles to workers’ union rights—RTW laws in 27 states and the lack of a duty to bargain for public employees in 24 states—suggests that combining these changes with additional policy changes would likely lead to additional increases in union density across the country.

Federal policy and union density

Given the clear benefits of tripling union membership, it is critical that policymakers prioritize reforms that enable workers to organize and collectively bargain. It is tempting to search for a policy “silver bullet” to restore the promise of the National Labor Relations Act (NLRA), our primary labor law. But the reality is that policymakers must adopt comprehensive labor law reforms to eradicate the effects of decades of political neglect that has steadily undermined the effectiveness of U.S. labor law. As discussed above, these reforms must at a minimum reverse state anti-union policies, via state or ideally federal labor law reforms that end Jim Crow-era occupational exclusions, ensure equal union rights and pathways to collective bargaining for all workers in all states, and eliminate RTW laws.

Labor law reform has passed the House three times with bipartisan support

A consistent narrative maintains that such policy change is impossible, but that narrative relies on the mistaken notions that real reforms require more political power than the labor movement has and that our legislative process prevents labor law reform. It is true that winning policy fights takes significant political capital. But labor law reform must not be seen as solely a labor movement priority. It is central to any attempt to address affordability pressures and economic inequality. And in this moment, such reform is imperative to our democracy. While the Senate filibuster rules do prevent much legislative progress, they are not inevitable dictates but rather agreed-upon rules that, as history shows, can change. It is deeply destructive to our political system to convince working people that the system simply cannot be expected to serve their interests, which is what this flawed narrative around labor law reform reinforces. To be clear, policies favored by elites benefiting from the unequal status quo are far more likely to become law than even broadly popular ones. But these reforms have the potential to help rebalance this inequality.

In fact, in the last two decades, legislation to significantly reform labor law has passed the U.S. House of Representatives three times—with bipartisan support each time. Even in the current Congress, legislation aimed at restoring collective bargaining rights has managed to bypass Republican House leadership opposition via parliamentary procedure (discharge petition) and pass with bipartisan support.19 Of the on average 12,000 bills introduced in a given Congress, labor law reform measures have had more success than roughly 95% of bills—passing a chamber with bipartisan support. Of course, Senate rules around the filibuster requiring 60 votes to proceed on consideration of various measures have been a significant impediment to the Senate passing these reforms. However, since 2013, the Senate has used the “constitutional option” to change its own rules for procedures and has eliminated the 60-vote requirement to proceed on specific debates three times. That could be done here, too.

Record high union approval strengthens the case for labor law reform

Labor unions today have significantly higher public approval ratings than when major labor law reform was last considered, polling more than 20 points higher.20 Since 2021, approval for unions has remained high, with over 68% of people in the U.S. viewing unions favorably (Brenan 2025). This positive view of unions is shared across generations, with majorities of Boomers (59%), Gen X (58%), Millennials (61%), and Gen Z (63%) viewing unions favorably. Young adults (ages 18–35) have the highest favorability rate at 72% (Glass 2025).

Unions are viewed positively across party lines, with both Democrats (90%) and independents (69%) having high favorability rates for unions, and over 40% of Republicans approving of labor unions (Brenan 2025). Some conservative organizations recognize that unions are popular among workers: Research by American Compass (2025) finds that at least 46% of Republicans view unions somewhat favorably, with favorability increasing among young Republicans (60%).

Data from the American National Election Studies show that people in the U.S. favor unions over big business now more than ever—with the average rating for labor unions hitting a new high (60%), while big business hit a low (44%) (Sojourner and Reich 2025). Further, most people in the U.S. say the decline in union density is bad for the country (60%) and bad for working people (62%). Most young adults (69%), including young Republicans (52%) and young Democrats (82%), view the decline in union density as negative for working people (Van Green 2025).

Three bipartisan bills would pave the way toward restoring collective bargaining rights

As with many popular policies, high public opinion of unions has not translated into the enactment of labor law reform. Even though several bills that would reform aspects of our current labor law are being introduced and even passing with bipartisan support in the U.S. House of Representatives, the Senate has failed to act on the legislation. There are three main bills with bipartisan support that would help reform our current labor law system and each should be passed.21

• The Protecting the Right to Organize (PRO) Act would restore private-sector workers’ right to organize and bargain collectively. It would streamline the process of forming a union, create a roadmap to reaching a first collective bargaining agreement, establish civil monetary penalties for employers who violate labor law, among other reforms—such as expanding coverage to more workers, overriding state “right-to-work” laws, and banning “captive audience” meetings (McNicholas, Poydock, and Rhinehart 2021). Since its first introduction in 2019, the PRO Act has passed the House of Representatives twice with bipartisan support.
• The Public Service Freedom to Negotiate Act (PSFNA) would establish public-sector workers’ right to organize and bargain collectively. This would fill an important gap—there is currently no federal law that guarantees all public-sector workers at the federal, state, and local levels the right to organize and collectively bargain. As a result, more than half of U.S. states today lack comprehensive collective bargaining laws for state and local public-sector workers (Sherer 2026).
• The Protecting America’s Workforce Act (PAWA) would reverse President Trump’s executive order that revokes collective bargaining rights for federal workers. The bill would reestablish collective bargaining rights for more than 1 million federal workers. In December 2025, PAWA passed the House of Representatives by a 231-195 vote.

Beyond passing these important bills, policymakers should also consider additional policies to help workers access collective bargaining and union membership. We propose two concrete policies that complement the labor reforms above. While these two proposals alone will not result in tripling union membership, they could help more workers receive the benefits of collective bargaining, which serves as a corrective to the affordability crunch and the economic inequality that characterizes our economy.

Guaranteed annual raises for workers in first contract arbitration

When workers win a union and begin to collectively bargain with their employer, both parties have an obligation to bargain in “good faith.” However, given that the NLRA lacks meaningful penalties for violations, employers often engage in bad faith bargaining tactics with few consequences. In fact, it is well documented that many union-busting consultants view bargaining as a new phase of union-busting and advise employers to drag out bargaining for as long as possible. The goal is to avoid reaching a contract for a year or more, hoping that workers will then give up their union through decertification, which is permitted one year after the election. It is no coincidence that workers who have successfully formed a new union spend an average of 465 days bargaining for a first contract before reaching an agreement.

The Faster Labor Contracts Act, which overwhelmingly passed the U.S. House of Representatives last month, would discourage delay and promote good faith bargaining by establishing a mediation and binding arbitration process when employers refuse to bargain in good faith. Beyond guaranteeing workers first contract arbitration, we suggest the adoption of a mandatory cost-of-living adjustment (COLA) for workers whose first contract bargaining ends up in arbitration. This would establish an important guardrail for workers in the arbitration process, given that an arbitrator will ultimately impose a final contract on both parties. This provision would ensure that workers receive at least a COLA each year of their first contract. In other words, by voting for a union, workers would be voting for a guaranteed raise.22

For the average production, nonsupervisory worker, a 3% COLA would result in almost a $2,000 increase in annual earnings for a full-time, full-year worker. 23 Table 2 shows that, while these increases would vary widely by industry because pay varies widely by industry, workers in some of the lowest-paid industries would still see annual pay increases above $1,000.

Table 2

Default collective bargaining when CEO-to-worker pay ratios exceed 100:1

The outsized and ballooning gap in recent decades between CEO pay and the pay of typical workers is among the clearest signs that the economy’s rules have been rigged to allow the most powerful to claim oversized shares of income growth. This CEO-to-worker pay ratio rose nearly tenfold from 1978 to 2024, as the pay of CEOs rose over 1,000% while the pay of typical workers rose just 26%. The explosion of CEO pay was driven not by CEO’s rising productivity or skills, but by policy changes that boosted both the incentives and the ability of CEOs to raise their own pay.

When a firm’s CEO makes more than 100 times what the typical worker in their industry makes, effective corporate governance has clearly broken down—which threatens the ability of those outside the C-suite to receive their fair share of the firm’s income. The two main parties competing with executives to claim a share of a firm’s income are the shareholders and the firm’s workers. The best mechanism for ensuring that workers are able to bargain against CEOs and shareholders for their fair share of the income generated by the firm is collective bargaining.

We propose instituting default collective bargaining in any firm that meets or exceeds this 100:1 ratio. Securities and Exchange Commission (SEC) reporting already requires the annual disclosure of CEO pay (SEC 2007). We propose that these disclosures be reported not only to the SEC but also to the National Labor Relations Board. Comparing those disclosures with Bureau of Labor Statistics data on the pay of a typical worker economy-wide in various industries, the NLRB would determine which corporations meet the default collective bargaining ratio of 100:1.24 The NLRB would then publish a public notice and notify specific corporations and their workers that the default collective bargaining ratio had been met, triggering default collective bargaining at the firm. The NLRB would then direct an election for a bargaining representative to be held within 45 days of the notification.25

Nonsupervisory workers at these firms would then have the opportunity to select a bargaining representative of their choosing—whether a labor organization or other representative. The NLRB would conduct the election for and certify a bargaining representative, after which bargaining would start. For purposes of default collective bargaining, the presumption for the bargaining unit would be a wall-to-wall unit—a model where all nonsupervisory employees join a single bargaining unit—ensuring comprehensive coverage under the collective bargaining process and resulting contract. This standard would apply absent an employer or employee representative demonstrating extraordinary circumstances.26 The NLRB would then determine the appropriate bargaining unit, the same way the agency already accepts or rejects bargaining unit proposals. We propose that all such questions be resolved within 10 days of the NLRB’s notice of election for bargaining representative. This proposal would not apply to existing bargaining units, but in firms where unions are present, it would apply to any nonunionized nonsupervisory employees, as described below.

A threshold of 100:1 for the CEO-to-typical-worker pay ratio is reasonable and fair. A ratio this high clearly signals a fatal breakdown in the ability of the firm’s workers and shareholders to protect their income claims against executives looking to maximize their own incomes. A ratio this high will not affect most publicly traded companies but will be relevant to a large share of the U.S. workforce.

Comprehensive data on CEO pay are available only for a subset of firms: The Compustat Execucomp database tracks CEO pay for half of publicly owned companies (and most U.S. firms are not publicly owned). For the firms in the Compustat database, under half (41.7%) had a CEO-to-typical-worker pay ratio exceeding 100:1 in 2024. This proposal would provide the 30 million workers employed in firms that have higher ratios—representing about a fifth of total private-sector employment in the United States—with collective bargaining.

It is not a coincidence that the stratospheric rise in CEO pay was accompanied by an acceleration in the downward trend of unionization in the United States. The broader correlation between declining unionization and the rise of inequality is well established, and the highest-quality research documents that this relationship is clearly causal, with the decline of unions leading to a higher share of income claimed by households at the top of the income distribution (Farber et al. 2021).

To be clear, using a threshold CEO-to-worker pay ratio as a trigger for default collective bargaining will not alone solve the problem of excess CEO pay. We focus on this threshold as a policy trigger because it is a readily available and measurable indicator of the outsized control of executives over the distribution of the firm’s income. In the total absence of collective bargaining or any other strong corporate governance institutions, firm executives will shift income in a zero-sum fashion away from both the workers and the shareholders of a firm. If shareholders manage to assert some influence over CEO pay—e.g., through public pressure campaigns or say-on-pay mandates—one likely outcome will be CEOs looking to suppress the firm’s wages even further to make room for both their own outsized salaries and a return to shareholders that placates them. Only collective bargaining can protect the interests and earnings of workers in firms where executives pocket an outsized share of firms’ incomes.

If collective bargaining became widespread enough throughout the corporate sector, it would likely not only boost workers’ wages but also rein in excess executive pay broadly—actually helping shareholders at the same time. The research on this question is encouraging: Unions and collective bargaining have been found to significantly restrain excess CEO pay (Huang et al. 2017; Nanda, Nishikawa, and Prevost 2025; DiNardo, Hallock, and Pischke 2000). But even if expanded collective bargaining does not tamp down the CEO-to-worker pay ratio beneath our 100:1 threshold, it will at a minimum protect workers’ interests from excess executive power—without foreclosing any policy route shareholders take to restrain excess CEO pay.

Currently, a number of firms with at least some degree of unionization among their workforces have CEO-to-worker pay ratios that exceed 100:1. But this is not an argument against using this threshold as an indicator of dysfunctional corporate governance requiring a strong policy solution. For many of these firms, union coverage among their rank-and-file workforce is far from complete, so this proposal would help fill in glaring gaps. Most of these firms clearly do pay wages that are among the highest in their industries, which signals that the policy of default collective bargaining to protect workers’ interests in the face of dysfunctional corporate governance would largely work. Finally, one key empirical driver of high CEO pay is the simple size of the firm: The CEO-to- worker pay ratio rises steeply with the size of the firm, all else equal.27 The firms with CEO-to-worker pay ratios above 100:1 and some degree of unionization among their workforces are large firms; it would take a very strong effect of collective bargaining on CEO pay specifically to have kept pay ratios at these large firms well below average.

In our world with only 10% union density (and less than this in the private sector), it should hardly be a shock that collective bargaining by itself has not been able to stem what has been an irresistible tide toward high CEO pay. Even large increases in executive pay are not enormous when compared with overall returns to shareholders. Given the strong policy and economic barriers to shareholder activism in restraining CEO pay, it takes truly outrageous pay scales to mobilize enough organized opposition from shareholders. In those firms where it is relatively strong, collective bargaining has protected workers’ interests, and that is the primary goal we are looking to achieve with this policy. The fact that in these firms the CEOs have felt free to shift income to themselves at the expense of other stakeholders (like the shareholders of the firm) is not a sign that default collective bargaining is a bad solution for protecting workers’ interests—it is only a sign that the problem of excess CEO pay needs to be addressed from other angles as well.

Tripling union density is what workers want—and it is entirely achievable

Restoring union density to 1950s levels is not a nostalgic pipe dream. Federal and state policymakers have a clear roadmap for tripling union density. While no single reform discussed in this report is a silver bullet for the problems facing the country, taken together they would address one of the worst: the erosion of workers’ right to bargain for their fair share of the wealth they produce. These reforms are meaningful steps toward tripling union density, and toward an economy where productivity gains are shared broadly, not captured by corporate elites and the superrich.

The evidence in this report shows what is at stake. Tripling union density would deliver nearly $270,000 in extra earnings over the median worker’s career and shift $1.2 trillion annually to working people—reversing a third of the rise in inequality since 1979. Rebuilding union power would narrow racial wage gaps by more than a third, and removing state anti-union policies would help dismantle the legacy of Jim Crow-era campaigns aiming to suppress multiracial organizing. States with higher union density deliver better economic and personal well-being outcomes to their residents, and they have healthier democracies with fewer voting restrictions. At a time when the voting rights of all citizens are under attack, rebuilding union power is a democratic imperative.

Acknowledgments

The authors thank Hilary Wething for her contribution to this report’s section on public education spending. We also thank Matthew Wich, Summer Labor Fellow from the Institute for Social Concerns at the University of Notre Dame, for his support of the project.

Appendix

Methodology

How we measure union density

The Bureau of Labor Statistics provides data on both union membership—workers who are full-fledged union members—and union representation, which includes both union members and workers who are not members but are covered by a collective bargaining agreement. As a result, the share of workers represented by a union is higher than the share of union members. For example, in 2025, 11.2% of workers were represented by a union, but 10% were union members.

In this report, we measure union density as the share of workers who are members of a union. Throughout this report, the terms “union density” and “unionization” refer to those who are members of a union. When measuring union density by state, data are averaged over three years (2023 to 2025) to give a more accurate estimate of state unionization rates and avoid temporary single-year changes due to small sample sizes in some states.

Estimating wage effects of tripling union density

To assess how much higher wages would be after tripling union density, we use state-level annual data on wages and unionization from 1979 to 2019 and compare median wages with unionization rates across states and over time. Specifically, we regress the state median wage on the state union membership rate, controlling for permanent differences in state characteristics, national annual shocks (like recessions), and annual state characteristics like state unemployment rate, minimum wage level, and education, race, age, gender, broad industry, and managerial shares.

Using state-level data from the Current Population Survey Outgoing Rotation Group for 1979–2019, we regress the log median wage on union density with state and year fixed effects and additional covariates: the log minimum wage, unemployment rate, and shares of those with less than a high school degree and just a high school degree, age group shares, and shares of those who are white, Black, Hispanic, married, and shares of those in the public sector, manufacturing, construction, services, and a managerial occupation. Regressions are weighted by state employment levels averaged over 1979–2019. The coefficient on union membership is 0.724 with a standard error, accounting for clustering at the state level, of 0.191.

To calculate effects of increasing union density on racial wage gaps, we use the same wage regression as before, except where the dependent variable is the state annual racial wage gap.

The calculation yielding the $1.2 trillion estimate of the annual increase in workers’ pay from tripling union density is as follows. First, the share of total labor income claimed by the bottom 80% is calculated from data provided by the Congressional Budget Office’s (CBO 2026) Distribution of Household Income data (we focus on the bottom 80% because research has generally identified the positive effect of unions on boosting pay as applying mostly to union and nonunion workers in the bottom 80% of the U.S. workforce). In 1979 this share was 60.5%, but by 2019 it had fallen to 50.1%. We use 50% for our calculations. Then we multiply the 14.5% boost to pay stemming from a tripling of union density by this 50% of labor income to get an estimate (7.25%) of how much total labor compensation would rise in the event of a tripling of union density. In the first quarter of 2026, the National Income and Product Accounts (NIPA) Table 2.1 from the Bureau of Economic Analysis (2026a) reports that total labor compensation was $16.1 trillion. Multiplying this by the 7.25% pay boost from tripling union density yields $1.16 trillion in higher pay for the bottom 80%. We believe this is the appropriate estimate for approximating how much higher wages would be for most workers if union density tripled. While potential caveats merit consideration, none, in our view, hold much force. For example, the regressions used earlier in the paper use median wages, not median total labor compensation, as the dependent variable. However, a long research literature has highlighted that benefit premiums stemming from unionization are likely even larger than wage premiums (Knepper 2020). To the degree that tripling union density works by giving all workers more leverage and bargaining power in labor markets, it seems clear that some of this leverage will be used to obtain broader and more generous coverage of benefits, not just higher wages. Another objection could be that union effects (both direct and indirect effects) are higher in the middle of the wage distribution than in either the lower or upper parts of the distribution, and hence the full 14.5% wage boost would only apply to (say) the second and middle fifths of workers while workers in the lowest and fourth fifth would see smaller wage boosts. However, in work that has estimated both the overall average effect of unionization on nonunion wages and the effect by wage percentile, the overall average effect is roughly one-half the effect at the median, a result that would be consistent with applying the 14.5% premium to half of all labor income, as we do (Fortin, Lemieux, and Lloyd 2021). Other research has similarly found that union effects at the median are very close to overall average effects (Baker et al. 2026).

For our analysis of how wage effects differ across union density levels, we use the same regression of log median wages on union density described above, modified to let the slope differ below and above 15% density using a piecewise-linear specification interacting union density with an indicator for density of at least 15%, while retaining the same controls and state and year fixed effects, weighted by state employment. The difference in slopes is statistically significant at the 1% level.

The scatterplot in Figure B uses 50 state-year bins to show this nonlinearity directly. The binned scatterplot groups the state-year observations into 50 employment-weighted bins by union density and plots each bin’s average real log median wage against its average union density, after partialing out the same controls and state and year fixed effects used in the regression.

State union density groupings

We divided the 50 U.S. states plus the District of Columbia into three equally sized groups based on their current (2023–2025) level of union density.

These groupings are shown in Appendix Table 1. We refer to the 17 states with the highest union density as “high-union-density states” (with 11.9%–25.1% union membership rates); the next 17 states (including D.C.) are “medium-union-density states” (6.8%–11.6%); and the remaining 17 are “low-union-density states” (2.5%–6.1%).

Appendix Table 1

Estimating union density effects of establishing a public-sector duty to bargain and repealing “right-to-work” laws

To estimate the effect of these two policy changes—1) requiring state and local governments to bargain with public-sector workers who choose to unionize, and 2) repealing RTW—we use the CPS Outgoing Rotation Groups for 2023–2025 to compute union density rates in states with stronger union policies (i.e., states with public sector collective bargaining and/or without RTW). We do this separately by industry and major occupation group for the private sector and by level of government (federal, state, and local) for the public sector. We then apply those rates to the workforce of each state that lacks the corresponding policy, holding each state’s industry, occupation, and government-employment mix fixed. Nevada is an exception on the private-sector side: Although Nevada is a RTW state, its private-sector union density is already comparatively high, so we hold its private-sector density at its current level.

Notes

1. “Union membership” refers to workers who are full-fledged union members, while “union representation” includes both union members and workers covered by a collective bargaining agreement but not members. The share of workers represented by a union is thus higher than the share of union members. In 2025, for example, 11.2% were represented by a union and 10% were union members.

2. In 2025, for the fifth consecutive year in a row, approval of unions reached record high levels last seen in the late 1950s, when union membership was roughly triple what it is now.

3. The productivity-pay gap is a measure of how much income is generated in an average hour of work.

4. “Union wage premium” refers to the additional wages paid to union members compared with nonunion workers with similar characteristics.

5. For example, when the top marginal tax rate was 91%, as it was in the 1950s and early 1960s, executives kept far less of each additional dollar of pay than they do under today’s 37% top rate, which reduced the payoff to pursuing ever-larger compensation packages.

6. Relatedly, expanded unemployment benefits during the pandemic boosted workers’ bargaining power and compelled employers to make higher wage offers (Bivens and Banerjee 2023).

7. See appendix for details about our methodology.

8. The real median wage is the wage of the person in the middle of the overall wage distribution, including both union and nonunion workers.

9. The median monthly cost of a mortgage in the U.S. is $1,521 according to Census (2025). Over the course of a year, that is $18,252.

10. See appendix for details about the calculation of this figure.

11. In 2020 and 2021, Congress authorized Economic Impact Payments—better known as the “COVID checks.” Those three rounds of payments added roughly $430 billion to U.S. families’ personal income in those years and were widely viewed as an historically ambitious economic intervention. Data on how much these checks added to personal income can be found at Bureau of Economic Analysis (2026c).

12. Data on federal defense spending in 2025 is from Bureau of Economic Analysis (2026b).

13. Data on the income shares by percentile come from CBO (2026), which contains data through 2022. The calculation of how much the $1.2 trillion gain to wages would reverse the rise in income shares of the top quintile uses data from BEA (2026a).

14. See appendix for details on how we estimated these wage effects.

15. See appendix for details on how we calculated the effects of increasing union density on racial wage gaps.

16. See Appendix Table 1, which shows how we grouped states into low-, medium-, and high-union-density categories.

17. For details on the data and methodology used to produce these estimates, see appendix.

18. For this state-level analysis, we use 2023–2025 averages of union density across states, which is 9.9%, rather than the 10% for 2025 cited earlier in this report.

19. See passage of Protecting America’s Workforce Act and Faster Labor Contracts Act.

20. The last time a major labor law reform was considered was in 2009 with the Employee Free Choice Act.

21. The Protecting the Right to Organize Act has two Republican co-sponsors, the Public Service Freedom to Negotiate Act has six Republican co-sponsors, and the Protecting America’s Workforce Act has nine Republican co-sponsors.

22. One way to determine the exact COLA amount is to use nonseasonally adjusted values of the national Consumer Price Index for All Urban Consumers (CPI-U) published by the Bureau of Labor Statistics. These price index values are easily available, less subject to revision, and widely covered in the media. The simplest COLA adjustment would be to use the annual rate of inflation measured as the percent change between the two most recent annual averages of nonseasonally adjusted CPI-U values. See BLS (2023) for other considerations.

23. CBO estimated CPI in 2026 at 2.8%, 2027 at 2.4%, and then 2.3% after—however those estimates were done before the U.S. war in Iran that increased energy prices, so we estimate COLA at 3% for purposes of the proposal. To calculate full-time, full-year worker wages, we used 2025 average production, nonsupervisory wage rates (EPI 2026f).

24. We specifically would recommend calculating the CEO-to-typical-worker pay ratio using the methodology detailed in EPI (2025). 

25. In order to appear on the ballot, an individual or organization would have to demonstrate a record of collective bargaining over the preceding three years or obtain 100 signatures or 10% of the workforce, whichever is less.

26. The showing of extraordinary circumstances is referenced in the acute care hospital rule: 29 CFR § 103.30 (1989).

27. This correlation between simple firm size and CEO pay is yet another piece of evidence that CEO pay is not about the skills or acumen of individual CEOs, but is driven by noncompetitive market structures and labor markets for executives.

References

AFL-CIO Tech Institute. 2026. “It’s Better in a Union!” (web page). Accessed July 7, 2026.

Ahlquist, John S., Jake Grumbach, and Thomas Kochan. 2024. The Rise of the ‘Union Curious’: Support for Unionization Among America’s Frontline Workers. Economic Policy Institute, July 2024.

American Compass. 2025. PRO-Tip: Only Some Labor Reforms Are Pro-Worker. May 1, 2025. 

Andrias, Kate, and Alexander Hertel-Fernandez. 2026. Democratic Abundance: An Abundance That Works for Workers. Roosevelt Institute, April 2026.

Baker, Michael, Yosh Halberstam, Kory Kroft, Alexandre Mas, Derek Messacar. 2026. The Impact of Unions on the Wage Distribution: Evidence from Higher Education. American Economic Review: Insights 8, no. 2 (June): 196–213.

Biasi, Barbara, and Heather Sarsons. 2022. “Flexible Wages, Bargaining, and the Gender Gap.” Quarterly Journal of Economics 137, no. 1 (February): 215–266. https://doi.org/10.1093/qje/qjab026.

Bivens, Josh. 2026. “Employer Assessment Fees Are Not an Adequate Solution to Low Wages and Large Safety Net Cuts.” Working Economics Blog (Economic Policy Institute), February 27, 2026.

Bivens, Josh, and Asha Banerjee. 2023. Lessons from the Inflation of 2021–202(?). Economic Policy Institute, April 2023.

Bivens, Josh, Celine McNicholas, Kyle K. Moore, and Margaret Poydock. 2023. “Unions Promote Racial Equity” (fact sheet). Economic Policy Institute, July 31, 2023. 

Bondy, Assaf S. 2025. “Workers For Democracy? Trade Unions and the Struggle Against Democratic Backsliding.” Democratization 33, no. 2: 344–368. https://doi.org/10.1080/13510347.2025.2507359. 

Brenan, Megan. 2025. “Labor Union Approval Relatively Steady at 68% in U.S.” Gallup, August 28, 2025. 

Bureau of Economic Analysis. 2026a. National Income and Product Accounts Table 2.1. – Personal Income and Its Disposition. Accessed June 25, 2026.

Bureau of Economic Analysis. 2026b. National Income and Product Accounts Table 1.1.5 – Gross Domestic Product. Accessed June 25, 2026.

Bureau of Economic Analysis. 2026c. COVID-19 and Recovery Archive – Personal Income. Accessed June 25, 2026.

Bureau of Labor Statistics. 2023. How to Use the Consumer Price Index for Escalation. June 8, 2023.

Bureau of Labor Statistics. 2026. Employee Benefits in the United States. Table 2. Medical care benefits: Access, participation, and take-up rates, March 2025. Last modified September 25, 2025. Accessed May 4, 2026. 

Census Bureau. 2025. “Monthly Mortgage Payments for Homeowners Who Moved in 2024 Were $2,225, Above the U.S. Median of $1,521.” September 11, 2025.

Center on Budget and Policy Priorities (CBPP). 2020. The Far-Reaching Benefits of the Affordable Care Act’s Medicaid Expansion (chart book). October 21, 2020. 

Childers, Chandra. 2023. Rooted in Racism and Economic Exploitation. Economic Policy Institute, October 2023.

Clegg, Daniel, Elke Heins, and Philip Rathgeb. 2022. “Unemployment Benefit Governance, Trade Unions And Outsider Protection In Conservative Welfare States.” Transfer: European Review of Labour and Research 28, no. 2: 195–210. 
https://doi.org/10.1177/10242589221094240. 

Congressional Budget Office (CBO). 2026. Distribution of Household Income 2022.

Dean, Adam, Jamie McCallum, and Jake Grumbach. 2023. Labor Unions and the Defense of American Democracy. Economic Policy Institute, December 2023. 

DiNardo, John, Kevin F. Hallock, and Jörn-Steffen Pischke. 2000. “Unions and the Labor Market for Managers.” IZA Discussion Paper, August 2000.

Dixon, Marc. 2007. “Limiting Labor: Business Political Mobilization and Union Setback in the States.” Journal of Policy History 19, no 3: 313–344. https://doi.org/10.1353/jph.2007.0015.

Dresser, Laura, Joel Rogers, and Leslie Vasquez. 2025. The State of Working Wisconsin 2025. High Road Strategy Center, August 2025.

Economic Policy Institute (EPI). 2021. “Unions Help Reduce Disparities and Strengthen Our Democracy” (fact sheet). April 23, 2021.

Economic Policy Institute (EPI). 2025. “CEO Pay Has Skyrocketed Since 1978: Discussion of our Methods” (web page). Last updated September 25, 2025.

Economic Policy Institute (EPI). 2026a. “Average Real Annual Wage (2023$),” State of Working America Data Library. Accessed June 30, 2026.

Economic Policy Institute (EPI). 2026b. “Nominal Wage Tracker” (web page). Accessed June 30, 2026.

Economic Policy Institute (EPI). 2026c. “The Productivity–Pay Gap” (web page). Last updated March 23, 2026.

Economic Policy Institute (EPI). 2026d. “Union Wage Premium – Union Wage Premium, Average (Regression-Based),” State of Working America Data Library. Accessed May 4, 2026.

Economic Policy Institute (EPI). 2026e. “Wage Calculator” (web page). Accessed May 4, 2026.

Economic Policy Institute (EPI). 2026f. “Hourly Earnings by Industry – Production and Nonsupervisory Employees, Average Nominal Wage,” State of Working America Data Library. Accessed June 30, 2026.

Farber, Henry S., Daniel Herbst, Ilyana Kuziemko, and Suresh Naidu. 2021. “Unions and Inequality over the Twentieth Century: New Evidence from Survey Data.” The Quarterly Journal of Economics 136, 3 (August): 1325–1385.

Feigenbaum, James, Alexander Hertel-Fernandez, and Vanessa Williamson. 2018. “From the Bargaining Table to the Ballot Box: Political Effects of Right to Work Laws.” National Bureau of Economic Research Working Paper no. 24259, January 2018.
https://doi.org/10.3386/w24259.

Fortin, Nicole, Thomas Lemieux, and Neil Lloyd. 2021. Labor Market Institutions and the Distribution of Wages: The Role of Spillover Effects. Journal of Labor Economics 39, no. S2.

Fortin, Nicole, Thomas Lemieux, and Neil Lloyd. 2022. “Right-to-Work Laws, Unionization, and Wage Setting.” National Bureau of Economic Research Working Paper no. 30098, June 2022. https://doi.org/10.3386/w30098.

Freeman, Richard B., and Casey Ichniowski. 1988. When Public Sector Workers Unionize. Chicago, Il.: Univ. of Chicago Press.

García, Emma, and Eunice Han. 2021. The Impact of Changes in Public-Sector Bargaining Laws on Districts’ Spending on Teacher Compensation. Economic Policy Institute, April 2021.

Glass, Aurelia. 2025. “Everybody Likes Unions.” Center for American Progress, November 4, 2025. 

Hertel-Fernandez, Alexander, and Alix Gould-Werth. 2020. Labor Organizations and Unemployment Insurance: A Virtuous Circle Supporting U.S. Workers’ Voices and Reducing Disparities in Benefits. Washington Center for Equitable Growth, October 2020.

Huang, Qianqian, Feng Jiang, Erik Lie, and Tingting Que. 2017. “The Effect of Labor Unions on CEO Compensation.” Journal of Financial and Quantitative Analysis 52, no. 2: 553–582. https://doi.org/10.1017/S0022109017000072.

Jackson, C. Kirabo, Rucker C. Johnson, and Claudia Persico. 2016. “The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms.” The Quarterly Journal of Economics 131, no. 1: 157–218. https://doi.org/10.1093/qje/qjv036. 

Jackson, C. Kirabo, and Claire L. Mackevicius. 2023. “What Impacts Can We Expect from School Spending Policy? Evidence from Evaluations in the United States.” American Economic Journal: Applied Economics 16, no. 1: 412–446. https://doi.org/10.1257/app.20220279.

Johnson, Theodore R., and Max Feldman. 2020. The New Voter Suppression. Brennan Center for Justice, January 2020. 

Kaufman, Dan. 2018. “A Labor Day Reflection on Unions, Race, and Division.” The New Yorker, September 3, 2018.

KFF. 2026. Health Insurance Coverage of Population Ages 0-64: 2024. Accessed May 4, 2026. 

Knepper, Matthew. 2020. “From the Fringe to the Fore: Labor Unions and Employee Compensation.” The Review of Economics and Statistics 102, no. 1: 98–112.

Ma, Jennifer, Matea Pender, and Xiaowen Hu. 2025. Trends in College Pricing and Student Aid 2025, College Board.

McNicholas, Celine, Margaret Poydock, and Lynn Rhinehart. 2021. “Why Workers Need the Protecting the Right to Organize Act” (fact sheet). Economic Policy Institute, February 9, 2021.

McNicholas, Celine, Margaret Poydock, and Heidi Shierholz. 2026. Workers’ Resolve Drives Increase in Unionization in 2025. Economic Policy Institute, February 2026.

McNicholas, Celine, Margaret Poydock, Heidi Shierholz, and Hilary Wething. 2025. Unions Aren’t Just Good for Workers—They Also Benefit Communities and Democracy. Economic Policy Institute, August 2025.

Nack, David, Michael Childers, Alexia Kulwiec, and Armando Ibarra. 2019. “The Recent Evolution of Wisconsin Public Worker Unionism Since Act 10.” Labor Studies Journal 45, no. 2: 147–165. https://doi.org/10.1177/0160449X19860585.

Nanda, Vikram, Takeshi Nishikawa, Andrew Prevost. 2025. “The Impact of Unions on Compensation Consultants and CEO Pay.” Financial Management 54, 89–122. 
https://doi.org/10.1111/fima.12472.

Pierce, Michael. 2017. The Origins of Right-to-Work: Vance Muse, Anti-Semitism, and the Maintenance of Jim Crow Labor Relations. The Labor and Working-Class History Association, January 12, 2017.

Rosenfeld, Jake, Patrick Denice, and Jennifer Laird. 2016. Union Decline Lowers Wages of Nonunion Workers. Economic Policy Institute, August 2016. 

Securities and Exchange Commission. 2007. “Executive Compensation” (web page). Last modified January 4, 2007.

Sherer, Jennifer. 2026. Holding the Line: Rights to Unionize and Collectively Bargain. Economic Policy Institute, February 2026.

Sherer, Jennifer, and Elise Gould. 2024. “Data Show Anti-Union ‘Right-to-Work’ Laws Damage State Economies.” Working Economics Blog (Economic Policy Institute), February 13, 2024.

Sherer, Jennifer, and Monique Morrissey. 2026. Stronger Collective Bargaining Laws Will Benefit All Virginians. Economic Policy Institute, January 2026.

Shierholz, Heidi. 2024. “Middle-Out Economics Is Good for Workers, Their Families, and the Broader Economy.” Working Economics Blog (Economic Policy Institute), March 19, 2024.

Sojourner, Aaron, and Adam Reich. 2025. “Americans Favor Labor Unions Over Big Business Now More Than Ever.” Working Economics Blog (Economic Policy Institute), May 20, 2025. 

Stelzner, Mark, Eric Hoyt, and Toushita Ramchurn. 2019. Structured Conflict: Changes in Federal and State Labor Laws and Strike Activity, 1950 to 2017. Political Economy Research Institute (PERI), University of Massachusetts Amherst, May 2019.

United States Department of Agriculture (USDA). 2017. “2015 Expenditures on Children By Families” (web page). Accessed June 30, 2026.

Van Green, Ted. 2025. “Majorities of Adults See Decline of Union Membership as Bad for the U.S. and Working People.” Pew Research Center, August 27, 2025. 

Zhang, Elizabeth. 2026. Nearly 3 Million Uninsured Adults Would Gain a Path to Medicaid Coverage if Their States Adopted ACA Medicaid Expansion. Center on Budget and Policy Priorities, March 19, 2026.

A note about terminology

Topics covered in this FAQ often involve specialized uses of language, reflecting both legally defined concepts and/ or “terms of art” typically used by practitioners. For definitions of key terms, check out the glossary at the end of this report.

What is sectoral bargaining?

Sectoral bargaining is a form of collective bargaining in which one or more unions bargains with multiple employers to reach a legally binding agreement on common standards that then apply to all workplaces across a particular industry, sector, or region.

Sectoral bargaining has not traditionally been part of labor law frameworks in the U.S., but it is not a new concept and has historically been an effective model for setting wages and standards in various sectors across many European countries. The sectoral approach to collective bargaining offers a different approach from the traditional U.S. “firm/enterprise level” model of bargaining in which unionized workers in a single workplace bargain with their employer to set wages and working conditions.

What conditions are motivating growing interest in sectoral bargaining in the U.S.?

In recent years, interest has grown in the question of whether sectoral bargaining or sectoral approaches to setting wages and other standards might enable U.S. workers to combat declining union density and rebuild bargaining power necessary to raise wages and improve conditions across what has become a highly unequal economy. Calls for expanding sectoral strategies are typically motivated by recognition of two closely related trends:

• Growing numbers of workers who wish they had a union contract are facing obstacles to forming or joining a union under existing weak and outdated labor laws.
• Growing numbers of workers are experiencing low wages and poor working conditions in industries in which it is especially difficult to unionize—for example because they lack employee status, are highly dispersed and isolated, work for a franchise, are hired via temp or staffing agencies, or perform “gig work” assigned via a digital app.

The National Labor Relations Act (NLRA or Act)—the primary federal law establishing union rights in the private sector—has as its premise a lofty and admirable goal: “encouraging the practice and procedure of collective bargaining” between workers and their employers. Since the Act’s passage in 1935, millions of workers have won higher pay, better health care and retirement benefits, stronger health and safety protections on the job, and other important improvements through forming unions and using their collective strength to bargain with their employers. Historically, strong unions have helped ensure that income growth is distributed broadly and not just to the wealthiest households.

But the NLRA has been significantly weakened since its passage through a series of congressional and court actions, and today’s broken federal labor law is failing to live up to the NLRA’s originally stated goal. For example, data show a growing mismatch between the millions of workers who say they want a union and the relatively small number of workers who actually have one. Union membership in the U.S. ticked up slightly in 2025, breaking a decades-long trend of declining unionization. But today’s unionization rate of 11.2% is less than a third of what it was in the 1950s when union strength delivered broadly shared prosperity and a thriving middle class, and lower than in 1935 when the NLRA was first enacted.

One of the consequences of this decline in union strength in the U.S. is a corresponding decline in the ability of unions in a particular sector or industry to set broad wage and benefit standards covering a large percentage of workers in that sector or industry. When unions were stronger, they were able to align the structure of collective bargaining with the corporate structure in their industry and negotiate agreements with large employers that established wage standards for an entire industry. Union contracts established wages for unionized workers, and nonunion employers raised wages to stay competitive. In this manner, unions helped raise wages for all workers, both union and nonunion.

What does existing U.S. labor law say about sectoral bargaining? What kinds of sectoral bargaining are already possible under current labor laws?

U.S. labor law places some obstacles in front of workers and unions seeking to bargain broadly with multiple employers in their industry. Specifically, the National Labor Relations Act has long been interpreted as establishing a single worksite and a single employer as the default unit for bargaining. Workers and unions can try to win a broader bargaining unit, such as a multifacility bargaining unit of the same employer, but to do so, they need to persuade the National Labor Relations Board (NLRB) of the appropriateness of the larger unit and organize support from a majority of employees in the bigger unit. 

Likewise, under current law workers and unions can propose but cannot insist that employers in their industry bargain together on a multiemployer basis with the union or a group of unions. Basically, workers and unions are limited in taking this multiemployer approach, even though when achievable, it enables coordinated bargaining within a sector or industry and prevents employers from pitting workers and unions at different locations against one another.

Still, even within constraints posed by existing U.S. labor law, there are many examples (both historical and contemporary) of unions using collective power to win and maintain bargaining agreements that cover workers beyond an individual workplace. Unions have achieved this through national agreements, through multiemployer bargaining, and through campaigns that use both policy changes and bargaining power to set standards for workers beyond those directly covered by a contract. Examples of these successes include union contracts that cover grocery workers across all major grocery chains in some regions, and the long-standing practice in the construction trades of multiple unions bargaining national, regional or local multiemployer master agreements with employer associations.

What policy changes would be necessary to achieve wide-scale, comprehensive sectoral bargaining in the U.S.?

Engaging employers and unions in comprehensive sectoral bargaining to set standards covering major industries across the U.S. would require federal legislative reform because the National Labor Relations Act, as currently interpreted, is too narrow and restrictive to facilitate sectoral bargaining. 

More modest changes to federal law could empower workers and unions to designate larger, multiemployer bargaining units for the purposes of collective bargaining, unless the employer can demonstrate a compelling reason why a broader unit is not workable. This would enable larger groups of workers and unions to pursue more sectoral approaches to bargaining in their industries. 

Even without major federal labor law reform, promising intermediate pathways to raising sectoral standards could include union-strategic organizing initiatives to increase union density in key industries and geographies. Many unions—even within the constraints of existing labor laws—have successfully used combinations of collective bargaining, organizing, and policy power to raise standards for groups of workers far beyond those they directly represent (see examples above). Under existing labor laws, unions can build toward forms of sectoral bargaining through organizing critical masses of workers in a particular industry or region, pursuing multiemployer collective bargaining agreements, and/or pursuing policy changes that effectively extend the wages and benefits unionized workers have won to other employers across an industry or region.

In addition, state and local governments have some limited legal authority to enact sectoral bargaining policies for workers who currently lack employee status under the National Labor Relations Act. Examples of such policies include state sectoral bargaining frameworks recently enacted to cover rideshare drivers in Massachusetts (2024) and California (2026) and similar legislation awaiting the governor’s signature in Illinois (see Appendix Table 1 for details on these policies). State and local governments also have broad latitude to pursue sectoral standard setting via wage/standards boards that, if well designed, can engage unions representing workers in key industries in the standard-setting process (see Appendix Table 2 for details on these state and local policies).

Other policy approaches to strengthening sectoral standards include expanding prevailing wage laws that apply to all employers receiving public contracts to perform work in a given industry or enacting sectoral minimum wage policies that raise the wage floor in a given industry.

What’s the difference between sectoral bargaining and a sectoral wage board or standards board?

Sectoral bargaining involves negotiations between one or more unions and a group of employers in a particular sector or industry to establish wages, benefits, and other working standards in the sector or industry. Beyond setting guidelines for the process, the government is typically not involved directly in the bargaining, though government may play a role in approving or implementing resulting agreements. 

In contrast, the government is heavily involved in sectoral wage boards or standards boards. Historically, wage boards in the U.S. context have typically brought together representatives of workers and employers to make recommendations to a government agency or legislative body on wages and other standards for their particular industry. Policymakers then consider the recommendations and potentially adopt them as standards that apply to all employers in the particular sector or industry. In some cases, wage/standards boards have authority to set certain standards more directly.

Unlike sectoral bargaining, wage boards have an established federal policy history in the U.S. For example, following the passage of the Fair Labor Standards Act (FLSA) in 1938, the federal government established several “industry committees,” focused primarily on low-wage sectors like garment and textile manufacturing. For a short period these industry committees helped raise wage floors in many low-wage sectors (thereby improving conditions for union organizing among some groups of workers), until they were disbanded in the late 1940s as part of a political compromise to secure a federal minimum wage increase.

As detailed in Appendix Table 2, examples of new sectoral wage or standards boards created by state or local governments in the past decade reflect highly variable policy designs, but government roles are central in each of them. Because government plays such a key role in the adoption, implementation, and enforcement of sectoral standards developed by wage boards, this process is sometimes referred to as sectoral co-regulation, to more clearly distinguish it from traditional collective bargaining, which is a private negotiation process between employers and unions.

What roles do unions play in sectoral bargaining versus wage boards/standards boards? 

Sectoral bargaining is a form of collective bargaining. In sectoral bargaining, a union (or unions) representing workers from a given sector is at the bargaining table negotiating directly with a group of employers, and agreements reached by the parties cover all employers in the sector or industry. The sectoral agreement sets a uniform “floor” for standards across the industry, and the union then supplements these sectoral agreements via negotiations at the local workplace level in locations where workers are unionized. Unionized workers are directly represented in the bargaining process (at the sectoral and the local levels) and have the opportunity to shape bargaining priorities and outcomes via participation in the union’s internal democratic decision-making processes.

Union roles in sectoral co-regulation (by means of participation in a wage or workforce standards board) can vary, depending on how a particular board is designed, the political context in which a board operates, and the degree to which particular unions take initiative to engage with the board process and/or engage members in providing input to any union representatives serving on the board.

For example, one version of this process might be that a union representative appointed to a wage board (alongside other board members representing employers and government) takes part in the process of analyzing and recommending wage standards that the board then submits to a government agency for final review, approval, and implementation. Unlike the process of collective bargaining, union members are typically not directly involved in deciding who represents workers on a wage board or in approving the standards a wage board recommends.

Union representation on a wage board may be required as a matter of policy or left to the discretion of those with authority to appoint board members. In most cases, wage board members are appointed by a government official—typically a governor, a legislative leader, or labor agency leader—meaning the appointments are part of a political process and can change based on changes in elected or agency leadership. Wage boards generally specify a certain number of seats for worker and/or union representatives, and in most cases, some but not all unions in a sector or industry are represented on a given board. See Appendix Table 2 for recent examples of how state or local sectoral standards boards have been structured.

Does sectoral bargaining lead to increased union membership and more worker power? 

Where achievable, strong sectoral bargaining systems have some clear advantages over enterprise-level bargaining in rebalancing labor market power and potentially creating more favorable economic conditions for worker organizing. Sectoral agreements that set wages and workplace standards across an entire industry can curb the ability of individual employers to pit workers (as well as state and local governments) against each other in a race to the bottom on wages and standards. By removing wages and basic standards from competition, sectoral bargaining can in turn reduce anti-union hostility of employers who are otherwise inclined to take extreme steps to prevent workers from unionizing in order to suppress wages and benefits.

On other dimensions of worker power—including the ability of unions to build membership, engage workers in addressing concerns particular to their own workplaces, and maintain strong worker-led organizations capable of enforcing negotiated standards on the ground—firm/enterprise models of bargaining may have distinct advantages. Because negotiated sectoral standards apply whether or not a worker in the sector is a member of a union, under a sectoral agreement, large majorities of workers are likely to gain the financial benefits of coverage without contributing financially to the union and without opportunities to participate in union decision-making or organizing in their own workplace.

Because sectoral and enterprise/workplace approaches to collective bargaining differ in scope and scale and produce different (highly complementary) economic and institutional benefits, an ideal labor-policy framework would include mechanisms to facilitate both.

Significant worker organizing is likely a precondition for large-scale forms of sectoral bargaining to emerge as a successful policy option in the U.S. Sectoral bargaining requires the presence of a representative union to engage in the bargaining process with employers. Successful sectoral bargaining models require that unions possess and maintain some degree of political power, rooted in the ability to organize and represent a significant base of workers. When unions are unable to sustain organizational power and political influence, gains won via sectoral strategies can quickly be lost, and sectoral bargaining systems themselves can become fragile.

Does sectoral standard-setting via wage boards or standards boards lead to increased union membership and more worker power?

There is no inherently direct relationship between wage boards/standards boards and unions or the unionization process. So, the answer to this question depends on many factors, including how boards are designed, how much strength unions already have (or are able to build) in a particular sector or region, and how much capacity unions have to engage with a sectoral board and leverage new standards as part of union organizing initiatives (which are carried out independently outside of the board process). Available examples further illustrate that details of board design are critical to determining outcomes, including the degree to which effective sectoral standard-setting occurs, the degree to which unions are engaged in the standard-setting process, and whether the presence of sectoral standards can help decrease obstacles to union organizing.

While there is no automatic connection between establishment of a standards board and increased unionization, examples also suggest that well-designed standards boards can help create more favorable conditions for union organizing. The process of creating and participating in a wage/standards board can present opportunities for unions to increase communication with and the involvement of both existing members and nonunion workers in the affected sector who may be interested in unionizing. Likewise, in cases in which a board has authority to set and enforce a strong legally binding “floor” for wages and conditions across an industry, these standards can help decrease the incentive for low-road employers to engage in intense anti-union tactics to block worker organizing, since such employers can no longer maintain a competitive advantage based primarily on their ability to suppress wages and benefits. Unions’ roles in winning better wages and standards won via participation in an effective sectoral wage/standards board can in turn be publicized to nonunion workers and leveraged in union-organizing campaigns.

Whether a particular wage/standards board can achieve effective sectoral standard setting and contribute in this way to rebalancing labor market power depends on the details of its design and the engagement of strong unions in the standard-setting process. Newly established state and local boards reflect a wide array of approaches to policy design (see Appendix Table 2 for examples), including variations in how workers or unions are represented on boards and the scope of each board’s authority. For example, early evidence suggests that some new state boards, like Minnesota’s Nursing Home Workforce Standards Board, are achieving greater effectiveness due to certain policy design elements, such as an ability to hire dedicated staff, a clear process for state adoption of new standards, and mechanisms for worker-led enforcement of new standards (such as “know your rights” training).

Based on available state and local examples, factors most associated with a standards board leading to increased union density likely include:

• strong policy design that requires union representation on the board and gives the board clear authority and necessary resources to set, implement, and enforce standards
• presence of already strong unions, capable of effectively representing worker interests on the board and ensuring that the board carries out its intended mission
• the presence of strong unions in the industry with significant organizing capacity and commitment to a strategic organizing program focused on unionizing more workers in the industry

How is sectoral bargaining approached under new state laws covering rideshare drivers?

So far, the only sectoral bargaining policies in place in the U.S. are recently enacted state laws covering rideshare drivers in Massachusetts (2024) and California (2026). A similar law passed by the Illinois legislature is, as of publication, awaiting the governor’s signature. These laws create a state-administered system for facilitating sectoral bargaining between rideshare companies and a designated bargaining representative (union) for a single bargaining unit that includes all rideshare drivers in the state. The three new laws have some variations, but all include the following key features:

• requirements for all rideshare companies (Uber, Lyft, etc.) to regularly submit lists of drivers and their contact information to the state
• process for a certain threshold of rideshare drivers (5%–10%, depending on the policy) to indicate interest (i.e., by signing union cards) in having a particular organization (union) serve as a designated bargaining representative, thereby obligating the state to share driver contact lists with the union
• process for a certain threshold of drivers (25%–50%, depending on the policy) to petition (i.e., by signing union cards) the state for certification of their union, thereby obligating rideshare companies to then collectively bargain with the certified union
• rules and procedures for parties to follow in negotiations, including requirements for parties to submit negotiated agreements to the state for approval; if approved, the terms of the negotiated agreement then apply to all drivers in the state and to any company engaging rideshare drivers in the state

These laws are too new to have been fully tested, and the California and Illinois laws have not yet taken effect. In Massachusetts, the App Drivers Union (SEIU 34BJ/IAM) was certified as the exclusive union for all rideshare drivers in the state in May 2026, obligating rideshare companies to begin bargaining. See Appendix Table 1 for additional details on new state rideshare collective bargaining laws.

Appendix Table 1

What state or local governments maintain wage boards or standards boards, and how are unions involved in these structures?

A few states have maintained laws allowing for industry-specific wage boards since the early 20th century, and these statutes have attracted renewed interest in recent years. For example, in 2015 the New York Labor Commissioner used their authority under the state’s long-standing wage board statute to convene a wage board for the fast food industry, resulting in a new $15 minimum wage covering fast food workers statewide.

The state of California operated a sectoral wage and standards board for decades through its Industrial Welfare Commission (IWC, established in 1913), until the commission was defunded by the legislature in 2004 over concerns that it was being used by employer interests to undermine updated state wage and hour laws. The IWC was briefly revived with a new infusion of state funding in 2024 and issued new wage orders covering several sectors in 2025. When in operation, the IWC consists of a five-member board, including two labor representatives, two employer representatives, and one public representative (all appointed by the governor). The IWC has authority to issue orders governing wages, hours, and working conditions and must prioritize consideration of industries in which more than 10% of the workforce is at or below the federal poverty level.

In the past decade, renewed interest in sectoral standard setting has sparked additional state and local policy experimentation with wage and standards boards. New policies in a dozen state or local jurisdictions present a range of models for board structures that include some form of representation from workers (or unions), employers, and government officials who are tasked with studying, recommending, or in rare cases, directly setting wages and standards that affect conditions of workers in specified low-wage sectors.

Formal roles for unions in recently created state or local standards boards vary, as do the levels of authority each board has to recommend or set standards. Many boards were created with direct input from unions or emerged as legislative proposals in contexts in which unions were already organizing affected workers. New state and local experiments to date suggest that wage and standards boards are most likely to help increase worker power when boards have clear authority to set standards and where unions are actively organizing in the affected sector as new standards are issued. Implementation challenges faced by some new boards, such as California’s fast food council, also illustrate that strong commitment from government leaders is a necessary condition for a wage or standards board to function effectively, especially in the face of heavy industry opposition.

For more details on these policies, see Appendix Table 2. Additionally, legislation has been introduced to create new standards boards for nail salon workers in New York and long-term care workers in Oregon; Oregon also passed legislation in 2025 to study conditions of farmworkers, as a step toward considering a farmworker standards board.

Appendix Table 2

Glossary of key terms

Bargaining unit: The defined group of workers who are included (represented by a single union or bargaining representative) in the collective bargaining process and covered by any resulting contract agreements with an employer. If a union and employer do not agree on who should be included in a particular bargaining unit, the National Labor Relations Board (NLRB) determines the composition of the unit. A bargaining unit may include all or some of the workers in a given workplace; it can be very small and narrowly defined, or very broad, depending on what a group of unionizing workers prefers, what the employer will agree to, and whether workers can persuade the NLRB to recognize a “community of interest” among workers in the proposed bargaining unit. When workers attempt to form a new union, employers often file legal objections to workers’ preferred bargaining unit and use such disputes to delay the union representation and first-contract bargaining process.

Collective bargaining and collective bargaining agreement: Collective bargaining is a process by which a group of workers, through a designated bargaining representative(s), such as a union, negotiates with their employer(s) over wages, hours, and terms and conditions of employment. Though not required under U.S. labor law, collective bargaining can involve more than one union, and it can involve more than one employer, if the parties involved agree to this arrangement. Collective bargaining is a private process between the parties (although sometimes a federal or private mediator will be involved in assisting the parties in reaching an agreement). Agreements reached by the parties through their negotiations are memorialized in a “collective bargaining agreement,” which is a formal, legally binding contract between the parties.

Enterprise bargaining: Collective bargaining between workers, through their designated representative (union) and their employer, covering workers at a single facility. Enterprise bargaining is the default approach to bargaining under the National Labor Relations Act.

Multiemployer bargaining: Collective bargaining between one or more unions and a group of employers (typically operating through an employer association for their industry or a designated employer representative). Agreements reached by the parties in bargaining apply to all employers who have agreed to the multiemployer arrangement, but not to other employers (although they can agree later to be added to the agreement). Multiemployer bargaining is a voluntary arrangement—workers and unions cannot force an employer to bargain in this manner, as the NLRA does not legally require it. Multiemployer bargaining is, however, possible under current labor law and already commonplace in industries like construction, entertainment, and professional sports. Multiemployer bargaining can take place at the national, regional, or local level, depending on the structure of a particular industry and the preferences of the parties.

National agreement or master agreement: Unions and larger employers sometimes bargain a national agreement (sometimes referred to as a “master agreement”) that covers all unionized facilities of the employer, resulting in a collective bargaining agreement broader than the typical enterprise-level agreement. National agreements are effective at establishing uniform wage and benefit standards across an employer’s operations. These agreements are often supplemented at the local level by local agreements addressing particular issues at that location. Examples would include contracts negotiated between the United Auto Workers union and each of the “Big Three” automakers (Ford, GM, and Stellantis), between the Teamsters union and UPS, or between postal unions and the U.S. Postal Service.

Prevailing wage laws: Prevailing wage laws set a uniform minimum wage that employers must pay to workers on a project. Typically, prevailing wage laws apply to employers on government-funded projects to ensure that public investments support the creation of good jobs and do not drive down wages in the industry. Prevailing wage laws exist at the federal, state, and local levels and are a well-established means of setting strong wage standards across an industry that cover both unionized and nonunion workers.

Sectoral bargaining: Collective bargaining between one or more unions and a representative group of employers in a sector or industry to set wage and benefit standards for the sector or industry. Agreements reached by the parties apply to all employers in the sector or industry. There is currently no mechanism for sectoral bargaining in the National Labor Relations Act, but it is common in many European countries.

Sectoral co-regulation: Regulatory systems, such as wage boards or workforce standards boards, designed to facilitate setting of labor standards at the sectoral level with the participation of worker representatives and employers alongside public officials.

Tripartite: Tripartite refers to a process through which representatives of three parties— workers, employers, and the government—work to address an issue. Tripartite processes are a common feature of labor relations in many European countries. With the exception of a few state and local wage or standards boards, tripartite processes are rare in the U.S., and there is no formal mechanism for them to operate in the labor relations system under U.S. labor law. 

Wage board or standards board: Wage boards (sometimes also called worker(s) boards, labor standards boards, industry standards boards, industry councils, or workforce standards boards) are established by legislative or executive branch action in order to study, recommend, and/or set minimum standards for wages (and sometimes other working conditions) in a particular industry. Typically, such boards have a “tripartite” structure, meaning they include representatives of workers, employers, and government agencies as participating members. The structural design and effectiveness of such boards, including the degree of authority they have to set or implement standards, can vary widely (see Appendix Table 2 above for examples). Standard setting via a wage board process differs from traditional collective bargaining in that the government is involved in appointing members of the board and in approving and implementing any board recommendations on standards (unlike collective bargaining, which is a private process between unions and employers). Any standards resulting from a wage board process apply to all employers in the industry, whereas agreements reached through traditional collective bargaining apply only to the employer(s) involved in and are covered by the collective bargaining agreement. Because wage boards are essentially a government process with participation by workers and employers, they are sometimes referred to as “sectoral co-regulation.”

Works council: A works council is a committee of elected worker representatives that advocates for workers’ interests with their employer at the workplace level. Works councils are common in the labor relations systems of many European countries as an enterprise-level complement to industry or sectoral bargaining conducted by labor unions. This labor relations structure differs from the U.S. system, and works councils are generally not allowed under U.S. labor law, which prohibits employer domination, interference, or support of labor organizations (including works councils).

Does raising the minimum wage increase unemployment?

In brief: No. High-quality economic research finds increasing the minimum wage does not significantly impact employment.

In detail: The 90% of high-quality economic studies show that increasing the minimum wage boosts wages for low-wage workers without meaningfully increasing unemployment. These studies use statistical tools and empirical methods to measure what happens to workers before and after a minimum wage increase, controlling for other factors that can impact employment. The consistency of these findings across time, place, and level of increase is powerful evidence that increasing the minimum wage creates a healthier low-wage labor market.

An increase in the minimum wage raises the cost of labor for businesses by definition, but the economy can absorb these changes through channels of adjustment including decreased turnover, modest price increases (see Question 2), lower profits, and the reallocation of workers to more productive firms. Even if a minimum wage increase leads businesses to adjust their staffing levels, what workers are likely to experience are decreases in hours worked or increased time between jobs, not categorical unemployment. Higher hourly earnings can more than offset these reductions, leaving many workers with greater total income even if they are working fewer hours.

Will raising the minimum wage cause inflation?

In brief: No. Increasing the minimum wage does not meaningfully increase prices.

In detail: Economists do find that raising the minimum wage increases prices at affected businesses but only very modestly. For example, one study found that a 10% minimum wage increase was associated with a 0.14 percentage point increase in the Consumer Price Index. A study focused on the restaurant industry found a 10% increase in the minimum wage was associated with a 0.58% menu price increase. Even some of the most ambitious minimum wage policies, such as California’s $20 hourly wage floor for fast-food workers, only increased fast-food prices 2.1% (around 8 cents for a $4 item). 

The economic benefits of the minimum wage far exceed these price increases. For low-wage workers, the wage boost from the higher minimum wage more than compensates for increased prices of the goods and services they buy. These workers are in turn spending more in aggregate because of their additional income, which can boost the overall economy. It is also worth noting that modest price increases on things like restaurant menu items are redistributive. Higher-earning consumers pay higher prices, transferring income to low-wage workers receiving bigger paychecks.

Claims that increasing the minimum wage will dramatically increase prices in the economy are false. Low-wage labor is a small share of total business expenses. In restaurants, for example, total labor costs are around 30% of operating costs—which also include rent, food, utilities, and insurance—and the wage bill of the lowest paid workers is an even smaller amount. This, combined with the fact that minimum wage increases can be offset through reduced profits, lower turnover, and higher productivity, is why price increases are small.

Will businesses just relocate if a state or locality raises its minimum wage?

In brief: The best economic research suggests businesses do not move in response to minimum wage increases.

In detail: One way that economists try to understand the impact of minimum wage increases is to compare economic outcomes across jurisdictional borders where a minimum wage increase took effect on one side but not the other. An analysis of cross-state and county impacts of all local minimum wage differences between 1990 and 2006 found no evidence that employment decreased in the places where the minimum wage went up or that employment increased in the places without a minimum wage increase. More recent research supports these findings, strongly suggesting that businesses are not relocating or moving their workers in response to minimum wage changes.

Businesses commonly affected by minimum wage changes (such as restaurants and retail) want to locate where there are consumers with money to spend. Because raising the minimum wage boosts the spending power of low-income households, it can strengthen the local customer base for these direct-to-consumer businesses even as it raises their labor costs.

Is the minimum wage an effective way to fight poverty?

In brief: Increasing the minimum wage does reduce poverty and should be paired with a strong safety net.

In detail: Minimum wage increases do significantly reduce poverty by boosting household income, especially among low-income households. Research has found that a 10% increase in the minimum wage reduces nonelderly poverty by 2–4%. When EPI applied this research to the 2021 Raise the Wage Act (which would have gradually increased the minimum wage to $15 an hour), an estimated 1.8 to 3.7 million individuals would have been lifted out of poverty, including up to 1.3 million children.

The current weakness of the federal wage floor exposes workers to poverty-level wages. As of 2025, a full-time worker earning the federal minimum wage makes less than the poverty line. A stronger wage floor would generate more savings across critical safety net programs like Medicaid, SNAP, the Earned Income Tax Credit (EITC), and the Child Tax Credit (CTC), as fewer workers would need or be eligible for these programs due to their increased wages. The safety net would thus be more targeted toward the households that need assistance the most. Those public savings can and should be reinvested in those programs to make benefits more generous.

Can increasing the minimum wage harm workers by pushing them over a “benefits cliff”? 

In brief: The minimum wage does reduce safety net program eligibility, but the wage gains almost always outweigh the loss of benefits.

In detail: Most income-tested safety net programs are not characterized by “cliffs” but rather gradual phase outs. Nevertheless, when a worker’s income increases because of a minimum wage increase, they can lose eligibility to programs like Medicaid, EITC, CTC, SNAP, and housing assistance. Research on the interaction between the minimum wage and safety net eligibility finds that benefit reduction is significantly outweighed by the increase in income from the minimum wage. Benefit reductions offset around a third of the income increases for low-income families caused by the minimum wage—meaning that on net they still benefit overwhelmingly.

Higher minimum wages also help low-wage workers increase their access to medical coverage. While minimum wage increases can lift workers out of income eligibility for Medicaid, they simultaneously increase the take-up of employer-based health insurance plans by many low-wage workers, since those workers can more easily afford those plans. Many workers who lose Medicaid eligibility also can receive heavily subsidized private health care through the Affordable Care Act (ACA) exchanges. Researchers estimate that the $20 fast-food minimum wage in California could push almost 60% of Medi-Cal eligible workers in the industry off Medi-Cal and onto alternative health insurance. The wage benefits of the wage floor increase far outweigh the annual premium contributions workers must pay for ACA marketplace healthcare, even accounting for the Trump administration’s choice to let expanded subsidies for the ACA expire.

The reduction in public benefit usage created by higher minimum wages generates substantial savings for federal and state government. These savings should be reinvested in the safety net by expanding program eligibility or otherwise strengthening programs.

There are some safety net programs, which have cliff-like characteristics, like child care assistance, although states are required to provide a graduated phase-out. In rare cases where changes in program eligibility from a minimum wage increase does reduce a family’s total income, this indicates that the design of these programs’ eligibility criteria needs reform, not that the minimum wage increase should be abandoned.

Should lower cost of living in the South and Midwest mean a lower wage floor in those states?

In brief: Even accounting for differences in the cost of living, the minimum wage is far too low in many states across the South and Midwest.

In detail: Cost of living does vary between states and regions across the country, but the minimum wage is still too low across the South and the Midwest. According to EPI’s Family Budget Calculator, even under conservative assumptions of what constitutes a living wage, there is almost no county in the U.S. where a single adult worker can achieve a modest but adequate standard of living earning less than $15 an hour. In fact, many metro areas in the South and Midwest are much more expensive to live in. The living wage in Austin, Atlanta, and Charlotte exceeds $20 an hour. Affordability is still a pressing issue across these regions, even if on average the cost of living is lower. Notably, voters in Florida, Missouri, and Nebraska passed ballot referenda to raise their state minimum wages to $15.

Low wage floors in Southern and Midwestern states hurt workers by suppressing their pay. Most of the states that use the $7.25 federal minimum wage are in the South and Midwest, meaning the effective wage floor in these states is a poverty-level wage (see Question 5). Compounding the problem, many states in these regions preempt localities from passing their own minimum wage policies, preventing policymakers in these jurisdictions from setting wage floors that meet the needs of workers. The use of preemption to dismantle higher labor standards like the minimum wage in the South and Midwest has a long history of being used to reinforce anti-Black racism and white supremacy in these regions.

Can employers ever pay less than the minimum wage?

In brief: Most U.S. minimum wage laws do exempt some groups of workers (such as farmworkers) or set lower minimum wages that apply in certain circumstances (such as for workers who customarily receive tips). Unfortunately, these exemptions can be deeply harmful to workers; in some cases, they were originally adopted to exclude workers of color from minimum wage protections.

In detail: Federal and state labor standards make several groups of workers either ineligible for minimum wage protections or subject to a separate “subminimum wage.”

The FLSA exempts a variety of occupations and types of workers from minimum wage protections. Agricultural workers are excluded from the federal minimum wage entirely and workers who customarily receive tips may be paid a subminimum wage (sometimes called the “tipped minimum wage”) as low as $2.13 an hour (see Questions 8–11). Both of these exemptions originated as ways to exclude Black workers from New Deal economic policies in order to appease Southern lawmakers. Originally, the FLSA also excluded domestic workers, another group of workers with a high concentration of Black workers, but lawmakers extended coverage to them in 1974.

The FLSA also allows employers who have been granted a certificate from the U.S. Department of Labor to pay less than the minimum wage to employees with disabilities (see Question 14).

Another category of federal exemptions and subminimum wages impact young workers. Youth under 20 can be paid as little as $4.25 per hour for their first 90 calendar days of employment. Full-time students, apprentices, and student-learners can also be subject to subminimum wages. And specific occupations typically held by young workers, like babysitters and seasonal amusement workers, are exempt.

Workers misclassified as independent contractors, such as gig economy workers and other wrongly classified employees are not eligible for FLSA protections, including the minimum wage. Also, despite the fact around half of incarcerated people work full-time, these individuals are also excluded from the minimum wage.

State and local policymakers in many states have made efforts to close many of these gaps in minimum wage coverage, but states that do not go beyond the federal standards maintain these exemptions.

Does raising the tipped subminimum wage hurt the restaurant industry?

In brief: Tipped workers are low-wage workers who need wage increases just as much as any other type of worker. Economic research does not find that boosting the minimum wage for tipped workers hurts the restaurant industry.

In detail: There is no inherent economic reason why tipped workers should be paid a lower minimum wage than other workers. The fact that U.S. law allows this can be traced directly back to racist economic practices following the abolition of slavery. Seven states do not have a separate subminimum wage for tipped workers yet still have strong restaurant and hospitality industries. Economic research on the restaurant industry finds that tipped minimum wage increases boost wages for workers without affecting employment. Similarly, when the District of Columbia increased its tipped minimum wage, the restaurant industry did not suffer in terms of employment growth or number of establishments when compared with the U.S average or nearby counties.

Don’t tipped workers earn enough to earn a living wage?

In brief: Tipped workers, including restaurant servers and bartenders, are overwhelmingly low-wage workers. Many struggle to make ends meet, especially those in states where they can be paid less than the minimum wage.

In detail: Tipped workers are more than twice as likely as non-tipped workers to be in poverty. Poverty rates of tipped workers who live in states that use the federal tipped minimum wage of $2.13 are substantially higher than poverty rates of tipped workers in states that use the same minimum wage for all workers, regardless of tips.

The subminimum wage for tipped workers exacerbates economic insecurity for many workers. Employers are legally required to ensure that on a weekly basis, tipped workers’ tips cover the gap between the tipped minimum wage and the regular minimum wage for all hours worked that week, on average. If they do not, employers are responsible for making up the difference. In practice, this requirement is exceptionally difficult to enforce, as it is largely left to workers themselves to track their hours and tips, make the relevant calculations, and then confront their employer if something seems amiss. As a result, tipped workers—who are already paid low wages—are particularly vulnerable to wage theft.

Will raising/eliminating the tipped minimum wage lead to fewer tips or force restaurants to end tipping?

In brief: Tipping is deeply embedded in U.S. culture. Even in places with no separate tipped subminimum wage, workers still receive tips and typically have higher overall take-home pay than their peers in places with a separate tipped subminimum wage.

In detail: In the seven states that do not have a tipped subminimum wage, tipped workers continue to receive tips. According to the Toast platform, California (a state where tipped workers receive the full minimum wage) had the lowest tipping rate (i.e., the average percentage tip on a bill) in the country at 17.2%. This is less than 5 percentage points less than Delaware, the highest tipping state (21.8%). By contrast, the effective minimum wage for tipped workers in California ($16.90) is more than seven times greater than in Delaware ($2.23). EPI research finds that tipped workers in states without a lower tipped subminimum wage earn, on average, 17% more per hour in total take-home pay (base wages plus tips) than tipped workers in states that use the federal $2.13 tipped subminimum.

There is nothing wrong with workers receiving tips for their work in service jobs, but formalizing tipping in minimum wage law allows employers to shift responsibility for paying their workers onto customers. This in turn means workers are more vulnerable to harassment, discrimination, and other forms of abuse. Restaurant workers, particularly women, are subject to the highest rates of sexual harassment of any industry. Research has also found that racial discrimination leads to Black workers receiving fewer tips than their white counterparts. Relying on tipping means workers have less ability to avoid or protect themselves from harmful interactions in the workplace.

Does the so-called “no tax on tips” deduction eliminate the need to raise the tipped minimum wage?

In brief: The 2025 budget tax bill did create a temporary tax deduction for tipped income, but for most tipped workers the benefits are modest and pale in comparison to the benefits of increasing the wage floor.

In detail: The 2025 Republican budget bill created a new, temporary federal income tax deduction for tipped income. This policy does little to address the precarity of tipped work and the benefits to most tipped workers pale in comparison to the gains they would receive through a significant minimum wage increase. The tax deduction encourages employers to rely more on tipped jobs and avoid raising base wages, exacerbating the low wages and challenging conditions of most tipped jobs (see Questions 9 and 10). Many tipped workers earn too little to qualify for the benefit, and those that do will likely see modest tax benefits. Whereas the average annual benefit for an eligible tipped worker will be around $1,700 a year for the three remaining years the deduction is in place, a minimum wage increase to $15 per hour would boost earnings by $3,200 a year for a full-time worker, in perpetuity.

Aren’t most minimum wage workers teenagers?

No, the vast majority of workers impacted by the minimum wage are not teenagers. Low-wage work is a widespread problem and not just isolated to younger workers. EPI’s analysis of the 2025 Raise the Wage Act found that only 14% of the workers that would be impacted by the policy were younger than 20 years old.

Will raising the minimum wage hurt young workers in their first jobs? 

In brief: Higher minimum wages cause little to no employment changes for teenagers.

In detail: The majority of studies find little to no evidence that the minimum wage causes employment losses for teen workers. Instead, their incomes increase as they earn higher pay. It is also worth keeping in mind that teen workers are a minority of low-wage workers, and a shrinking share of the workforce overall as the cultural and economic emphasis on education has grown. To that end, minimum wage increases can support young workers’ educational attainment, particularly for low-income teens. Minimum wage increases significantly improve high school graduation rates for low-income students, a vital investment that can have large long-term consequences for those workers’ lifetime earnings.

Do workers benefit from the FLSA’s subminimum wage for workers with disabilities?

In brief: The federal subminimum wage for disabled workers does not provide real wage protections and is out of step with the most effective ways to boost employment for workers with disabilities.

In detail: Under Section 14(c) of the Fair Labor Standards Act, employers can apply for special certificates with the Department of Labor that allow employers to pay workers with mental or physical disabilities less than federal minimum wage. Employers can only apply for certificates if the worker’s disability actually impairs the worker’s earning or productive capacity. An overwhelming share (96%) of 14(c) employees work in so-called “sheltered workshops” which put workers with developmental disabilities in isolated, noncompetitive environments.

These certificates apply to a small number of workers (less than 37,000 nationally) but also produce exceedingly low pay for workers with disabilities. Nearly half of 14(c) workers were paid less than $3.50 an hour, exacerbating the economic precarity experienced by disabled workers. Disabled adults are 24.1% more likely to live in poverty than other adults. The low pay permissible under 14(c) perpetuates these workers’ struggle to make ends meet. This measure is also unnecessary for providing well-paying employment opportunities to workers with disabilities.

Researchers studying state repeals of 14(c) have found that the change has not hurt disabled workers’ employment. In Maryland, eliminating the provision caused no significant change to disabled worker employment, while in New Hampshire, employment increased. An analysis of the federal AbilityOne program, which is composed of nonprofits that primarily employ workers with disabilities, found that state and local minimum wage increases did not impact the employment of those workers. Employers also do not appear to shift more workers to 14(c) certificates in response to minimum wage increases.

Overall, the use of 14(c) certificates has been declining over time. Across the country, 27 states and D.C. have eliminated or restricted the use of the provisions, reflecting that the policy does not offer real wage protections for disabled workers and that there are superior models of employment for workers with developmental disabilities. Respecting the dignity of workers with disabilities requires prioritizing real pay and inclusion in supportive, but integrated employment opportunities.

Many cities and states already have minimum wages above $15 an hour. Is increasing the federal minimum wage still important?

In brief: Yes, tens of millions of workers still earn less than $15 an hour. In many states and cities, higher wage floors are needed to provide meaningful economic security.

In detail: In the last decade, dozens of cities and states have responded to federal minimum wage inaction by enacting stronger wage floors, in many cases reaching or exceeding $15 an hour. As of 2026, more workers work in a state with at least a $15 minimum wage than in a state using the federal minimum wage. However, there are still 20 states that use the federal $7.25 wage floor and around 14 million workers earn less than $15 an hour.

Even places with recent minimum wage increases might need higher wage floors. The first $15 minimum wage was enacted in 2013. Prices have risen substantially since then, and consequently, the value of targets like $15 an hour has declined significantly. According to EPI’s Family Budget Calculator, $15 is not a living wage almost anywhere in the country. Many cities and states have at least partially protected their wage floors by adopting automatic annual adjustments to account for inflation, but if the initial value is too low, this inflation-indexing only locks in an unlivable floor.

Very few workers earn the federal minimum wage of $7.25 an hour. Is the minimum wage even relevant anymore?

In brief: The fact that so few workers earn the federal minimum wage is a policy failure, not a reason to abandon the policy. The minimum wage is a vital tool for lifting wages and addressing systematic power imbalances between workers and employers. The failure to adequately raise the minimum wage over time has left millions of workers being paid less today than they could have been earning.

In detail: It is true that a small fraction of the labor force earns exactly the federal minimum wage, but this is a policy failure that has left tens of millions of workers with lower wages. Had Congress simply raised the federal minimum wage to keep pace with inflation since the late 1960s, it would be over $12.50 today. According to EPI’s Low Wage Workforce Tracker, 14 million workers earn less than $15 an hour, while 42 million earn less than $20 an hour. The minimum wage does not just impact workers at the very bottom of the wage distribution; it exerts upward pressure for low-wage workers in general. Minimum wage increases create “spillover effects,” where workers above the new minimum wage threshold also see wage increases as employers keep wage ladders and seniority consistent in their firms.

It is important to recognize that without leveraging policy tools like the minimum wage, the low-wage labor market gives employers excess power to set low wages. Workers have limited information about the wages and work policies at alternative employers and can be constrained in their job choices by limited transportation options or the need to maintain specific schedules for child care and other family needs. These economic “frictions” add up, providing leverage for employers to pay lower wages than is optimal for the economy. In short, the longstanding failure to increase the federal minimum wage suppresses worker pay, leaving low-wage workers worse off every year there is no increase.

Does raising the minimum wage lead to automation of low-wage jobs?

In brief: The minimum wage is not a primary cause of automation of low-wage work, but automation is changing the tasks and occupations of some low-wage workers.

In detail: Increasing the cost of low-wage labor can encourage businesses to invest in automation. This can lead to disruption for specific low-wage jobs, or changes in the roles in those occupations. Since we see that the minimum wage does not increase unemployment for low-wage workers (Question 1), the effects of automation on these low-wage jobs are either limited or counterbalanced by expanding employment in other occupations. Evidence suggests that while in recent years automation is taking over a growing number of routine tasks from low-wage workers, the minimum wage has a limited contribution in driving that adoption. Researchers with access to extensive data on McDonalds franchises nationwide found that, while the adoption of touch-screen ordering kiosks grew significantly between 2017 and 2019, there was no evidence that uptake was driven by minimum wage increases. So far, the overall employment impact of automation on low-wage workers has been insignificant, as reductions in occupations with high amounts of routine tasks have been replaced with greater demand for jobs with interpersonal tasks.

Technology is a tool, but the balance of labor market power determines who it helps. Automation has been a feature of our economy since the industrial revolution, boosting productivity in our economy. Technological change can disrupt employment for specific sectors or professions, but in aggregate the economy benefits. Workers benefit from these productivity increases when there are strong labor institutions like access to unions, a strong minimum wage, and policies that support full employment. When those institutions are weak, the gains from technological advancement are not shared widely and contribute to increased inequality.

Key takeaways:

• The federal minimum wage is at its lowest real value in 77 years. Frozen at $7.25 since 2009, the federal minimum wage has lost 30% of its purchasing power during this 17-year freeze.
• Setting the federal minimum wage at two-thirds of the national median wage would raise pay for 39.6 million workers in 2030, about 1 in 4 of the wage-earning workforce.
• The policy would move the federal floor meaningfully toward one definition of a living wage, meeting EPI’s Family Budget Calculator thresholds in half of U.S. counties for a single adult working full time. But it falls short for many families, meaning that policies to strengthen unionization, provide a more robust safety net, and keep unemployment low remain essential.
• Decades of economic research support this two-thirds benchmark, finding little to no employment loss from ambitious minimum wage increases.
• Indexing the federal minimum wage to median wage growth would lock in these gains. Median wages typically outpace prices, so median wage indexing would prevent the kind of decades-long slide that has eroded the current floor.

Introduction

The federal minimum wage, frozen at $7.25 since 2009, is now at its lowest real value in 77 years and a major driver of the affordability crisis facing low-wage workers. For over a decade, the senior Democrats on the House and Senate’s labor committees have consistently introduced and championed the Raise the Wage Act, which would significantly raise the federal level (most recently, to $17 an hour in 2030) and index it to median wage growth going forward. But Congress as a whole has failed to take action on the legislation. In the absence of federal movement, states have moved on their own: Thanks in large part to the Fight for $15 campaign, 21 states and the District of Columbia, home to half of all U.S. wage earners, will have a minimum wage of at least $15 by 2028. But that patchwork still leaves 20 states—home to about 55 million workers—at $7.25, and updating the federal floor to a modern benchmark is the only way to reach these workers.

Raising the federal minimum wage to two-thirds of the national median wage would lift pay for nearly 40 million workers, about a quarter of the workforce. Two-thirds of the median—equivalent to roughly $17.70 today, a projected $20 in 2030, and a projected $25 in 2038—matches the benchmarks used in other high-income countries and tracks the direction of recent minimum wage research. Indexing to median wage growth thereafter would keep the floor from losing ground to inflation or falling behind the broader economy.

A federal minimum at two-thirds of the national median would eliminate poverty wages and move the floor meaningfully toward a living wage in much of the country: A single adult working full time could cover modest expenses in half of U.S. counties under EPI’s Family Budget Calculator thresholds. Maintaining the two-thirds minimum-to-median ratio would lock in those gains, improving affordability for U.S. workers and their families. It would also durably narrow the gap between low-wage workers and the typical worker, with Black workers and women seeing the largest benefits.

The two-thirds benchmark is also well-supported by economic research. Decades of studies of state and federal minimum wages find that higher floors raise pay for low-wage workers with little to no effect on employment, and a smaller but growing body of work on minimum wages approaching two-thirds of the median reaches the same conclusion. Setting the federal floor at two-thirds of the median, and updating it annually, would raise incomes at the bottom and prevent the kind of decades-long slide that has left the current minimum at its lowest real value in 77 years.

The outdated federal minimum wage and extent of low pay

The federal minimum wage is now at its lowest real value in 77 years. Stuck at $7.25 since 2009, it is in its longest stretch without an increase since the federal wage floor was established in 1938 (Figure A). Inflation has eroded 30% of its purchasing power over those 17 years, gradually cutting real pay for the lowest-wage workers in states still tied to the federal floor. Simply indexing the 2009 wage to inflation, a far weaker standard than this report proposes, would put the federal minimum at about $10.60 today.

The minimum wage was once meaningfully higher in real terms. Civil rights organizers in the late 1960s pressed Congress not only to raise the wage floor but also to extend its coverage to service industries that had previously been excluded because they disproportionately employed Black workers. By 1968, the federal minimum wage reached $1.60 per hour, equivalent to $12.62 in 2026 dollars and roughly 61% of the national median wage at the time, close to the two-thirds benchmark this report proposes. Even a federal minimum wage of $12.62 today would raise the wages of about 12 million workers.

Because Congress has not raised the federal floor in 17 years, states and localities have moved on their own. Thirty states, the District of Columbia, and dozens of cities and counties have raised their minimum wages, many in response to the Fight for $15 campaign (EPI 2026a). By the end of 2028, more than half of the U.S. workforce, about 74 million workers, will live in a state with a minimum wage of at least $15.

The state-by-state patchwork has delivered real successes but also left tens of millions of workers behind. Roughly 55 million people work in the 20 states still tied to the $7.25 federal floor, and they are nearly twice as likely as workers elsewhere to earn less than $15 per hour. Nationally, almost no one is paid exactly $7.25 anymore: The floor is so low it rarely binds. Yet 14 million workers, about 9% of the workforce, still earn less than $15. Closing that gap and preventing the federal floor from eroding further requires a national standard pegged to a modern benchmark.

A new standard: Two-thirds of the median wage

The federal minimum wage suffers from two related deficiencies: Its level is too low, and it does not adjust as the economy grows. Both can be solved by tying the federal minimum to two-thirds of the national median wage. Congress would first raise the floor to that level, and each subsequent year the minimum would adjust to maintain the same ratio.

First, the new benchmark replaces a poverty-level federal floor (Hickey and Cid-Martinez 2025) with one that pushes the minimum wage toward a living wage. As Oakford (2026) argues, two-thirds of the median is “a realistic stepping stone to living wages,” and standards below that ratio leave too large a gap between earnings and the cost of necessary expenses. A federal minimum at two-thirds of the median also better fulfills the original promise of the federal standard, which Congress described in 1937 as protecting “this Nation from the evils and dangers resulting from wages too low to buy the bare necessities of life” (U.S. Congress 1937).

Second, maintaining the two-thirds ratio guarantees automatic increases as the economy grows, ending the recurring erosion that comes from a frozen federal floor. Because median wages typically outpace prices, median wage indexing produces real gains, not just inflation protection. In 2025, two-thirds of the national median wage was $17.11 per hour (Figure B), and today, it is estimated to be $17.70. By 2030, applying Congressional Budget Office (2026) Employment Cost Index projections, it would reach $20.02. A federal minimum tied to two-thirds of the median would likely reach or exceed $25 by 2038, four years sooner than if a $17.11 wage in 2025 had been indexed only to the cost of living going forward.1

Nineteen states and the District of Columbia index their minimum wages to inflation, but Connecticut goes further by indexing to average wage growth and capturing the real gains that wage growth typically delivers above prices. Congress should follow Connecticut’s lead and link the federal minimum to the national median wage. Of course, indexing to price inflation would be an enormous improvement to current federal minimum wage policy and to state and local minimum wage policies that have also failed to implement automatic increases. Tying the minimum wage to median wages—i.e., indexing the minimum to typical workers’ wage growth—would yield even larger increases over time.

Tying the federal minimum to two-thirds of the median would also durably narrow inequality in the bottom half of the wage distribution. Whenever the minimum wage fails to keep pace with economy-wide wage growth, the gap between low and median earners widens. But a substantial increase in the minimum to a fixed ratio of the median shrinks and bounds that gap by construction. The gains disproportionately affect Black workers and women, who are overrepresented in low-wage jobs due to persistent racism and sexism (Banks 2019). Minimum wages are a major determinant of Black-white wage gaps (Derenoncourt and Montialoux 2020; Wursten and Reich 2023), and the long erosion of the federal minimum was a leading driver of widening pay inequality among women (Autor, Manning, and Smith 2016).

The state of minimum wage research and new policies

Minimum wages and job losses

A federal benchmark of two-thirds of the national median would significantly raise wages, and recent research strongly supports the conclusion that ambitious minimum wage targets work as intended, with little to no employment downsides. Across more than three decades of modern economic research, the median estimated employment effect is small; among studies that look at all low-wage workers rather than narrow subgroups, the effect is essentially zero (Zipperer 2024). The recurring scare stories about job losses are not borne out by the body of evidence.

Businesses adjust to higher minimum wages through what Dube (2026b) and Bernstein (2013) call the “Three P’s”: productivity, prices, and profits.2 Take productivity first. Higher wages reduce the rate at which workers quit, particularly in high-turnover sectors like restaurants and retail. That lowers hiring and training costs and means employment levels can hold steady even as new hiring slows. Better-paid workers, and workers with longer tenure, are also typically more productive, further offsetting the cost of the wage increase.

The minimum wage also redistributes income to low-wage workers when employers cover higher labor costs through reduced profits or modestly higher prices. Vergara (2026) and Coviello, Deserranno, and Persico (2022) both find that minimum wage increases shrink profits in low-wage industries. Price pass-through is small in aggregate terms because low-wage workers’ earnings are only a fraction of total labor costs, which are themselves a fraction of total business expenses. California’s $4 overnight increase in the fast-food minimum generated a one-time increase in fast-food prices of 2.1% to 3.6% (Sosinskiy and Reich 2026; Clemens et al. 2026). To put that in context: The price of a $6.00 hamburger would have risen to about $6.17.

How high is too high?

A common way to measure the level of a given minimum wage is to use the minimum-to-median wage ratio. Sometimes called the Kaitz index, the minimum-to-median wage ratio compares the minimum with the underlying distribution of wages by measuring the share of the typical wage that the floor reaches. This report proposes setting that ratio at about 67%. Most of the U.S. evidence base reflects periods when the ratio sat well below that level, because until recently, U.S. minimum wages were rarely considered high by today’s standards. But a growing body of recent research, together with recent state and local policies, has pushed the evidence into higher ratios—and the results are the same: There is substantial room for higher minimums without large employment losses.

Cengiz et al. (2019) found no negative employment effects at minimum-to-median ratios up to 59%. Dube and Lindner (2021), studying city-level minimum wages with ratios averaging 58% to 64%, found small and statistically insignificant effects. Godoy and Reich (2022) found no employment effect across localities with ratios ranging from 56% to 82%. And the 1968 federal minimum, which reached roughly 61% of the median,3 has been reexamined in two recent studies that likewise found small or no employment effects (Bailey, DiNardo, and Stuart 2021; Derenoncourt and Montialoux 2021).

The most direct evidence that the floor can go meaningfully higher comes from California’s $20 fast-food minimum wage. In April 2024, the state raised the wage for fast-food chain workers from $16 to $20, pushing the ratio of that minimum to the state’s median wage to about 74%, well above most U.S. precedents.4 One might worry that customers would substitute toward lower-priced independent restaurants exempt from the policy, generating job losses at the chains. The actual evidence shows otherwise. Despite the large wage increase, research finds little to no employment effect of the policy (Bivens and Zipperer 2026), and the median employment effect in Dube (2026a) is essentially zero. Evaluations of the UK minimum wage through 2019, when it reached nearly 60% of the median wage, also find small, statistically insignificant effects on the employment of low-wage workers (Giupponi et al. 2024).

A federal benchmark set at two-thirds of the national median will push some states above two-thirds of their own median wage. There is good reason to be optimistic about employment changes there as well. The studies above already span a wide range of Kaitz ratios, from the high 50s through the low 80s, and consistently find little or no employment effect. California’s $20 fast-food minimum extends this evidence to a 74% state-level ratio with essentially no employment losses, and only five states would have a minimum-to-median wage ratio above that threshold under the proposed federal benchmark. And while the minimum wage would be at a higher level relative to the state median in those states, it would still be less than a “living wage” for many families in those areas, as I discuss later.

Even if some employment loss does occur, that is not the right test of policy success. Low-wage labor markets are dominated by job-to-job churn, so reduced employment in response to a higher minimum typically shows up as longer gaps between jobs rather than workers permanently shut out of the labor market (Cooper, Mishel, and Zipperer 2018). On net, low-wage workers come out ahead in annual earnings when significantly higher hourly pay more than offsets a modest increase in unemployment.

Policymakers and organizers campaigning for minimum wage increases have considerable room to maneuver above the current federal floor before needing to worry about job losses. To assuage concerns about employment impacts, a federal proposal could be structured to limit annual increases of the federal minimum wage so that they never exceed two-thirds of the national median wage. States and localities, of course, can and should continue to push for higher minimum wages, as many will have higher median wages and costs of living than the national average.

Existing proposals and policies reaching two-thirds of the median

Some recent federal proposals already target or are consistent with the two-thirds benchmark. The recent Give America a Raise Act would raise the federal minimum to $20 by 2029, close to this report’s projection of two-thirds of the 2029 median wage ($19.44). The Living Wage for All Act names the two-thirds benchmark explicitly and locks in indexation in statute: “once the minimum wage equals two-thirds of the national median hourly wage, it shall thereafter be automatically adjusted each year to maintain that ratio.” The Bold Economic Program for America (Reich 2026) likewise proposes $20 by 2030, and Oakford (2026) embeds the two-thirds target in a broader portfolio that includes just cause protections and stronger wage theft enforcement.

The benchmark also aligns U.S. policy with international practice. The UK Low Pay Commission has targeted two-thirds of the median for the National Living Wage since 2024, and in the EU, 17 of 22 countries benchmark their statutory minimum wages to a ratio of the median or average wage. The 2022 European Union Minimum Wage Directive obligates member states to use “indicative reference values”—such as 60% of the gross median wage—to assess adequacy of their wage standards (Luebker and Schulten 2026).

Some of these international benchmarks may look numerically lower than two-thirds, but they are usually defined against a different denominator. Germany, for instance, benchmarks against the median wage of full-time workers. In the United States, the full-time median is about 10% higher than the overall median, so 60% of the full-time median is roughly equivalent to two-thirds of the overall median that this report proposes.

Implementing a minimum wage equal to two-thirds of the median wage

Any federal legislation will need a phase-in period, but it must specify two things: a clear path to the target and an explicit guarantee that automatic median wage indexing kicks in once the floor reaches two-thirds of the median.

Implementing the benchmark also requires choosing a wage source. Legislation should designate the Department of Labor (DOL)—which already publishes median wage estimates through the Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics (OEWS)—to publish the official median wage each year. DOL has two ready sources: OEWS, an establishment survey, and the Current Population Survey (CPS), the household survey already used to produce the unemployment rate, which collects detailed wage and hours data.

Each source has tradeoffs. The CPS is timelier, with wage data available at a one- to two-month lag, but smaller samples, the difficulty of computing hourly earnings for salaried workers, and respondents’ tendency to round wages all introduce noise. OEWS uses an established BLS hourly wage methodology and median wage calculation that may be less volatile, but it is published with a one-year lag and pools data from earlier, lower-wage years. DOL could pick one source or use a weighted average; recent data show only about a $1 difference between the two surveys.5 Either way, expanding resources at BLS and the Census Bureau would strengthen the underlying data and support further refinements to the methodology.

Once DOL has a baseline median, indexing requires projecting that median forward to the year the new minimum takes effect. The UK Low Pay Commission, which recommends a two-thirds median target to the UK government, offers a useful template: It estimates a midyear median wage by combining lagged historical data with timely indicators and short-run forecasts (Low Pay Commission 2024). A concrete schedule illustrates the approach. To set the minimum for January 1, 2030, DOL would announce the new wage on July 1, 2029, six months in advance, based on its best projection of the July 2030 median, the midyear point representative of the median wage workers will face on average throughout 2030. The projection would proceed in three steps: compute the 2028 median from CPS or OEWS data; roll it forward to early-to-mid-2029 using a combination of available data—like the Current Employment Statistics, the Consumer Price Index, and the Employment Cost Index (ECI); and then roll it forward one more year using short-run wage projections like those in the CBO Budget and Economic Outlook (2026).

National and state effects of a federal minimum wage at two-thirds of the median

To estimate the economic benefits of a federal minimum wage set at two-thirds of the median wage, I model how many low-wage workers would see higher pay under this policy. I assume the policy is phased in over five years, so that if it went into effect today, the federal minimum would reach two-thirds of the median in 2030 and then automatically adjust each year to maintain that ratio.

Concretely, I assume the federal minimum rises to $12 immediately in 2026 and then increases incrementally to $20 in 2030, which is about two-thirds of the projected national median wage.6 Legislation should build in a path adjustment if 2030 median wages come in higher or lower than projected.

I focus on the effects in 2030. I assume the same phase-in path and automatic indexing applies to the federal tipped minimum wage, which has been frozen at $2.13 per hour since 1991.7 Wages elsewhere are assumed to grow in line with CBO ECI projections from 2026 to 2030, and the model incorporates the effects of scheduled state-level minimum wage increases (see the appendix for details).

In 2030, a federal minimum wage equal to two-thirds of the national median would raise pay for 39.6 million workers, about 1 in 4 of the wage-earning workforce (Table 1).8 Annual earnings would rise substantially, and the gains would be largest for Black workers: A full-time, full-year Black worker affected by the increase would earn about $5,000 more per year, compared with $4,400 for all affected workers. In line with other minimum wage increases, women would gain more than men, with 31% of women seeing higher pay compared with 23% of men.

Adults ages 20 and over would make up 9 in 10 affected workers (teens would have the largest share of affected workers of any age group, but they make up a small share of total employment). The problem of low pay is far from limited to the youngest workers.

Although several states with scheduled minimum wage increases will see the gap between their minimum wage and the new federal floor shrink, workers in every state would still be affected (Figure C). With the exception of D.C., no state’s scheduled 2030 minimum wage reaches $20. The largest gains go to workers in the 20 states still tied to $7.25: 1 in 3 (33%) would see a raise, and annual pay for those affected would rise by about $6,200 on a full-time, full-year basis.

Figure C

Beyond who gets a raise and how much, a related question is whether the raise is enough to cover a family’s basic costs. Setting a target of two-thirds of the median would push the federal floor much closer to a living wage for many families. What counts as a living wage varies across the country, depending on local costs and on family size and composition. EPI’s Family Budget Calculator thresholds make this concrete: They calculate the income a given family type needs in a given place to afford a “modest but adequate” standard of living. For example, in 2025 a two-adult, one-child family in Los Angeles County, California, needed about $118,000 in annual pretax earnings to pay for housing, food, child care, transportation, health care, taxes, and other necessities. In more rural Early County, Georgia, a similar family needed about $74,000. These budgets are minimal by design, with no allowance for savings, emergencies, retirement, college, or entertainment.

Of course, other business income and government provided social benefits can lower the amount of labor market earnings a family needs to maintain the same standard of living. Gould, Mokhiber, and deCourcy (2024) report that, according to Congressional Budget Office data, about 81% of a middle-income family’s budget is met by labor market income.

Applying that 81% adjustment to EPI’s Family Budget Calculator thresholds gives a more useful benchmark for what wages need to deliver. Under this adjusted measure, the Los Angeles County family would have needed about $96,000 in earnings to meet their 2025 budget, equivalent to both adults working full time, year round at about $23 per hour. The Early County family would have needed about $60,000, equivalent to both adults working full time, year round at $15 per hour.

The implications for everyday affordability are significant. After inflating these adjusted thresholds to 2030 dollars using CBO Consumer Price Index projections, a federal minimum at two-thirds of the median substantially closes the gap between full-time annual earnings and necessary expenses for low-wage workers and their families. A single adult working full time at the 2030 minimum of $20 would cover modest but adequate expenses in half of U.S. counties. Two full-time working parents with two children would meet their family budget in roughly a quarter of U.S. counties. Using similar thresholds, Oakford (2026) finds that a federal minimum at two-thirds of the national median in 2025 would be “90% to 99% of the median living wage of a single adult without children in 16 states.”

A federal minimum tied to two-thirds of the national median would therefore make enormous progress in increasing affordability and helping families make ends meet. Closing the remaining gaps will require a broader set of policies, including strengthening other labor standards like overtime protections and their enforcement, a more robust safety net, expanded public goods like universal health insurance, fewer barriers to unionization, and a renewed commitment to full employment.

Conclusion

The federal minimum wage is at its lowest real value in 77 years, and tens of millions of low-wage workers are paying for that erosion every paycheck. Pegging the federal floor to two-thirds of the national median wage, and maintaining that ratio, would correct the two flaws that have left the floor unfit for purpose: a level too low to function as a meaningful wage standard and a structure that does not adjust as the economy grows.

A federal minimum at two-thirds of the median would raise pay for nearly 40 million workers in 2030, deliver the largest gains to Black workers and to women, and bring the floor close to a living wage in much of the country. Decades of research, recent state and local experience, and California’s $20 fast-food minimum all point to the same conclusion: The labor market can absorb minimum wages of this size with little to no employment cost. The benchmark also brings U.S. policy into line with the UK and most of the EU, where two-thirds-style targets are now standard practice.

A higher floor cannot, on its own, guarantee economic security for working people. That will require a broader agenda: a stronger safety net, expanded public goods, fewer barriers to unionization, and a renewed commitment to full employment. But updating the federal minimum to a modern, indexed benchmark is the single most direct step Congress can take to raise wages at the bottom, and the only step that reaches the 55 million workers in the 20 states still stuck at $7.25.

Appendix

State benefits

Methodology

Underlying wages are based on the 2025 Current Population Survey and between 2025 and 2030. I assume wages increase at the rate of CBO (2026a) ECI projections and because of future state-level minimum wages. Due to the Trump administration’s immigration policies and the possibility of continued labor market weakening, how the baseline level of employment grows over the next five years is very uncertain. For simplicity, I hold the estimated employment level constant between 2025 and 2030 instead of making additional assumptions about either employment rates or population growth. In terms of total population growth, this assumption may not be too far off the mark of current projections; CBO (2026b), for example, estimates that between 2025 and 2030, the civilian population ages 16 to 64 will only grow by 0.06%, or 130,000 people.

Affected workers include those “directly” affected, whose wages would otherwise be less than the new federal minimum wage, as well as “indirectly” affected workers who earn up to 115% of the new minimum (Cooper, Mokhiber, and Zipperer 2019). These particular estimates may overstate the number of workers affected because while they incorporate already scheduled state-level increases, they exclude city-level minimum wage increases, and some cities will have higher than $20 minimum wage standards in 2030. On the other hand, if the labor market continues to weaken, low-wage workers will, in the absence of minimum wages, face slower than usual wage growth because their wage growth slows disproportionately when unemployment is higher (Bivens and Zipperer 2018).

Notes

1. These projections follow CBO ECI and CPI projections from 2025–2036, and for subsequent years assume 2026–2035 annual growth rates of 2.26% for CPI and 2.94% for ECI. 

2. For additional discussion, see Dube and Lindner (2025), Schmitt (2013), and Zipperer (2023).

3. OECD (2026) estimated the U.S. minimum-to-median wage for full-time workers was 55.05% in 1968. Assuming a 10% premium for the full-time median wage relative to the overall median wage results in a minimum-to-median wage ratio of 60.56%.

4. In April 2024, the state raised the wage for fast-food chain workers from $16 to $20, pushing the ratio of that minimum to the state’s median wage to about 74%, well above most U.S. precedents.

5. The 2024 OEWS national median wage (which is the latest available data) was $23.80 (BLS 2025). The EPI State of Working America Data Library (EPI 2026b), which uses CPS wage data and which we use for wage levels throughout this paper, reports a 2024 median wage of $24.87.

6. The exact schedule simulated below is $12 in 2026, $13.50 in 2027, $15.50 in 2028, $17.50 in 2029, and $20 in 2030.

7. Ideally other subminimum wages would be phased out, including those for some workers with disabilities and youth workers. I do not model the effects of those changes due to data constraints.

8. I concentrate on the effects in 2030. Were low-wage workers’ wages to grow slower (or faster) than median wages, these estimates would understate (or overstate) the effects in later years.

References

Banks, Nina. 2019. “Black Women’s Labor Market History Reveals Deep-Seated Race and Gender Discrimination.” Working Economics Blog (Economic Policy Institute), February 19, 2019.

Bernstein, Jared. 2013. “If Increasing the Minimum Wage Doesn’t Cost Jobs, How Does It Get Absorbed?” Huffington Post, August 14, 2013.

Bivens, Josh, and Ben Zipperer. 2018. The Importance of Locking in Full Employment for the Long Haul. Economic Policy Institute, August 2018.

Bureau of Labor Statistics (BLS). 2025. “Occupational Employment and Wage Statistics (OEWS) Tables, May 2024” [Excel file], Occupational Employment and Wage Statistics. Accessed May 13, 2026. 

Clemens, Jeffrey, Olivia Eduwards, Jonathan Meer, and Joshua D. Nguyen. 2026. “The Effects of Calfornia’s $20 Fast Food Minimum Wage on Prices.” National Bureau of Economic Research Working Paper no. 34990, March 2026.

Congressional Budget Office (CBO). 2026a. The Budget and Economic Outlook: 2026 to 2036. February 11, 2026.

Congressional Budget Office (CBO). 2026b. The Demographic Outlook: 2026 to 2056. January 7, 2026.

Cooper, David, Zane Mokhiber, and Ben Zipperer. 2019. Minimum Wage Simulation Model Technical Methodology. Economic Policy Institute, February 2019. 

Coviello, Decio, Erika Deserranno, and Nicola Persico. 2022. “Minimum Wage and Individual Worker Productivity: Evidence from a Large US Retailer.” Journal of Political Economy 130, no. 9: 2315–2360.

Derenoncourt, Ellora, and Claire Montialoux. 2021. “Minimum Wages and Racial Inequality.” Quarterly Journal of Economics 136, no. 1 (February): 169–228.

Dube, Arindrajit. 2026a. “Labor Market Effects of California’s $20 Fast-Food Minimum Wage.” National Bureau of Economic Research Working Paper no. 35171, May 2026.

Dube, Arindrajit. 2026b. The Wage Standard: What’s Wrong in the Labor Market and How to Fix It. New York: Penguin Random House.

Dube, Arindrajit, and Attila S. Lindner. 2024. “Minimum Wages in the 21st Century.” In Handbook of Labor Economics, Volume 5, edited by Christian Dustmann and Thomas Lemieux. 

Economic Policy Institute (EPI). 2026a. Minimum Wage Tracker. Accessed May 5, 2026.

Economic Policy Institute (EPI). 2026b. State of Working America Data Library. Accessed May 5, 2026. 

Giupponi, Giulia, Robert Joyce, Attila Lindner, Tom Waters, Thomas Wernham, and Xiaowei Xu. 2024. “The Employment and Distributional Impacts of Nationwide Minimum Wage Changes.” Journal of Labor Economics 42, no. S1: S293–S333.

Hickey, Sebastian, and Ismael Cid-Martinez. 2025. “The Federal Minimum Wage is Officially a Poverty Wage in 2025.” Working Economics Blog (Economic Policy Institute), April 28, 2025.

Low Pay Commission. 2024. “What Will the Minimum Wage Be Next Year?” (blog post). April 19, 2024.

Oakford, Patrick. 2026. Federal Employment Standards as the Foundation of Economic Security: Revisiting Minimum Wage, Just Cause, and Tools to Combat Wage Theft. Roosevelt Institute, May 2026.

Organisation for Economic Co-operation and Development (OECD). 2026. OECD Data Explorer. Accessed May 5, 2026.

Reich, Michael. 2026. The Unexpected Effects of a $20 Federal Minimum Wage. Center on Wage and Employment Dynamics, February 2026.

Reich, Michael, and Denis Sosinskiy. 2026. “Effects of a $20 Minimum Wage: Evidence from Granular Data on Wages, Employment, and Prices.” Institute for Research on Labor and Employment Working Paper, April 1, 2026.

U.S. Congress. Senate. Committee on Education and Labor. 1937. Fair Labor Standards Act of 1937. S. Rep. No. 884, 75th Cong., 1st Sess. Washington, DC: Government Printing Office.

Wursten, Jesse, and Michael Reich. 2023. “Racial Inequality in Frictional Labor Markets: Evidence from Minimum Wages.” Labour Economics 82, 102344.

Introduction

In 2025, unionization in the United States grew to its highest levels since 2009 (McNicholas, Poydock, and Shierholz 2026). This growth is a testament to the fact that Americans increasingly view unions favorably and recognize them as critical instruments for building a just economy. Yet more than 50 million nonunion workers would join a union but are unable to do so because our nation’s labor laws allow employers to derail workers’ unionization efforts (McNicholas et al. 2019).

It is well documented that employers often hire union avoidance consultants to dissuade and weaken workers’ unionization efforts. These consultants work to prevent a union election from taking place—and if that fails, to ensure that workers vote against the union and then stall negotiations over a first collective bargaining agreement. Over the past several decades, large law firms have developed substantial business specializing in union avoidance services. These firms now play a significant role in denying workers their rights to a union and collective bargaining (Kaufman and Stephan 1995).

The role of these law firms in defeating workers’ organizing campaigns and frustrating workers’ attempts to reach a first contract has largely gone unexamined. While employers are required to disclose money spent on lawyers engaged in persuading employees on their union and collective bargaining rights, there is an exemption around reporting money spent on “advice” services, which is ill-defined under the law. Union avoidance law firms have taken full advantage of this reporting loophole and have constructed an industry providing counsel on union busting. Further, many union avoidance law firms provide employers services beyond these persuader activities, including representation at the NLRB and the stalling of first contract negotiations. 

In this report, we examine the union avoidance industry and the law firms that play integral roles in this business. We calculate the revenue law firms generate from employers who try to avoid unions and undermine collective bargaining with their workers. Further, we discuss the impacts of the union avoidance industry on workers’ ability to organize and what it means for workers, our economy, and our democracy.

Employers spend millions on union avoidance consultants

When workers seek to form a union, employers often hire union avoidance consultants to dissuade and weaken workers’ unionization efforts. These consultants include both non-attorney consultants and attorney consultants. Under the Labor–Management Reporting and Disclosure Act (LMRDA), employers and the consultants they hire must file disclosure reports on agreements in which the consultant is engaging in union-busting activities. Table 1 lists just a few of the employers who filed mandatory reports with the Department of Labor during 2025.

Table 1

These reports represent only a fraction of the total money spent on anti-union campaign services, not to mention legal counsel, representation, and litigation aimed at union avoidance. That’s for two main reasons: 1) consultants are not required to report activity that counts as “advice,” which is ill-defined but currently interpreted to exempt nearly all activities that don’t involve direct contact with workers, even though this accounts for the vast majority of work that consultants engage in; and 2) even activities that clearly must be reported very often are not. Research from LaborLab found that 57% of employers who were known to owe a financial disclosure for having hired a union avoidance consultant in 2024 had failed to file their required disclosure by June 30, 2025, three months after the filing deadline (LaborLab 2025). In 2024, a total of 153 employers filed a financial disclosure, according to the LaborLab report. This showcases a significant amount of underreporting from employers when one considers that over 3,200 union election petitions were filed in 2024, and that 71%–87% of employers hire a union avoidance consultant when faced with a union-organizing drive (NLRB 2026; DOL n.d.). If most “advice” provided by consultants were included, EPI estimates employers spend $442 million per year on both attorney and non-attorney consultants for anti-union campaign services.1

However, that still represents only a fraction of what employers spend on union avoidance. The EPI estimate excludes spending on legal counsel, representation and litigation aimed at defeating organizing drives and stalling contract negotiations, as well as strike preparation and strike-breaking services (McNicholas et al. 2019). It further excludes spending on consultants to implement or enhance employee engagement and “positive employee relations” programs that center around “union-substitution” policies (Levine et al. 2025). These programs feature techniques that are deliberately crafted to preempt, detect, and rapidly quash union organizing, including supervisor training, manipulative communication policies, surveillance techniques, “voice” mechanisms (like suggestion boxes), and employee-involvement programs (such as employee committees and teams).

As mentioned, EPI estimates that employers spend at least an estimated $442 million on anti-union campaign services provided by consultants that are designed to persuade or intimidate workers into voting “no” in union elections. Many of these consultants are also practicing attorneys who simultaneously will provide legal counsel and representation services related to NLRB proceedings. These attorneys also will help employers bend the law to their advantage during contract negotiations, prepare for and break strikes, file unfair labor practice charges to weaken unions and defend employers against such charges, sometimes appealing them not just to the NLRB but also into federal courts. Inclusive of all of these services, the traditional labor relation practices of these law firms generate an estimated $1.48 billion on average.2 When we account for overlap (much labor practice revenue comes from providing anti-union campaign services, not just representation and counsel), these two figures suggest that total spending on attorneys (whether for representation, consulting, or both) and non-attorney consultants is roughly $1.7 billion a year.3 Table 2 shows top law firms’ share of cases at NLRB and the estimated revenue the labor relations practices of these firms generated in 2024.

Table 2

Union avoidance law firms

Prominent law firms—such as Littler Mendelson, Morgan Lewis, and Jackson Lewis—have generated substantial business in union avoidance work on behalf of U.S. employers seeking to frustrate worker organizing and collective bargaining. As shown in Table 2, these law firms do a great deal of business before the National Labor Relations Board, the independent agency charged with enforcing the National Labor Relations Act (NLRA). The NLRA is the nation’s fundamental labor law that guarantees most private-sector workers the right to organize and the right to collective bargaining. However, decades of federal policy and court decisions have weakened the NLRA (Shierholz et al. 2024). Union avoidance consultants and law firms have long exploited the law’s significant loopholes, making it harder and harder for workers to win unions. For nearly 80 years, policymakers have failed to address the NLRA’s weaknesses and restore meaningful union and collective bargaining rights to workers.

These law firms have represented employers in fighting against some of the largest organizing efforts over the last decade, including worker organizing drives at Amazon, Starbucks, and Trader Joe’s (Logan 2025). These law firms have essentially created a specialized practice of union busting and together have generated billions of dollars in revenue, as shown in Table 2. The firms range from exclusively labor and employment firms to full-service corporate firms offering representation in a range of matters. The following are profiles of three law firms that have been at the center of the largest union avoidance campaigns in recent years.

Littler Mendelson

One of the largest union avoidance law firms is Littler Mendelson, a global management-side law firm with more than 1,800 attorneys who can make upwards of $1,700 an hour (Littler Mendelson 2026).4 In Littler Mendelson’s 80-year history, it has represented the likes of Amazon, Delta Airlines, and McDonald’s and has played a predominant role in Starbucks’s anti-union campaign (Logan 2022; Logan 2025). Beyond offering their union-busting services to employers, Littler Mendelson has expanded their services to include promoting anti-worker legislation. For example, Littler Mendelson’s Workplace Policy Institute (WPI) played a predominant role in opposing California’s Assembly Bill (AB) 5, legislation aimed at protecting workers by combatting misclassification (Poydock 2020). WPI also supported the passage of Proposition 22, which exempted gig workers from AB5 (McNicholas and Poydock 2019). WPI is part of the Coalition for Workplace Innovation, which has lobbied for proposals that weaken workers’ rights, including the exclusion of gig/app-based workers from employee status (Pinto 2022).

Morgan Lewis

Morgan Lewis also has a large practice aimed at union avoidance (Morgan Lewis 2026). The firm is a global law firm with nearly 2,000 attorneys, representing the likes of Amazon, REI, and McDonald’s. In addition to being one of the largest union avoidance law firms, Morgan Lewis is also known as one of the most expensive firms, with partners making $1,100 to $1,900 an hour.5 Morgan Lewis is the lead law firm engaged in the legal challenge to have the NLRB declared unconstitutional, despite employing multiple former NLRB officials (Rhinehart and McNicholas 2024).

Jackson Lewis

Another law firm with a significant union avoidance practice is Jackson Lewis, a national labor and employment law firm with a nearly 70-year history in union avoidance (Jackson Lewis 2026). The firm has over 1,000 attorneys who can make upwards of $730 per hour.6 Jackson Lewis has an especially robust presence in the higher education and health care industries but also serves major companies in a wide range of other industries, such as ExxonMobil, Amazon, and Google. As with other union avoidance law firms, Jackson Lewis’s services go beyond legal representation—often providing employers a “full-service” campaign in which they train supervisors and design materials, including speeches, to dissuade workers from organizing a union (Correia 2019).

How union avoidance law firms frustrate worker organizing

The NLRB election process is designed to be straightforward. Workers seeking to form a union file an election petition with the NLRB with signatures of at least 30% of the proposed bargaining unit. If parties cannot agree on a bargaining unit and election logistics, the NLRB will hold a hearing on issues of disagreement and then issue a decision and direct that an election be held. Either party can file post-election objections over the conduct of the election and other issues. Once these issues are resolved, if a majority of workers casting valid ballots in the election vote for union representation, the NLRB will certify the union and direct the parties to begin bargaining. 

While the NLRB election process is supposed to be relatively simple, the strategy of union avoidance law firms follows a standard playbook—they use their overwhelming resources to exploit the NLRB’s administrative processes and sometimes create nearly endless delays. This includes challenging bargaining units and election results and filing endless appeals of adverse decisions (See Appendix Table 1 for examples). The result is to create an unnecessarily complicated and protracted legal process for workers. The NLRB’s own performance objectives aim to ensure that the median age of representation and unfair labor practice cases before the Board is 180 days or less (NLRB 2025). While the NLRB has achieved this goal for many years, the median age for cases is over 100 days and for some workers, it can take years. For example, the NLRB only recently ordered Amazon—an employer known for hiring Littler Mendelson, Morgan Lewis, and Ogletree Deakins—to bargain with workers who voted to unionize over four years ago (Bensinger 2026).

Impact of union avoidance

The roughly $1.7 billion U.S. employers spend each year on anti-union law firms and consultants has an undeniable impact on workers’ ability to organize and bargain collectively. It also contributes to the creation of an economy marked by inequality: It has been well documented that the decline in unionization has contributed to increased income inequality over the last several decades (Bivens et al. 2023). It is no coincidence that the overall decline in unionization follows decades of federal policy neglect that have weakened U.S. labor law. The loopholes in U.S. labor law, which union avoidance consultants and law firms exploit, routinely frustrate workers’ organizing and collective bargaining, enabling wealthy corporations to prosper at workers’ expense.

Why would these corporations want to frustrate workers’ organizing? Consider the benefits unions provide for workers and their communities. When workers join together in a union and engage in collective bargaining, they see higher wages and better benefits (McNicholas, Poydock, and Shierholz 2026). Further, in communities with higher union density rates, working families have higher incomes, greater access to health care, and few voter restrictions (McNicholas et al. 2025). It is clear that when unions are strong, workers have more power and their communities thrive.

Despite the erosion of U.S. labor law and the standard playbook of union avoidance, workers do win unions and union contracts. In 2025, 16.5 million workers in the United States were represented by a union—an increase of 463,000 from 2024 and the highest number of unionized workers in the U.S. in 16 years. The 2025 rise in union density coincides with a high public favorability toward unions, with nearly 70% of people in the U.S. viewing unions favorably (Brenan 2025). Further, research from the Pew Research Center finds that most people in the U.S. see the decline in union density as bad for the country (60%) and bad for working people (62%) (Van Green 2025).

To sustain the modest gains seen in union density in 2025, policymakers must act to restore workers’ rights to a union and collective bargaining. This is critical to the health of our economy and to ensuring that workers receive a fair share of the profits they help produce. Policymakers must pass the Richard L. Trumka Protecting the Right to Organize (PRO) Act, which would help restore private-sector workers’ ability to form unions and bargain collectively.7 The PRO Act addresses many of the major shortcomings with U.S. labor law by establishing civil penalties for employers who violate workers’ rights, creating an election process that limits employer interference, and establishing a bargaining process for reaching a first contract in a timely manner. The PRO Act also would shed light on the union avoidance industry by requiring prompt disclosure of union-busting activities and closing the “advice” loophole through which employers and consultants have evaded reporting (McNicholas, Poydock, and Rhinehart 2021).

Acknowledgments

The authors would like to thank Joe Fast and Hannah Faris for their research assistance for this report.

Appendix

Methodology for labor practice revenue estimate

Estimated revenue of company-level labor practices and of U.S. labor practices as a whole was calculated in the following manner. 

First, we divided the number of attorneys listed in a company’s labor practice in 2026 by the number of attorneys that Law.com reported that the firm had in 2024, the most recent year for which Law.com data are available. We treated that figure as an initial indicator of the fraction of the firm’s total revenue that came from its labor practice. We then multiplied that fraction by the company’s total 2024 revenue, as reported by Law.com. Next, we discounted the result by 50%, on the conservative assumption that half of the revenue generated by attorneys in a company’s labor practice was earned for work performed in other areas of law than labor law. (Many labor relations attorneys belong to multiple practices, often practicing both labor law and employment law at the same company.) This calculation yielded our estimate of the revenue generated by a firm’s labor practice in 2024, inclusive of both representation and consulting services. 

We performed this calculation for the six law firms with 1.5% market share or more in 2024, where market share is defined here as a firm’s share of all NLRB cases in 2024. We then estimated the total revenue generated by all U.S. labor practices by dividing the sum of the six firms’ estimated labor practice revenue by the sum of the six firms’ market share.

Market share data were obtained through a custom query of NLRB data compiled by Labor Data (https://labordata.bunkum.us/). The number of attorneys in a company’s labor practice was obtained by tallying the number of attorneys listed on each company’s labor relations practice page in March 2026 and weeding out any attorneys practicing outside the U.S. 

Note: The share of revenue generated by attorneys in a labor practice that comes exclusively from labor relations services (rather than other areas of practice, such as employment law) may vary significantly by each law firm. For example, our labor practice revenue estimate for Littler Mendelson is lower than our estimate for Ogletree, Deakins, Nash, Smoak & Stewart, even though the former has greater market share than the latter does. This may be because our 50% assumption is too low in Littler Mendelson’s case. Perhaps attorneys in Littler Mendelson’s labor practice specialize in labor relations more often and more intensively than attorneys in Ogletree’s labor practice, thereby leading to higher labor practice revenue for Littler than our estimate suggests.

Appendix Table 1

Notes

1. See Celine McNicholas, Margaret Poydock, Julia Wolfe, Ben Zipperer, Gordon Lafer, and Lola Loustaunau, Unlawful: U.S. Employers Are Charged with Violating Federal Law in 41.5% of All Union Election Campaigns, Economic Policy Institute, December 2019. To arrive at the $442 million figure, we take the $338 million dollar estimate from McNicholas et al. 2019, which covered the four-year period 2014–2017, and adjust it for inflation to 2025 dollars, according to Consumer Price Index (CPI-U) estimates using the annual average of the BLS CPI-U for 2014–2017 and BLS C-CPI-U for 2025. The estimated rates for consultants are from McNicholas et al. 2019.

2. Full methodology for this calculation can be found in the methodology section in the appendix.

3. We assume about half ($221 million) of the $442 million goes to attorney consultants for anti-union campaign services, which we also capture in the law firms’ labor practice revenue of $1.48 billion. To get to the $1.7 billion, we add the remaining of the $442 million ($221 million) on non-attorney consultants with the law firm revenue estimates ($1.48 billion).

4. Author’s analysis of public court documents and engagement letters sourced from LexisNexis and municipality websites.

5. Author’s analysis of public court documents and engagement letters sourced from LexisNexis and municipality websites.

6. Author’s analysis of public court documents and engagement letters sourced from LexisNexis and municipality websites.

7. Richard L. Trumka Protecting the Right to Organize Act of 2025, [H.R. 20], 119th Cong. (2025).

References

Bensinger, Greg. 2026. “Amazon Must Negotiate with Staten Island Warehouse Workers, NLRB Says.” Reuters, April 2, 2026.

Bivens, Josh, Celine McNicholas, Margaret Poydock, Jennifer Sherer, and Monica Leon. 2023. What to Know About This Summer’s Strike Activity. Economic Policy Institute, August 2023.

Brenan, Megan. 2025. “Labor Union Approval Relatively Steady at 68% in U.S.” Gallup, August 28, 2025.

Correia, David. 2019. “Union Busting on Campus: Jackson Lewis and Higher Education Anti-Unionism.” Verso Books, March 11, 2019.

Department of Labor (DOL). n.d. Persuader Agreements: Ensuring Transparency in Reporting for Employer and Labor Relations (fact sheet). n.d.

Department of Labor, Office of Labor–Management Standards (OLMS). 2026. “OPDR–LM-10 Employer” (web page). Accessed May 15, 2026.

Gregg, Forest. 2026. “Labor Data.” Accessed May 15, 2026.

Jackson Lewis. 2026. “About Us” (web page). Accessed May 8, 2026.

Kaufman, Bruce E., and Paula E. Stephan. 1995. “The Role of Management Attorneys in Union Organizing Campaigns.” Journal of Labor Research 16 (December 1995): 439–454. https://doi.org/10.1007/BF02685719.

LaborLab. 2025. One-Sided Transparency: The Growing Gap Between Required Annual Union Versus Employer and Persuader Filings and OLMS Compliance Efforts Continues to Widen. July 2025.

Law.com. 2026. “Fisher Phillips” (web page). Accessed May 15, 2026.

Law.com. 2026. “Jackson Lewis” (web page). Accessed May 15, 2026.

Law.com. 2026. “Littler” (web page). Accessed May 15, 2026.

Law.com. 2026. “Morgan Lewis” (web page). Accessed May 15, 2026.

Law.com. 2026. “Ogletree Deakins (web page). Accessed May 15, 2026.

Law.com. 2026. “Seyfarth” (web page). Accessed May 15, 2026.

Levine, Jonathan O., Tanja L. Thompson, Brooke E. Niedecken, and Brendan Fitzgerald. 2025. Littler’s 2025 Labor Survey Report. Littler Mendelson, September 30, 2025.

Littler Mendelson. 2026. “Our Firm History” (web page). Accessed May 8, 2026.

Logan, John. 2022. “Not Your Father’s Anti-Union Movement: Ten Key Facts About Starbucks’ Union Avoidance Law Firm, Littler Mendelson.” The Labor and Working-Class History Association (LAWCHA), March 7, 2022.

Logan, John. 2025. Corporate Union Busting in Plain Sight: How Amazon, Starbucks, and Trader Joe’s Crushed Dynamic Grassroots Worker Organizing Campaigns. Economic Policy Institute, January 2025.

McNicholas, Celine, and Margaret Poydock. 2019. How California’s AB5 Protects Workers from Misclassification (fact sheet). Economic Policy Institute, November 14, 2019.

McNicholas, Celine, Margaret Poydock, and Lynn Rhinehart. 2021. Why Workers Need the Protecting the Right to Organize Act (fact sheet). Economic Policy Institute, February 9, 2021.

McNicholas, Celine, Margaret Poydock, and Heidi Shierholz. 2026. Workers’ Resolve Drives Increase in Unionization in 2025. Economic Policy Institute, February 2026.

McNicholas, Celine, Margaret Poydock, Heidi Shierholz, and Hilary Wething. 2025. Unions Aren’t Just Good for Workers—They Also Benefit Communities and Democracy. Economic Policy Institute, August 2025. 

McNicholas, Celine, Margaret Poydock, Julia Wolfe, Ben Zipperer, Gordon Lafer, and Lola Loustaunau. 2019. Unlawful: U.S. Employers Are Charged with Violating Federal Law in 41.5% of All Union Election Campaigns. Economic Policy Institute, December 2019.

Morgan Lewis. 2026. “Our Firm” (web page). Accessed May 8, 2026.

National Labor Relations Board (NLRB). 2025. The National Labor Relations Board 2025 Performance and Accountability Report. Fiscal Year 2025. 

National Labor Relations Board (NLRB). 2026. “Case Search” (web page). Accessed May 8, 2026.

Pinto, Maya. 2022. How the ‘Coalition for Workforce Innovation’ Is Putting Workers’ Rights at Risk. Gig Workers Rising, National Employment Law Project, PowerSwitch Action, Service Employees International Union, and Temp Worker Justice, July 2022.

Poydock, Margaret. 2020. “The Passage of California’s Proposition 22 Would Give Digital Platform Companies a Free Pass to Misclassify Their Workers.” Working Economics Blog (Economic Policy Institute), October 22, 2020.

Rhinehart, Lynn, and Celine McNicholas. 2024. “What’s Behind the Corporate Effort to Kneecap the National Labor Relations Board?: SpaceX, Amazon, Trader Joe’s, and Starbucks Are Trying to Have the NLRB Declared Unconstitutional—After Collectively Being Charged with Hundreds of Violations of Workers’ Organizing Rights.” Working Economics Blog (Economic Policy Institute), March 7, 2024.

Shierholz, Heidi, Celine McNicholas, Margaret Poydock, and Jennifer Sherer. 2024. Workers Want Unions, but the Latest Data Point to Obstacles in Their Path: Private-Sector Unionization Rose by More Than a Quarter Million in 2023, While Unionization in State and Local Governments Fell. Economic Policy Institute, January 2024.

Van Green, Ted. 2025. “Majorities of Adults See Decline of Union Membership as Bad for the U.S. and Working People.” Pew Research Center, August 27, 2025. 

Since the second Trump administration swept into office in January 2025, it has undertaken a range of damaging and destabilizing actions that have weakened the economy, undermined workers, hurt businesses and consumers, and threatened core elements of our democracy. While Trump has targeted numerous Democratic-led states and cities, the Washington, D.C., region has faced acute and prolonged harms since day one. From the first set of executive actions signed on Inauguration Day, the Trump administration has attacked people and businesses in the capital region repeatedly and intensely. These initial actions announced the president’s dubious claims of authority to fire large segments of the federal workforce, eliminate long-standing federal agencies and programs, and begin a campaign of illegal and inhumane mass deportations.  

The Trump administration’s damaging actions have been enabled and abetted by Republican members of Congress. Their passage of H.R. 1, the bill that the White House has referred to as the “One Big Beautiful Bill Act” (OBBBA), amplifies the administration’s mass deportation agenda and shreds critical health care and food supports for lower-income families to finance tax cuts for the wealthy. This funding bill will only cause more pain in the years ahead for Washington, D.C.-area households and throughout the country.

Congress also passed a federal spending bill that constrained the District of Columbia’s ability to spend its own tax revenue (Koma 2025) and a resolution that may force the district to adopt local tax code changes that match the OBBBA, whether the city wants to or not—changes that will jeopardize hundreds of millions of dollars for city programs (D.C. Fiscal Policy Institute 2026).

In this report, we assess the early indicators of the damage of Trump’s actions and their effects on the Washington, D.C., regional economy, with particular attention to effects on workers and the labor market. We focus on this region due to its prominence as an early target of the Trump administration, in part due to its large federal workforce. Additionally, the district’s unique status as a non-state means that its leaders have far less legal authority to resist Trump’s interference than other target areas do.

Throughout this report, unless otherwise indicated, the data describe economic conditions for the Washington, D.C., metropolitan statistical area (MSA), which includes the District of Columbia, four nearby counties in Maryland, six cities and 11 counties in northern Virginia, and one county in West Virginia. We also refer to this region as the DMV (Washington, D.C.; Maryland; and Virginia). While we do not yet have the requisite data to fully and precisely document all the effects of the administration’s actions, we can see clear signals that the regional economy is already struggling, with more severe impacts likely to register in the data soon.

We then explore some of the factors that make other regions particularly vulnerable to significant economic harm from the Trump administration’s agenda. These include counties with large concentrations of federal workers, areas where federal transfer income (such as Medicaid and Social Security) makes up a significant portion of the region’s economic base, and places with significant immigrant populations. Though Trump has largely targeted prominent, Democratic-led areas, many of the regions most susceptible to the harmful economic consequences of the administration’s actions are rural counties, frequently represented in Congress by Republicans.

Trump’s actions in Washington, D.C., have led to reduced employment and rising unemployment

The clearest sign of the harm that the Trump administration’s actions have done to the Washington, D.C., regional economy is the substantial drop in the region’s employment rate. Based on EPI analysis of Current Population Survey data from the Bureau of Labor Statistics, from December 2024 to December 2025, the share of the regional working-age population with a job fell by 3.2 percentage points.1 As shown in Table 1, this compares with a decline of just 0.4 percentage points for the country over the same period. Among prime-age workers (those ages 25–54), the share employed in the DMV fell by 2.7 percentage points, compared with a decline of just 0.1 percentage points for the country overall.

This dramatic drop in regional employment is a direct result of the Trump administration’s relentless attacks on federal government workers, cuts to federal programs and agencies, and their cascading effects on connected regional industries. Prior to Trump’s taking office, federal employees made up 11.2% of the metro area’s total workforce (BLS-CES-SAE 2025).2 Between the end of 2024 and 2025, federal employment in the DMV region fell by more than 53,800 jobs (-14.2%) (BLS-CES-SAE 2026).3 These losses reverberated through the regional economy as affected households pulled back on spending, and many may have even opted to move, as data show the DMV region had the largest increase in home sale listings of any major metro last year (Brookings Institution 2026).

These significant cuts to federal employment, though highly damaging on their own, are only the first layer of the administration’s harm on the regional labor market. The DMV has a non-federal workforce of over three million people (BLS-CES-SAE 2026), many of whom work at firms that consult with, contract with, are funded by, or are otherwise connected to the government.4 The Trump administration has terminated thousands of grants to scientific research institutions (Kozlov, Tollefson, and Garisto 2026) and frozen or delayed funding for tens of thousands of nonprofit organizations, causing those targeted to limit operations or lay off staff (Tomasko et al. 2025). These cuts have also shrunk the funding pool for nonprofit groups, causing budget challenges even for those not previously receiving federal funding, as they must compete with groups previously funded through federal programs that are now scrambling to fill gaps with private support (Barrett 2025). The administration has also moved to cancel contracts with any company that maintains a commitment to DEI standards (Singh 2026). Although these cuts affect organizations everywhere, the DMV is disproportionately vulnerable to the economic harms of attacks on this sector as it has one of the highest concentrations of nonprofits in the country (Friesenhahn 2025). This is evident in the region’s slight dip (-0.3%) in private-sector employment from December 2024 to December 2025, a change from the consistent, albeit slowing, growth that had marked the years following the COVID-19 pandemic. At the national level, private-sector employment experienced slow but still positive change (0.5%) over the same period (BLS-CES-SAE 2026).5

The widespread impact of the administration’s actions can be seen in the breadth of employment declines across racial, ethnic, gender, and age groups in the region. As shown in Table 1, the employment rate fell by at least 2 percentage points for every demographic category of workers in the DMV. Notably, young workers under age 25 (-4.3 percentage points), workers age 55 and older (-3.3 percentage points), men (-3.5 percentage points), and Black workers (-5.9 percentage points) all experienced drops in their employment rates larger than the regional average. For older workers, the above-average decline likely reflects, at least in part, the firings and retirements of many federal employees, including many who had been near retirement age and opted into the so-called “Fork in the Road” deferred resignation program. For young workers, the administration’s funding and programmatic cuts directly reduced many traditional Beltway early-career opportunities (internships, fellowships), while weakness in the broader regional economy simultaneously forced area employers to pull back on entry-level positions.

Still, not all groups have been equally affected by Trump’s actions. As Table 1 shows, Black workers in the DMV region have suffered the largest employment declines, with the share employed falling by 5.9 percentage points in 2025. This is nearly triple the employment drop experienced by white workers (2.0 percentage points) in the region and, notably, more than seven times the employment drop of Black workers throughout the country overall (0.8 percentage points). Again, this is a direct consequence of the administration’s attacks on the federal workforce. Black workers have long tended to make up a larger share of the public sector than they do in the private sector—both in the DMV and across the country. This is because the public sector has historically been a pathway to the middle class for workers of color who face labor market discrimination in the private sector (Maye and Marvin 2025).

Trump’s massive cuts to federal employment have also rapidly undone what had been considerable progress in shrinking the regional Black-white employment gap. Figure A shows the employment rate of DMV workers, overall and by race/ethnicity, since the end of 2018. The rapid drop in the Black employment rate since the start of President Trump’s second term is striking, bringing the regional Black employment rate back down to its pandemic-era low. It is also notable that before that drop began, Black workers in the region were employed at essentially the same rate as their white counterparts—the only time in the last two decades when that occurred. These losses in employment will exacerbate existing racial and gender inequity across wages, poverty, and unemployment (Markoff and Zielinski 2026; Zielinski 2025; Busette and Elizondo 2022).

Recent increases in the DMV’s overall unemployment rate underscore the damage Trump is doing to the region. The non-seasonally adjusted unemployment rate jumped more than a full percentage point, from 3.1% in January 2025 to 4.4% in January 2026—more than four times the increase in the national figure. (Importantly, this increase understates the weakening of the area labor market, as the BLS estimates the DMV labor force shrank by 3% over the same period—meaning that many workers who would have been counted as unemployed simply left the area labor force.) For comparison, the national non-seasonally adjusted unemployment rate increased by less than half a percentage point, moving from 4.4% in January 2025 to 4.7% in January 2026 (BLS-LAUS 2026).

These numbers do not capture the full extent of the economic downturn in the DMV area, nor can they give us precise insight into where the pain has been most acutely felt. The administration’s violent deportation agenda, for example, will lead to a drop in immigrant and U.S.-born Hispanic workers’ employment, but resulting changes in Hispanic employment rates may be muted by the corresponding shrinking of the overall Hispanic population (Zipperer 2025). In other words, while the overall Hispanic population in the U.S. may fall dramatically in coming years, the ratio of remaining employed workers to remaining total population may stay somewhat consistent. This will mask the true scale of the economic and social harm being done to immigrant communities in the DMV and across the country.

It is also difficult to fully quantify how the deployment and continued presence of National Guard troops, violent immigration actions, and other authoritarian, fear-inducing tactics have impacted D.C.-area businesses, workers, and families, particularly in neighborhoods with predominately Black and Latino populations. Early data show regional declines in tourism, consumer spending, and foot traffic; harder to capture are the emotional and long-term economic consequences (Montgomery 2025; Hadden Loh and Haskins 2025; Sachs and Cocco 2025). Other recent analyses estimate similar economic harms in cities where targeted federal immigration enforcement actions have been aggressively deployed (Rosenthal and Sojourner 2026). A full accounting of the Trump administration’s harms on the Washington, D.C., region will take years to document.

Other localities should brace for similar consequences

Some of the Trump administration’s actions and their acute consequences are unique to the DMV, a function of the region’s high concentration of federal employees and government contractors, as well as the District of Columbia’s lack of statehood and full constitutional rights. However, the anti-government attacks the administration has unleashed on DMV-area households, workers, and businesses will have cascading consequences for communities throughout the country. The effects of the administration’s authoritarian attacks on the civil service, democratic institutions, and immigrants (Human Rights Watch 2026) that first registered across the DMV should be viewed as a preview of the consequences that will be felt in other regions. While no locality will be spared, regions particularly at risk include those with large shares of government workers (especially federal workers, but state and local government workers too), localities in which federal funding and social safety net programs make up a large portion of total area income, and those with large immigrant populations.

Trump’s attacks on the federal workforce will harm communities that rely on their employment

The day Trump returned to power in January 2025, he began attacking the federal workforce, first by moving to reclassify tens of thousands of federal employees to make it easier to fire and replace them with political loyalists (EPI 2026c), and then by stripping more than one million federal workers of their collective bargaining rights (EPI 2025a). The Trump White House subsequently worked feverishly to slash federal employment, attempting large and chaotic reductions in force, shuttering entire agencies, and coercing tens of thousands of staff to resign, among many other attacks (Poydock 2025). As of March 2026, the administration’s actions have reduced nationwide federal government employment by over 350,000 (11.7%) since January 2025 (Gould 2026).

Though federal workers make up a sizeable share of the DMV’s workforce, over 80% of federal workers live outside the region (Partnership for Public Service 2024). For instance, in Alaska, Hawaii, and New Mexico—states that are home to large swaths of federal and Native land, military bases, and federal research institutions—federal workers make up at least 4.5% of total employment (EPI 2025c). Within states, federal workers tend to be concentrated in specific localities. For instance, in Apache County, Arizona, which is largely made up of the Navajo Nation and the White Mountain Apache Reservations, lands that extend beyond county lines, the federal government employs 12% of the county’s workers, more than double the next most significant county for federal worker employment in the state (EPI 2025c). There are 22 U.S. counties, spread across the South, Midwest, and West Census regions, where federal workers comprise at least 10% of the county’s workforce (see Table 2).

In these counties and elsewhere, federal workers are the backbone of the regional economy, both through the essential services they provide and through their contributions to the local economy. Trump’s attacks simultaneously threaten federal workers’ livelihoods and the economic health of communities in which these workers’ spending on goods and services makes up a large share of economic activity in the region. In Apache County, Arizona, civilian government workers’ earnings comprise 11.7% of total economic activity in the county (see Table 3)—roughly the same as their share of overall county employment. However, in some counties, federal employees’ earnings are a disproportionate share of the regional economic base. For instance, in Leavenworth County, Kansas, where federal employees make up 10.0% of employment (Leavenworth has a large federal prison), federal civilian earnings comprise 22.1% of total income in the county.

The effects from lost federal jobs and income in these regions could be devastating. Some of these communities are places that have already faced historic disinvestment and in which there are few local employment opportunities that can match the quality of federal government jobs. These jobs are historically stable, good quality, union jobs that offer a pathway to the middle class, particularly for workers without a college education.6

Regions highly dependent on federal revenue will also suffer from a reduction in services and a loss of income

Beyond the harm to localities from reductions in the federal workforce, localities that are particularly reliant on federal government revenue and services will bear the consequences of Trump’s actions most acutely, though no locality will be spared from harm. For example, the Trump administration has announced or considered $23 billion in cuts to federal clean energy projects in nearly every state (CATF 2025) and $8 billion in cuts to colleges and universities that will impact every state’s economy (Bedekovics and Ragland 2025). Trump’s 2025 budget bill also made massive cuts to federal safety net programs that millions of low-income households rely on in order to finance tax cuts for the wealthiest households and corporations.

Funds from federal programs such as SNAP, Medicaid, and other social programs not only help struggling families make ends meet, they also comprise a significant share of a locality’s “economic base,” the amount of money circulating in that region, as shown by sociologist Robert Manduca in a recent working paper (2025). Indeed, an often-overlooked benefit of Medicaid coverage is its role as a source of income for low-income households (money they would have had to spend on medical care in the absence of Medicaid). For the bottom 20% of households in the U.S., Medicaid comprised 70% of their total money income, based on recent data from the Congressional Budget Office (Bivens, Wething, and Morrissey 2025). In fact, government transfers such as Social Security, Medicare, and Medicaid collectively made up 40% of the economic base of U.S. regions in 2022 (Manduca 2025). Substantial cuts to government social programs that support low-income households could reduce the economic base of these localities, at a scale equivalent, in many cases, to the loss of entire private industries in those areas.

Without deliberate intervention by state lawmakers to offset lost federal revenues, localities in every state face dire economic losses, but states particularly reliant on government transfers will suffer most. For instance, take Clay County, West Virginia, which is represented in Congress by Rep. Carol Miller (R-WV01), who voted in support of Trump’s budget bill (Miller 2025). Clay County’s poverty rate is more than double the national rate, and its per capita income is half the national amount (U.S. Census 2024a). Of the 10 U.S. counties that rely most on each of the largest federal social insurance programs (Medicare, Medicaid, SNAP, and Social Security) as a share of their economic base, Clay is the only county in the country to show up three times (see Table 4). Federal government transfers in the form of Medicare, SNAP, and Social Security payments comprise 57% of Clay County’s economic base, 20 times the share comprised by the earnings of every private industry in the county combined. Alaska, Arizona, Florida, Georgia, Kentucky, Tennessee, and West Virginia all have at least three counties that are ranked in the top 10 in the country for their reliance on a given social safety net program as a share of the county’s economic base (see Table 4).

Localities that have significant shares of federal workers and rely heavily on federal government transfers may face particularly significant consequences as a result of Trump’s attacks on the federal workforce and the Republican budget bill’s cuts to essential social safety net programs. For example, in Rio Arriba County, New Mexico, and Apache County, Arizona, federal government workers make up 16.1% and 12.0% of all workers in the county, respectively (EPI 2025b). At the same time, both counties are ranked in the top-10 counties most reliant on federal government transfers—Apache is #2 for Medicaid, and Rio Arriba is #10 for SNAP. In Apache County, federal government transfers account for three-quarters (76.9%) of the county’s economic base, and the earnings of federal government civilian workers account for 11.7%—the Navajo Nation Tribal Government is the county’s largest employer (NACOG 2023). Meanwhile, private earnings account for a mere 2.8% of the county’s economy. In Apache, Trump’s cuts to both the federal workforce and federal government programs mean that the federal government may be unable to fulfill its legal obligations to tribal communities (Brown 2025) that have faced decades of disinvestment and depressed economic outcomes resulting from historic land theft and forced assimilation. Apache County’s poverty rate of 31.2% (AZ Economics 2026) is nearly triple the national rate of 11.1% in 2023 (Shrider 2024).

Trump’s anti-immigrant crackdown and deportation agenda hurt localities with large immigrant populations

Trump has launched a campaign of terror against immigrant communities, communities of color, and those who stand with them. Last summer, Trump federalized local police and deployed thousands of federal troops to diverse cities with large immigrant populations (Kim 2025). Though Washington, D.C., may have experienced the most visible federal troop presence, a function of the district’s lack of statehood and the president’s unchecked authority to mobilize the National Guard there (Dallas 2025), Los Angeles was the first city Trump targeted after public opposition to aggressive immigration raids (Kim 2025). It was soon followed by Washington, D.C.; Memphis, Tennessee; Portland, Oregon; New Orleans, Louisiana; Minneapolis, Minnesota; and Portland, Maine.

These attacks are characteristic of an authoritarian playbook that includes forcing the leaders of diverse, opposition-led communities to bend to the strongman government’s will (McManus, Benson, and Herman 2024). Minneapolis, home to a large immigrant population, was subjected to an unprecedented immigration crackdown that drew widespread protests (Boone 2026). During “Operation Metro Surge,” as it was called, federal immigration enforcement officials made 4,000 arrests and killed two U.S. citizens. Though the true toll of this violent operation may never be fully quantified, initial economic data show clear cause for concern. A recent analysis estimated that Trump’s immigration crackdown has led to a 2.9% decline in consumer spending in Minnesota over a single month—the equivalent of the state’s economy losing $626 million (Rosenthal and Sojourner 2026). Relative to overall consumer spending, the food and accommodation sector (which employs a large share of immigrant workers) saw the most significant decline in January 2026—3.8% or a $46 million reduction in economic activity. Researchers also estimated that nearly 3% of workers in the Minneapolis-Saint Paul region were unable to work during the occupation, resulting in a loss of over $100 million in wages (Sojourner and Rosenthal 2026).

Trump’s deportation agenda will continue to destabilize local communities and result in job losses for immigrant and U.S.-born residents alike (Zipperer 2025). Though immigrants live in counties across the U.S., coastal urban areas tend to have the largest shares of foreign-born residents. Counties with the largest foreign-born populations include Miami-Dade, Florida; Queens, New York; Aleutians, Alaska; and Hudson, New Jersey (see Table 5). Counties with relatively large shares of immigrants may see particularly acute harms from aggressive immigration enforcement.

Communities face overlapping economic threats from attacks on federal workers, the social safety net, and immigrants, but state and local lawmakers can resist them.

The Trump administration’s attacks on the federal workforce, the social safety net, and immigrant communities are designed to exacerbate economic precarity in many communities that are already struggling (Bivens 2026). The implementation of Trump’s authoritarian agenda in the DMV region may be the first, clearest, and in some cases most direct manifestation of its harms, but other localities across the country—particularly those with large federal workforces, those that are heavily dependent on federal revenue and those with sizeable immigrant populations—are far from immune, and many will suffer as much, if not more, from this agenda.

While state and local leaders cannot stop federal attacks, they do have the power to resist Trump’s agenda by improving state labor standards (EPI 2026b), advancing protections for immigrant workers (Díaz and Whitaker 2026), investing in the public-sector workforce (Bivens and Shierholz 2026), and using progressive tax policies (Austin and Davis 2025) to stabilize funding for critical social programs and other investments that workers, families, and communities need.

Notes

1. Throughout this report, unless explicitly noted, the source for all employment rate data is the authors’ analysis of Current Population Survey data (EPI 2026a). We compare an average of calendar year 2025 with calendar year 2024 in order to have adequate sample sizes for the noted demographic groups.

2. Employment level by industry and sector data come from the authors’ analysis of the Bureau of Labor Statistics’ Current Employment Statistics (CES) State and Metro Area (SAE) data.

3. These numbers are calculated using monthly totals rather than annual averages. A quarterly comparison of 2025Q4 to 2024Q4 finds roughly the same results—employment fell by 52,600 jobs (13.9%). The quarterly analysis omits October in both years to maintain an apples-to-apples comparison, accounting for missing data due to the government shutdown that began in October 2025 and the subsequent lapse in Bureau of Labor Statistics funding.

4. The non-federal workforce includes private sector workers as well as state and local government employees.

5. These numbers are calculated using monthly totals rather than annual averages. Quarterly comparisons of 2025 Q4 to 2024 Q4 produce similar results—private sector employment fell by 0.1% in the DMV and grew by 0.7% nationally. The quarterly analysis follows the methodology outlined in note 2.

6. On average, federal workers with advanced degrees typically earn less in wages and total compensation than their private-sector counterparts. Federal workers without an advanced degree typically earn more than their private-sector counterparts and have access to retirement benefits that have become less common in the private sector (CBO 2024).

References

Austin, Sarah, and Carl Davis. 2025. The Wealth Proceeds Tax: A Simple Way for States to Tax the Wealthy. Institute on Taxation and Economic Policy, October 2025.

AZ Economics. 2026 “Apache County, Arizona.” U.S. Economic Research. Accessed April 2026.

Barrett, William P. 2025. “America’s Top 100 Charities: A Year of Pain After Trump Cuts.” Forbes, December 12, 2025.

Bedekovics, Gréta, and Will Ragland. 2025. Mapping Federal Funding Cuts to U.S. Colleges and Universities. Center for American Progress, July 2025.

Bivens, Josh. 2026. The Trump Administration’s Macroeconomic Agenda Harms Affordability and Raises Inequality. Economic Policy Institute, February 2026.

Bivens, Josh, and Heidi Shierholz. 2026. “You Can’t Starve the Public Sector to Excellence.” Working Economics Blog (Economic Policy Institute), February 27, 2026.

Bivens, Josh, Hilary Wething, and Monique Morrissey. 2025. Cutting Medicaid to Pay for Low Taxes on the Rich Is a Terrible Trade for American Families. Economic Policy Institute, February 2025.

Boone, Rebecca. 2026. “A Timeline of Trump’s Immigration Crackdown in Minnesota.” PBS Newshour, February 13, 2026.

Brookings Institution. 2026. “Active Residential For-Sale Listings,” DMV Monitor. Last updated February 18, 2026.

Brown, Alex. 2025. “For Indian Country, Federal Cuts Decimate Core Tribal Programs.” Stateline, March 4, 2025.

Bureau of Labor Statistics, Current Employment Statistics State and Metro Area (BLS-CES-SAE). Various years. Public data series accessed through the CES State and Metro Area Databases and through series reports. Accessed April 2026.

Bureau of Labor Statistics, Local Area Unemployment Statistics (BLS-LAUS). Various years. Data from the LAUS are available through the LAUS database and through series reports. Accessed April 2026.

Busette, Camille, and Samantha Elizondo. 2022. “Economic Disparities in the Washington, D.C. Metro Region Provide Opportunities for Policy Action.” Commentary, Brookings Institution, April 27, 2022.

Clean Air Task Force (CATF). 2025. “The High Cost of Retreat: Impacts of Department of Energy Project Cuts.” Clean Air Task Force, November 21, 2025.

Congressional Budget Office (CBO). 2024. Comparing the Compensation of Federal and Private-Sector Employees in 2022. Congressional Budget Office, April 2024.

Dallas, Kelsey. 2025. “The President’s Power to Deploy Troops Domestically: An Explainer.” SCOTUSblog, October 28, 2025.

D.C. Fiscal Policy Institute. 2026. “Congressional Interference Will Cost D.C. Nearly $700 Million in Local Revenue and Jeopardize Efforts to Reduce Child Poverty.” D.C. Fiscal Policy Institute, February 4, 2026.

Díaz, Marisa, and Mimi Whitaker. 2026. How States and Localities Can Strengthen Workplace Protections for Immigrant Workers. National Employment Law Project, January 2026.

Economic Policy Institute (EPI). 2025a. “Executive Order on ‘Exclusions from Federal Labor-Management Relations Programs.’” Federal Policy Watch (Economic Policy Institute), December 17, 2025.

Economic Policy Institute (EPI). 2025b. How Many Federal Employees Live in Your State? Economic Policy Institute.

Economic Policy Institute (EPI). 2025c. “New Resource Calculates How Many Federal Workers Live in Every State, County, and Congressional District” Economic Policy Institute (press release). March 3, 2025.

Economic Policy Institute (EPI). 2026a. Current Population Survey Extracts, Version 2026.3.11, https://microdata.epi.org.

Economic Policy Institute (EPI). 2026b. Holding the Line: State Solutions to the U.S. Worker Rights Crisis. Economic Policy Institute.

Economic Policy Institute (EPI). 2026c. “OPM Finalizes Regulation Enabling Firing Federal Employees for Political Reasons.” Federal Policy Watch (Economic Policy Institute), March 4, 2026.

Friesenhahn, Erik. 2025. “Nonprofit Organizations: State and Regional Employment Trends.” Monthly Labor Review (U.S. Bureau of Labor Statistics), March 2025. https://doi.org/10.21916/mlr.2025.6.

Gould, Elise. 2026. “Attacks on the federal workforce continue (down 18k jobs in March).” Bluesky, @elisegould.bluesky.social, April 3, 2026, 9:01 a.m.

Hadden Loh, Tracy, and Glencora Haskins. 2025. Consumer Spending and Visitor Demand in the Washington, D.C. Region Are Dropping. Brookings Institution, December 2025.

Human Rights Watch. 2026. “Sliding Towards Authoritarianism?” January 2026.

Kim, Juliana. 2025. “Trump Says National Guard Will Soon Go to New Orleans. Here’s the Latest.” NPR, December 3, 2025.

Koma, Alex. 2025. “Here’s How D.C. Solved the Billion-Dollar Budget Problem Congress Created.” WAMU, October 22, 2025.

Kozlov, Max, Jeff Tollefson, and Dan Garisto. 2026. “U.S. Science After a Year of Trump.” Nature 649 (January): 812–815.

Lynch, Teresa M., and Robert Manduca. 2024. “Beyond Local and Traded: Evidence for a Third Industry Market Area Type and Implications for Regional Economic Development.” Economic Development Quarterly 38, no. 3: 183–194, July 2024. 

Manduca, Robert. 2025. Financial and Transfer Income as Components of the Regional Economic Base. Washington Center for Equitable Growth, June 2025.

Markoff, Shira, and Connor Zielinski. 2026. Chronic Racial Inequality Holds Back Workers and Equitable Economic Growth. D.C. Fiscal Policy Institute, March 2026.

Maye, Adewale A., and Stevie Marvin. 2025. “Trump Attacks on Federal Agencies Have Steep Implications for Black Workers.” Working Economics Blog (Economic Policy Institute), April 10, 2025.

McManus, Allison, Robert Benson, and Dan Herman. 2024 “The Dangers of Project 2025: Global Lessons in Authoritarianism.” Center for American Progress, October 2024.

Miller, Carol. 2025. “Miller Votes to Send the One, Big, Beautiful Bill to President Trump’s Desk” (press release). Office of Congresswoman Carol Miller, West Virginia’s First District, July 3, 2025.

Montgomery, Mimi. 2025. “Trump Crackdown Is Affecting D.C.’s Image and Tourism Numbers.” Axios, August 29, 2025.

Northern Arizona Council of Governments (NACOG). 2023. “Business, Jobs, and Industry Highlights for Apache County.” Northern Arizona Council of Governments, November 20, 2023.

Partnership for Public Service. 2024. Beyond the Capital: The Federal Workforce Outside the D.C. Area. March 2024.

Poydock, Margaret. 2025. “How Trump Has Dismantled the Federal Workforce in His First 100 Days.” Working Economics Blog (Economic Policy Institute), May 23, 2025.

Rosenthal, Aaron, and Aaron Sojourner. 2026. The Economic Impact of Operation Metro Surge in January 2026: A Synthetic Difference-in-Differences Analysis. North Star Policy Action, February 2026.

Sachs, Andrea, and Federica Cocco. 2025. “D.C. Tourism Was Already Struggling. Then the National Guard Arrived.” Washington Post, August 29, 2025.

Shrider, Emily A. 2024. Poverty in the United States: 2023. United States Census Bureau, Report Number P60-283, September 2024.

Singh, Kanishka. 2026. “Trump Signs Executive Order Asking Federal Contractors to Eliminate DEI.” Reuters, March 26, 2026.

Sojourner, Aaron, and Aaron Rosenthal. 2026. Impact of DHS Agent Surge on Minneapolis-Saint Paul Metro Area Labor Outcomes. North Star Policy Action, February 2026.

Tomasko, Laura, Hannah Martin, Katie Fallon, Mirae Kim, Lewis Faulk, and Elizabeth T. Boris. 2025. How Government Funding Disruptions Affected Nonprofits in Early 2025: Nationally Representative Findings from the Nonprofit Trends and Impacts Study. Urban Institute, October 2025.

U.S. Census Bureau. 2024a. “American Community Survey 5-Year Estimates: Retrieved from Census Reporter Profile Page for Clay County, WV.” Accessed April 14, 2026.

U.S. Census Bureau. 2024b. “U.S. Foreign-Born Population: 2018–2022 American Community Survey, 5 Year-Estimates (Table B05006).” Accessed April 14, 2026.

Zielinski, Connor. 2025. “Inequality Remained Extreme in 2024 as D.C. Backslid on Poverty.” DCFPI Blog (D.C. Fiscal Policy Institute), September 15, 2025.

Zipperer, Ben. 2025. Trump’s Deportation Agenda Will Destroy Millions of Jobs: Both Immigrants and U.S.-Born Workers Would Suffer Lob losses, Particularly in Construction and Child Care. Economic Policy Institute, July 2025.

Key findings:

• This analysis estimates the cost to workers of being misclassified as an independent contractor for 11 commonly misclassified jobs. We find, for example, that a typical construction worker misclassified as an independent contractor would lose as much as $20,399 in annual income and job benefits compared with what they would have earned as an employee. A typical truck driver, if misclassified as an independent contractor, would lose as much as $23,266 annually.
• Lost compensation due to misclassification varies by state. Estimated annual per-worker costs in lost compensation are as high as $31,326 for truck drivers in New Jersey. On average, misclassified workers stand to lose more in higher-wage states and occupations because W-2 earnings are greater, but losses are substantial in all states.
• Misclassification can happen in any occupation. However, because of occupational segregation and other labor market disparities, people of color, women, and immigrants—and people at the intersections of these categories—are more likely to be in occupations where misclassification is common, like most of the 11 occupations analyzed in this report.
• Misclassification shifts the full burden of social insurance—like Social Security and Medicare—to workers, while also reducing the total revenues received by the social insurance system. We estimate that social insurance systems can lose up to roughly 30% of per-worker revenue when workers are misclassified as independent contractors.
• In 2025 and 2026, lawmakers in at least 12 states proposed or passed legislation to address worker misclassification. Most recent state efforts have focused on increasing accountability of employers that misclassify workers, bolstering remedies for workers subject to illegal misclassification, and strengthening enforcement capacity.

Read fact sheets by state here.

What is misclassification?

The type of misclassification addressed in this report occurs when an employer wrongly classifies an employee as an independent contractor. The problem of workers being misclassified as independent contractors is pervasive and widespread. An analysis from the National Employment Law Project focusing on state-level reports on misclassification estimated that as many as 10–30% of employers misclassify their workers.1

The way a worker is classified has serious implications for their labor rights and economic security. Federal, state, and local labor laws provide extensive protections for employees that are not available to independent contractors. For example:

• When a worker is misclassified as an independent contractor, they are stripped of minimum wage and overtime protections.
• These misclassified workers are no longer eligible for unemployment insurance or workers’ compensation.
• They do not qualify for paid sick or family leave, even in places where those benefits are statutorily prescribed for employees, and they are extremely unlikely to receive employer-provided health insurance or retirement benefits.
• They are no longer protected by the National Labor Relations Act, which ensures workers’ rights to form unions and bargain collectively to improve their working conditions.
• In most states, misclassified workers are not covered by anti-discrimination and sexual harassment protections.2
• Workers misclassified as independent contractors also must assume the full financial cost of Social Security and Medicare contributions, rather than split it evenly with their employer.

Losing these benefits and protections leaves independent contractors in a far more vulnerable position than employees when it comes to their basic rights on the job. Employers have argued that many workers prefer being classified as independent contractors because they value “flexibility” over fundamental labor rights. But this so-called flexibility is often illusory, given the degree of control many employers retain over workers and their schedules.3

Misclassification remains pervasive in part because its costs to individual workers can be hard to quantify and thus easy to obscure. Prior research has estimated the costs of misclassification by quantifying the number of workers misclassified; the amount of wage theft experienced by misclassified workers; and the loss in federal and state tax revenues resulting from employers not paying payroll taxes and workers’ compensation insurance.4 This report presents estimates of two types of costs caused by misclassification for 11 commonly misclassified occupations:

1. What workers lose when they are misclassified—that is, the difference in the value of a job to a worker if the worker is classified as an independent contractor rather than as an employee; and
2. What social insurance funds lose when workers are misclassified—that is, the difference in payments to social insurance funds if a worker is classified as an independent contractor rather than as an employee.

Misclassification can happen to any worker. However, because of occupational segregation and other labor market disparities, people of color, women, and immigrants—and people at the intersections of these categories—are more likely to be in occupations where misclassification is common, such as most of the 11 occupations investigated in this analysis (see Appendix Table 1). Any policy conversations about worker classification status should center these types of occupations, as workers classified as independent contractors in these occupations are often not genuine independent contractors with full control over their work conditions and are more likely to be exposed to the harms of reduced earnings and loss of labor protections.

The cost to workers

Table 1 presents estimates of the cost to workers of being misclassified as an independent contractor for 11 occupations that are highly prone to misclassification.5

For example, when classified as an employee, the typical construction worker had annual earnings of $58,360 in 2025 (column 1, top row of Table 1). This includes the average value of supplemental pay—overtime, shift differentials, and paid time off. When we also include the value of health insurance and retirement plans and subtract the worker contribution to Social Security and Medicare, the full value of the job to the worker when classified as an employee rises to $62,567 (column 2, top row). But when the typical construction worker is misclassified as an independent contractor—and therefore loses access to legal protections, supplemental pay, and employer contributions to Social Security and Medicare—we estimate that the value of that job falls to between $42,169 and $49,382 (columns 3 and 4, top row). That estimated range depends on the assumptions we make about the degree to which the employer increases the base pay of independent contractors, if at all, to offset the fact that the worker does not have access to many rights and benefits.

The estimates in columns 3 and 4 are based on two scenarios, described below, that together define the endpoints of this range and establish plausible estimates of the cost of misclassification to workers. It should be noted, however, that this range is conservative because it does not account for the loss independent contractors face of many rights associated with being an employee—for example, it excludes the impact of the loss of rights guaranteed by the National Labor Relations Act, such as the right to union representation.

In both scenarios, we assume that the worker—if classified as an independent contractor—receives the full regular pay of a W-2 employee but does not receive supplemental pay (like overtime or paid time off), must pay the full combined employer and employee contribution to Social Security and Medicare (15.3% of earnings), and must cover paperwork costs like invoicing, bookkeeping, and small business tax filings.

Scenario 1: No compensation for health and retirement benefits

In the first scenario, we assume employers do not compensate independent contractors for the value of health insurance and retirement benefits. This generates our low estimate of the value to workers of independent contractor jobs—along with the high estimate of the cost to workers of independent contractor jobs—in Table 1.

Under this assumption, we conservatively estimate the net value of a construction job done as an independent contractor falls to $42,169 per year. This is $20,399—or 32.6%—less than if that worker were a W-2 employee ($62,567 in column 2). Notably, misclassified truck drivers also see a massive decline in net value of the job. As a W-2 employee, a truck driving job is worth $64,474, while an independent contractor receiving the same wage, but no supplemental pay or benefits, earns $41,208, which is $23,266 less.

Table 1

Scenario 2: Full compensation for health and retirement benefits

In the second scenario, we assume employers fully compensate independent contractors for the value of health insurance and retirement benefits. This generates our high estimate of the value to workers of independent contractor jobs, along with the low estimate of the cost to workers of independent contractor jobs, in Table 1.

Access to these benefits increases the annual earnings of an independent contractor, but not to the level of a W-2 employee. For a construction worker, the net value of the job as an independent contractor is only $49,382, or more than $13,000 below the net value of the same job done as an employee. For a truck driver, the switch to independent contractor status would cost $13,760.

Table 1 also shows estimates for nine other occupations with lower annual earnings than construction workers and truck drivers. As W-2 employees, these workers had median annual earnings between $33,690 and $44,140. Under the estimates in scenario 1 (no compensation for health and retirement benefits), being misclassified as an independent contractor would cost between $8,858 (retail sales workers) and $17,939 (light truck delivery drivers). Under scenario 2 (full compensation for health and retirement benefits), the costs would be $6,294 and $10,634, respectively.

Mapping cost to workers by state

See fact sheets by state.

Because worker pay varies meaningfully across states, we also estimate the cost of misclassification to workers by state. We follow the same methodology we used for our national-level estimates but incorporate state-level data where available.

Figure A maps the financial penalty that workers face when wrongfully misclassified as independent contractors. This figure uses estimates from scenario 1, where we assume employers do not compensate independent contractors for health and retirement benefits. (See Appendix Table 2 and Appendix Table 3 for a detailed breakdown of costs to workers by occupation and state for independent contractors with and without compensation for health and retirement benefits.)

The cost of misclassification ranges from $5,774 annually for housekeeping cleaners in Mississippi to $31,326 for truck drivers in New Jersey. This range of estimates reflects the fact that misclassified workers stand to lose more in higher-wage states and occupations where the W-2 earnings of employees are greater. Even so, losses are substantial across all states.    

Figure A

The cost to social insurance

Social insurance consists of government programs funded by dedicated payroll taxes paid by workers and/or employers, which entitle workers to benefits when they experience qualifying events—such as reaching retirement age (Social Security and Medicare), being laid off (unemployment insurance), or being injured on the job (workers’ compensation). When a worker is misclassified as an independent contractor, the entire cost of Social Security and Medicare contributions is shifted to the worker.6 Misclassification also renders workers ineligible for participation in state and federal unemployment insurance and workers’ compensation programs.

Misclassification does not just shift the full burden of social insurance to workers—it also reduces the total revenues received by the social insurance system. This occurs for several reasons. First, unemployment insurance and workers’ compensation systems receive no contributions from independent contractors—though it is worth noting that this in no way ensures that these workers will not need to rely on public safety net programs if they are laid off or injured on the job. Second, independent contractors in the occupations we analyze may earn less than they would as employees, because, for example, they are no longer legally entitled to the minimum wage, overtime protections, and are highly unlikely to receive any paid time off. Because Social Security contributions are a percentage of earnings (and the taxable maximum is not binding in these occupations), lower pay translates directly into lower contributions.

Table 2 illustrates the impact of worker misclassification on payments to social insurance funds in the 11 occupations analyzed above. For example, the typical construction worker classified as an employee and their employer jointly contributed a total of $10,663 toward these social insurance programs in 2025. When misclassified as an independent contractor, total payments toward social insurance programs fall to between $7,617 and $8,920 per construction worker (using the same two scenarios described above). This represents a decline in social insurance revenues between $1,743 and $3,046 per construction worker per year.

Under our scenario 1 assumptions (where employers do not increase pay to compensate independent contractors for their lack of employer-provided health and retirement benefits), total contributions to social insurance fall from between 21% ($1,220) for manicurists/pedicurists and 29% ($3,046) for construction workers. Under our scenario 2 assumptions (where employers increase pay enough to fully compensate independent contractors for health and retirement benefits), payments to social insurance drop by somewhat less—10% ($601) for manicurists/pedicurists and 16% ($1,743) for construction workers—due to the higher base pay.

Table 2

Mapping the cost to social insurance funds by state

Expanding this methodology to states reveals how misclassification deprives social insurance funds of crucial dollars needed to maintain crucial programs, such as unemployment insurance and workers’ compensation. Figure B maps the difference in contributions to social insurance funds between W-2 employees and independent contractors under scenario 1, where we assume employers do not compensate independent contractors for health and retirement benefits. The median cost to social insurance funds ranges from $654 per person annually for housekeeping cleaners in Mississippi to $4,008 for construction workers in Hawaii. See Appendix Table 4 and Appendix Table 5 for a detailed breakdown of costs to social insurance funds by occupation and state for the full range of estimates for independent contractors with and without compensation for health and retirement benefits.

Figure B

Recent state and federal policy changes

Strong statutory language, like the ABC test, provides the legal foundation for identifying misclassification 

Given the high stakes of misclassification for workers’ access to fundamental rights and protections, embedding strong legal definitions in state and federal law is fundamental to ensuring that employees are not improperly classified as independent contractors.  

The ABC test is the strongest, most protective test for determining employee status. The test establishes a presumption that an individual performing services for an employer is an employee—not an independent contractor—unless the employer can establish three factors: 

1. The work is done without the direction and control of the employer; 
2. The work is performed outside the usual course of the employer’s business; and 
3. The work is done by someone who has their own, independent business or trade doing that kind of work. 

The ABC test differs from other “tests” of employee status such as the National Labor Relations Act (NLRA) “common law” test and the Fair Labor Standards Act (FLSA) “economic realities” test because the ABC test shifts the presumption to one of employee status, places the burden on the employer to prove independent contractor status, and provides a clear, narrow definition of independent contractor status. In turn, this reduces the likelihood that workers are misclassified and lose protections they should be guaranteed under the law as employees.  

The strength of frameworks used to determine employee status is highly varied across states. At least 18 states and the District of Columbia currently use the ABC test for determining employee status for certain workplace laws. Some states have taken action recently. In addition to pursuing strong, innovative enforcement strategies to combat misclassification, New Jersey’s labor department proposed a new administrative rule in 2025 to codify into state law the agency’s existing ABC test for preventing independent contractor misclassification (the rule has since been paused). This year, a West Virginia bill proposed establishing a new ABC test into state law. 

However, the number of states with ABC tests has decreased in the past decade, with some states weakening or repealing their statutory definitions as a result of lobbying efforts by digital platform companies (e.g. Uber) and other industries whose business models depend on designating large numbers of workers as “independent contractors.” While most states with ABC tests apply them to determine workers’ eligibility for unemployment insurance benefits, only a few states apply them to wage and hour standards like the minimum wage and overtime compensation, and some states have them in place only for workers in certain occupations.

Strong enforcement mechanisms allow lawmakers to protect workers and hold employers accountable 

While strong legal tests provide a basis for determining whether an employee has been misclassified as an independent contractor, they must be paired with strong enforcement mechanisms to uphold workers’ rights and deter employers from violating the law. Many states are taking steps to strengthen enforcement. In 2025 and 2026, lawmakers in at least 12 states proposed or passed legislation to address worker misclassification. For example, Delaware passed a law in 2025 to hold contractors liable when their subcontractors misclassify workers, Colorado enacted a law to penalize employers that willfully misclassify workers, and Minnesota enacted a law requiring the state labor agency to study the impact of misclassification on workers and state revenue. In 2026, lawmakers in at least eight additional states7 have proposed legislation to address worker misclassification, and two states (Virginia and Washington) have sent approved legislation to the governor. 

At the same time, attacks also continued in 2026. Bills in several states proposed weakening existing ABC tests and excluding certain occupations from being subject to the tests. Other bills proposed establishing corporate-backed sham “portable benefits” schemes that promise some limited (but often inaccessible) benefits for gig workers while locking them out of full coverage under standard state programs and protections by treating them as “independent contractors.”8

Strong enforcement is important, and whether a given situation will be subject to enforcement depends on the strength of a state’s statutory definitions of employment. Both strong legal tests and enforcement are critical to protecting workers from being misclassified.  

Policy recommendations 

Policymakers at the federal, state, and local levels should act to curb misclassification and enforce the rights to which all workers should be entitled. Unfortunately, federal protections from misclassification are limited, and recent progress to address misclassification has been undermined. For example, the ABC test is not currently part of any federal workplace laws. In 2024, the Department of Labor finalized a rule to combat misclassification by adopting a six-factor test to determine worker classification under wage and hour laws. However, the Trump administration stopped enforcing the 2024 rule and recently proposed replacing it with a weaker standard. Given federal retrenchment, state lawmakers have an opportunity and responsibility to strengthen existing state standards.

State and federal policymakers should:

• Establish or expand the use of a strong, uniform protective legal test for determining employee status, such as the ABC test;9
• Strengthen enforcement and increase penalties to deter the misclassification of workers as independent contractors; 
• Pass the Protecting the Right to Organize (PRO) Act,10 which would make it harder for employers to misclassify employees in order to prevent them from forming a union and bargaining collectively;
• Strengthen enforcement of wage theft and misclassification, and fully fund the federal and state agencies responsible for enforcing workers’ wage and hour rights;
• Require employers to provide workers with transparent statements of their employment status and a justification for their classification;
• Extend basic wage and hour protections, workplace health and safety protections, paid sick leave, and other protections to independent contractors to discourage misclassification as a “race to the bottom” for workers’ rights; and
• Improve coordination among state and federal tax and labor enforcement agencies by establishing interagency misclassification task forces with dedicated resources and staff and strong co-enforcement partnerships capable of effectively cracking down on misclassification in targeted industries.11

Methodology

Since there are no comprehensive private or public data sources on workers misclassified as independent contractors, we apply a methodology that makes use of available employee total compensation and earnings data to estimate the costs of misclassification. For each of the 11 occupations included in our analysis, we begin with the average compensation profile drawn from the Bureau of Labor Statistics’ (BLS) Employer Costs for Employee Compensation (ECEC) database. This profile provides a breakdown of average employer costs for employee compensation in the private sector. As an example, Table 3 presents the average hourly compensation profile for construction workers broken into its component parts. We take the ratio of the individual compensation components to regular pay—which includes wages, salaries, supplemental pay, and paid leave—to estimate the ratio of compensation to pay.

Table 3

Next, we apply the ratios of total compensation to pay to median annual earnings obtained from the BLS’ Occupational Employment and Wage Statistics data (OEWS). This gives us estimates of the regular pay, supplemental pay, paid leave, and insurance and retirement benefits for a W-2 employee. We then calculate the net value to the worker as an employee based on the sum of all pay, paid leave, insurance and benefits, minus Social Security and Medicare taxes.

From here, we model two possible ways that the value of a job to a worker can change if the employee is misclassified as an independent contractor. In both scenarios, we assume that the worker, if classified as an independent contractor, receives the full regular pay of a W-2 employee, does not receive supplemental pay (like overtime or paid time off), must pay the full employer and employee contribution to Social Security and Medicare (15.3% of earnings), and must cover paperwork costs like invoicing, bookkeeping, and small business tax filings. We calculate paperwork costs by updating the methodology used in 2020 comments on independent contractor status under the Fair Labor Standards Act.12 The difference in the two scenarios is in our assumptions about the degree to which the employer increases the base pay of independent contractors, if at all, to offset the fact that the worker does not have access to many rights and benefits.

1. In the first scenario, we assume employers do not compensate independent contractors for health and retirement benefits. This generates our low estimate of the value to workers of independent contractor jobs—along with the high estimate of the cost to workers of independent contractor jobs.
2. In the second scenario, we assume that employers fully compensate independent contractors for the cost of health insurance and retirement benefits that employers would have paid to the same worker working as an employee. This generates our high estimate of the value to workers of independent contractor jobs, along with the low estimate of the cost to workers of independent contractor jobs.

State estimates

Estimates of the cost of misclassification by state and occupational group are produced similarly to national estimates, using compensation data from the BLS’ ECEC data and state earnings data from the BLS’ OEWS data.

Compensation profiles can be obtained from the ECEC that detail the total hourly cost of compensating a worker, including the share of total compensation derived from regular pay, insurance and retirement benefits, and legally required benefits. A ratio of compensation to pay can be calculated from these profiles by dividing each compensation component by regular pay, as in Table 3.

The ECEC does not have compensation profiles for occupational groups at the state level. They do, however, have compensation profiles for all workers, for all workers by occupation, and for all workers by census division, which we combine to estimate compensation profiles for occupational groups at the census division level. Table 4 illustrates this procedure using construction workers in New England as an example. First, we create compensation to pay ratios for private-sector workers at the national level, for each occupational group (e.g. construction workers), and for each census division (e.g. New England). Next, we divide the occupation-specific ratio by the national ratio and multiply this quotient by the census division ratio. This yields a unique compensation to pay ratio for New England construction workers, which is then mapped onto all states within this respective census division. This procedure is followed for all occupational groups and census divisions to produce compensation to pay ratios for all 50 states and the District of Columbia.

Table 4

We apply the state- and occupation-specific compensation to pay ratios to state and occupation median annual earnings obtained from BLS’ OEWS data. This gives us estimates of total compensation that comes from regular pay, supplemental pay, paid leave, and insurance and retirement benefits for W-2 employees across all states and occupations.

As in the national estimates, the cost of misclassification to both workers and to social insurance funds is calculated by comparing the net value of a job for a W-2 employee with that of an independent contractor under two scenarios: with and without compensation for health and retirement benefits. Appendix Tables 2–5 provide detailed breakdowns of these costs in both net dollar amounts and percentage differences relative to W-2 employees.

Notes

1. National Employment Law Project, Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries, October 2020.

2. Meghan Racklin, Molly Weston Williamson, and Dina Bakst, “State Leadership on Anti-Discrimination Protections for Independent Contractors,” Future of Work Blog (A Better Balance), April 22, 2020.

3. Margaret Poydock, Lynn Rhinehart, and Celine McNicholas, Flexible Work: What Workers, Especially Low-Wage Workers, Really Want And How Best To Provide It, Economic Policy Institute, July 2024.

4. Françoise Carré, (In)dependent Contractor Misclassification, Economic Policy Institute, June 2015; Government Accountability Office, Employee Misclassification: Improved Coordination, Outreach, and Targeting Could Better Ensure Detection and Prevention, GAO-09–717, August 2009.

5. For discussions of occupations where workers are particularly vulnerable to misclassification as independent contractors, see Annette Bernhardt, Sarah Thomason, Chris Campos, Allen Prohofsky, Aparna Ramesh, and Jesse Rothstein, Independent Contracting in California: An Analysis of Trends and Characteristics Using Tax Data, UC Berkeley Labor Center and California Policy Lab, March 2022; Françoise Carré, (In)dependent Contractor Misclassification, Economic Policy Institute, June 2015; National Employment Law Project, Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries, October 2020; and Lisa Xu and Mark Erlich, Economic Consequences of Misclassification in the State of Washington, Harvard Labor and Worklife Program, December 2019.

6. When workers are employees, they pay the employee share of Social Security and Medicare (7.65% of W-2 earnings). Their employers also make identical payments to Social Security and Medicare.

7. Arizona HB 2463, Illinois HB 2794, Iowa HB 2385, Kentucky HB 449, Virginia SB 644, Washington SB 6302, West Virginia HB 4571, and Wisconsin AB 1160.

8. See, for example, New Jersey A 1184, California SB 527, and Georgia HB 987.

9. Lynne Rhinehart et al. Misclassification, the ABC Test, and Employee Status, Economic Policy Institute, June 2021.

10. Celine McNicholas, Margaret Poydock, and Lynne Rhinehart, Why Workers Need the Protecting the Right to Organize Act, Economic Policy Institute, February 2021.

11. For more on interagency misclassification task forces, see Rebecca Smith, Public Task Forces Take on Employee Misclassification: Best Practices (policy brief), National Employment Law Project, updated August 2020. For more on co-enforcement partnerships, see Janice Fine, Daniel Galvin, Jenn Round, and Hana Sheperd, “Strategic Enforcement and Co-enforcement of U.S. Labor Standards Are Needed to Protect Workers Through the Coronavirus Recession,” Boosting Wages for U.S. Workers in the New Economy series, Washington Center for Equitable Growth, January 2021.

12. Heidi Shierholz, “EPI comments on independent contractor status under the Fair Labor Standards Act,” comments submitted on behalf of the Economic Policy Institute to Division of Regulations, Legislation, and Interpretation (Wage and Hour Division) Director Amy DeBisschop, October 26, 2020.

The IRS estimates that business taxpayers spend 13 more hours than nonbusiness taxpayers doing their taxes. If we conservatively assume that independent contractors spend 30 minutes per week on other (non-tax) paperwork costs that they wouldn’t have to spend if they were a payroll employee, that, plus the additional 13 hours spent on taxes, is an additional 39 hours of paperwork per year. This is equivalent to 1.8% of pay, or $880 annually for an independent contractor who earns $48,887 in regular pay annually.  

Additionally, we estimate these paperwork costs as the annual purchase of basic bookkeeping software ($114 on the lowest end, using FreshBooks, see https://www.freshbooks.com/pricing, accessed October 16, 2024), self-employed tax filing software for federal taxes ($129, using TurboTax, https://turbotax.intuit.com/personal-taxes/online/live/, accessed October 16, 2024) and state taxes ($64, using TurboTax).

Data appendix

Appendix Table 1

Appendix Table 2

Appendix Table 3

Appendix Table 4

Appendix Table 5

Rising authoritarianism and the need to upend the failed Southern economic development model

For generations, Southern politicians backed by powerful business interests have promoted a Southern economic development model—characterized by low wages, regressive taxation, lax environmental regulations, a weak social safety net, and vicious opposition to unions—while claiming such policies will attract business and thereby generate regional economic gains. But data actually show a grim reality. The South lags all other regions on most indicators of economic health including job growth and wages, and Southern workers and their families experience significantly higher rates of poverty than in other parts of the country (Childers 2024a).

The truth is that this Southern economic development model was never designed to benefit most Southerners; rather, it is historically rooted in efforts of white plantation owners to retain their wealth following emancipation and ensure continued access to the labor of Black people for as little compensation as possible (Childers 2025). Foundational to these efforts was an authoritarian approach to state governance that suppressed popular democracy and worker organizing—an approach that also sanctioned prison labor, sharecropping, a century of Jim Crow laws, lynching, and other forms of state-sponsored terror and exploitation. Until partially challenged by federal legal and policy interventions won by post-WWII civil rights movements, many Southern states for decades held elections that served merely to provide a cover of legitimacy to one-party rule of white, wealthy elites—functionally excluding Black voters from the electorate and blocking working-class constituencies from any meaningful participation in governance (Mickey 2015; Perez 2024; Mast 2025).

Today, the Trump administration’s increasingly authoritarian actions echo this troubling Southern history. At their foundation, the administration’s approaches to bypassing constitutional checks and balances—while rolling back civil rights, worker rights, and environmental protections; terrorizing immigrant communities; deploying military troops in U.S. cities; and attempting to engineer election outcomes via gerrymandering and other forms of voter suppression—are rooted in authoritarian models developed and tested in the U.S. South, and that Black, brown, and immigrant communities across the country are no stranger to.

Recent attempts to terminate federal employee collective bargaining agreements, for example, are familiar to public employees in Southern states for whom collective bargaining has long been banned or severely restricted. The Trump administration’s use of military-style policing in communities across the country echoes Southern histories of weaponizing law enforcement (or National Guard troops) to suppress organizing and instill fear, while prioritizing the expansion of the carceral state over investments in housing, education, and public services. Trump’s efforts to override the authority of state officials mirror Southern state uses of abusive preemption laws to strip policymaking authority from local governments. And administration attempts to halt clean energy investments and environmental protections threaten to repeat harms familiar in Black and brown communities in the South, where corporations have insisted on lax environmental regulations that allow them to degrade air, water, and climate quality, while profiting from the exploitation of local natural resources and labor.

Seizing opportunities to reverse decades of anti-worker, anti-democratic policymaking in the South at a moment of rising authoritarianism in the U.S. is a daunting and unavoidably urgent challenge. It will require robust new forms of multiracial organizing and labor-community coalition building across a broad set of industries in the South. Labor-community coalitions can leverage community benefits agreements (CBAs) as a powerful tool to transform economic power relations in Southern workplaces and communities. Because CBAs are private agreements between labor-community coalitions and project owners, they do not rely on government action and can therefore shape economic outcomes of major projects even in otherwise hostile political environments. CBAs have traditionally been fought for and won by labor and community groups coming together and building necessary public pressure to hold developers, corporations, and elected leaders accountable for ensuring that public investments in major new developments truly benefit workers and communities.

In this report, we analyze the potential for labor-community coalitions to pursue strong CBAs that secure significant economic benefits for Southern manufacturing workers and communities, drawing on examples of existing agreements to model potential impacts. We examine the scale of recent public investments in Southern manufacturing and examine how strong CBAs on major publicly-subsidized private projects could improve the quality of newly created construction and production jobs; open up pathways to unionization; ensure equitable hiring and training opportunities for local residents; and address community needs such as child care, affordable housing, and natural resource protection.

We contend that upending the failed Southern economic development model and the authoritarian structures that underpin it will require building new forms of labor and community power to increase union density in the South. Well-known research shows that unions promote economic equality and help workers win improvements in pay, benefits, and working conditions (Economic Policy Institute 2021). But unions also powerfully affect people’s lives outside of work. They help foster solidarity, increase democratic participation, enable working-class communities to shape economic policies affecting their lives, and serve as a counterweight to corporate power in our economy and democracy (McNicholas et al. 2025). Historically, unions have been engines of resistance to entrenched and undemocratic power—mobilizing working people to challenge inequality, defend civil rights, and push back against authoritarianism in all its forms. For all these reasons, strengthening labor-community coalitions and pathways to unionization in growing Southern industrial sectors is not just good economic policy—it is also a democratic imperative amid national authoritarian backsliding.

Worker and community power can ensure new manufacturing investments yield good jobs and community benefits

The latest wave of manufacturing growth in the South presents both opportunities and pitfalls for workers and communities. Southern states continue to lure businesses—including large manufacturing facilities—with promises of low corporate tax rates, low wages, lax regulations, and massive public subsidies. The automotive manufacturing industry has been a key recipient of public subsidies, receiving billions of dollars from Southern states in recent decades (Childers 2024a; Todd 2021). This system of low taxation and corporate giveaways starves other essential public goods, like education and social safety net programs (Mast 2025b). Likewise, weak or nonexistent environmental regulations have contributed to toxic sites and resource degradation that disproportionately affect Black and brown families, reflecting often intentional decisions to site hazardous facilities in low-income communities of color (Bergman 2019).

Some announced manufacturing projects have been cancelled or reduced in size after the Trump administration’s slashing of federal supports for strategic industries, but many projects launched during the Biden administration continue to move forward. These manufacturing investments, both in traditional industries and nascent ones such as electric vehicle (EV) and EV battery manufacturing, are spurring significant job growth in some Southern communities. Yet past experience shows that new investments and resulting jobs are unlikely to generate economic benefits for most Southerners unless local residents are able to ensure that developers and corporations respect workers’ rights, protect local natural resources, and contribute a fair share toward addressing priority community needs.

Community benefits agreements can be powerful vehicles for communities to secure lasting local economic benefits from major industrial development, at both new and existing facilities. A CBA is a legally enforceable contract between a private developer or company and a local coalition—typically made up of labor, community, faith, environmental, and other grassroots organizations—that details how a project will benefit workers and the community, and in turn how the community will support the project (including via potential public investment). Benefits spelled out in a CBA can include commitments to strong labor standards; respect for workers’ rights to organize; equitable workforce recruitment, training, and hiring practices; affordable housing; environmental protections; or a broad range of other community-identified priorities. CBAs are a well-developed model for responsible community development—so far mostly, but not entirely, in regions outside the South—and have been used for many different types of major projects including sports stadiums, events centers, manufacturing plants, airports, transit projects, and more (WRI n.d.).

CBAs can likewise mitigate risks for project developers by ensuring local project support and addressing important concerns early on, whereas failure to engage local communities in major development decisions can otherwise lead to strong community opposition, interruption of development, obstacles to obtaining necessary siting permits or rezoning approvals, or significant legal costs. In an example from June 2024, developers shelved plans for a $1.3 billion data center in Indiana after facing significant local opposition over environmental concerns (Fazili et al. 2025).

Because a CBA is a private, legally binding agreement, it does not require government action and can be used to shape outcomes of major projects even in contexts (as in most of the South) where state legislators have preempted local governments from establishing their own job quality or environmental standards (EPI 2025a). That being said, state and local governments can still have a role in facilitating, negotiating, or enforcing community benefits. Cities like Detroit and Cleveland have ordinances requiring developers of projects using public resources to engage in a community benefits plan process (City of Detroit n.d.; City of Cleveland n.d.). In 2005, Atlanta passed an ordinance specifying worker and community benefits for the Beltline redevelopment (WRI 2025). However, government involvement in community benefits plans does not guarantee strong agreements on its own. A strong labor-community coalition remains essential for securing meaningful community benefits.

Another key strength of a CBA is that it can set standards across all stages of a project’s development to ensure long-term benefits for the community at large. Private developers or public entities sometimes negotiate Project Labor Agreements (PLAs) or Community Workforce Agreements (CWAs) with building trades unions and community partners to set wages, working conditions, and timelines for the construction phase of a complex development project. A CBA can be negotiated alongside a PLA to also ensure pathways to quality jobs for local residents during the operational phases of a project, including any future expansions of the facility or additions to its workforce. A CBA can also secure commitments to build affordable housing, strengthen environmental standards, and provide other benefits to the community such as child care, public parks, or other community spaces.

To be successful, a CBA must also include defined enforcement mechanisms that hold all parties to the agreement accountable. It must clearly establish the obligations of each party, metrics for measuring progress, and ongoing monitoring of compliance with the agreement’s provisions (Last 2025; PWF and CBLC 2016). If the company or the coalition fails to make good-faith efforts on the agreement’s commitments, an arbitration process is initiated. While monitoring of the agreement is an ongoing responsibility of all members of the coalition, providing a pathway for workers to organize in the operational phase of a project is of particular importance. A newly established union at the project site is well-positioned to monitor the commitments of the CBA and hold the company accountable over the long term.

Organizers and advocates should be clear-eyed that while strong CBAs can yield powerful economic outcomes, such agreements are by no means easy to win. There are generally no legal requirements for a particular company or developer to recognize or engage with a labor-community coalition, much less to agree to negotiate and implement a CBA. Building the broad-based, durable coalitions and leverage necessary to compel private interests to engage in CBA negotiations (and then to implement and enforce the terms of a CBA) is unavoidably a challenging, long-term, resource-intensive organizing project. And like any worthwhile organizing, the formation of strong, durable labor-community coalitions is itself a key outcome of successful CBA campaigns. Vastly expanding the capacity of broad-based coalitions and labor, faith, environmental, and other grassroots organizations to gradually build community and worker power in Southern communities is the most essential ingredient for transforming existing power imbalances and, ultimately, upending the failed Southern economic development model.

Indeed, recent initiatives to win CBAs in Southern states have proven so threatening to some corporate interests that they have sought to undermine them. In 2025, Tennessee Republicans passed legislation prohibiting any company that enters into a CBA from receiving state economic development funds—aiming to create obstacles to replication of a highly successful CBA covering Nashville’s soccer stadium, and to discourage a coalition of West Tennessee residents and allied groups calling on Ford and SK Innovation to negotiate a CBA covering its massive BlueOval electric vehicle and battery manufacturing complex (Abrams 2025). In Tennessee and elsewhere, however, labor-community coalitions are nonetheless continuing to organize to ensure that massive, publicly subsidized new facilities yield good jobs and community benefits.

A new wave of Southern manufacturing is an opportunity to transform working conditions in growing industries—and across the South

Growth in Southern manufacturing industries presents a significant opportunity for labor-community coalitions to shape labor standards and community benefits in new plants and facilities—and to shape economic outcomes for generations of Southern workers to come. In recent years, the South has seen a wave of manufacturing investments. Between 2017 and 2023, manufacturing construction doubled in the East South Central Census division (Alabama, Kentucky, Tennessee, and Mississippi) (O’Brien 2023). The West South Central division (Arkansas, Louisiana, Oklahoma, and Texas) has the highest amount of manufacturing construction spending of any division in the U.S. These investments are part of a long-term trend of manufacturing industries locating in the South, which in recent years was accelerated by large federal investments through the Inflation Reduction Act, Infrastructure Investment and Jobs Act, and CHIPS and Science Act. These federal investments included both direct public subsidies and tax credits to businesses that invested in key clean energy manufacturing industries such as the production of batteries, electric vehicles, solar panels, and wind energy products.

In contrast to the typical economic development approach of many Southern states, some recent federal investments have included incentives meant to encourage strong labor standards on projects receiving public funds. While the future of many of these investments (and accompanying incentives) is now uncertain, the U.S. has in the past two years experienced its largest investment in clean energy manufacturing ever, and much of that has occurred in Southern states.1 Since the third quarter of 2023, more than $125 billion worth of clean energy manufacturing investments were announced across Georgia, North Carolina, South Carolina, Tennessee, Kentucky, and Texas (CET 2025). Advancing even a portion of these projects would result in thousands of jobs for Southern workers.

Independent of the future of federal support for clean energy manufacturing, the South will likely continue to be the largest manufacturing employer of all U.S. regions. Figure A shows manufacturing employment by region in the United States since 1990. While manufacturing employment overall has fallen during the last three decades, the South has retained the largest share of manufacturing employment of any region. In 2024, 35% of U.S. manufacturing employment was in the South. Furthermore, since 2010, manufacturing employment in the South has grown by 17%, the quickest growth of any region.

Figure A

Manufacturing jobs are often considered to be well-paid, benefit-providing “middle-class” jobs, but there is nothing inherent to the sector that determines their quality. Manufacturing jobs in some industries became “good jobs” thanks to relatively high levels of unionization during the mid-20th century, which improved wages, benefits, and working conditions (Bayard et al. 2024; Rhinehart and McNicholas 2020). As Figure B shows, unionization in manufacturing has fallen in all regions since 1983, but the South has almost without exception had the lowest unionization rate of any region.

Conservative Southern policymakers have long been hostile to union organizing. For example, every Southern state except Maryland and Delaware has passed anti-union so-called right-to-work (RTW) laws, which make it harder for workers to form, join, and sustain unions. Southern states like Florida and Arkansas were among the first to pass such laws in the 1940s, amid a wave of big business backlash against new federal labor laws and white supremacist campaigns to maintain racial hierarchies and suppress multiracial worker organizing. RTW laws suppress unionization rates and, as a result, have driven down wages for both union and nonunion workers alike across the South (Sherer and Gould 2025; Childers 2023).

Figure B

In 2025, Southern manufacturing had a 6.7% unionization rate—slightly below the national unionization rate for private-sector workers (6.8%). Unionization in Southern manufacturing grew by more than a percentage point between 2024 and 2025, a notable one-year reversal of the industry’s long-standing unionization decline, consistent with overall union gains in the South (McNicholas, Poydock, and Shierholz 2026). Nevertheless, Southern manufacturing’s unionization rate remains well below the Midwest’s (11.2%), the region where manufacturing is the most heavily unionized. Unions have a strong impact on job quality because they leverage worker power collectively to raise wages, win benefits like health care and retirement, and enact other meaningful workplace improvements, such as improved health and safety standards. These benefits can extend beyond unionized workers themselves, helping set standards across a workplace, and with enough density, across an industry.

As unionization declines in an industry or region, so does job quality. For instance, as unionization rates have fallen in auto manufacturing, the pay advantage for auto workers compared with the median worker has declined significantly (Barrett and Bivens 2021). Figure C demonstrates how this relationship holds across regions in 2025. Manufacturing jobs in the South have a pay advantage of 7%, the lowest of any region. Southern manufacturing workers also experience the lowest median hourly pay of any region ($24.41).2

Figure C

The Southern economic development model clearly hurts the region’s workers by denying them their right to organize and suppressing their wages, but there are harmful spillover effects for their communities as well. Corporate tax breaks with no strings attached provide billions of dollars to corporations that could otherwise be used to invest in schools and other essential government services. These types of tax breaks might be worthy of consideration if manufacturing employers were required to create high-quality jobs for local workers and make long-term investments in local community development needs (i.e., housing, infrastructure, education, etc.). Without such protections, they are simply taxpayer-funded giveaways that often drain the very resources needed to develop the local workforce recruited by large new facilities.

Southern states enact little to no regulation of workplace safety or environmental pollution. This results in unsafe workplaces with greater levels of injury and death (Childers 2024a). Environmental pollution from manufacturing sites can negatively affect public health by contaminating water, air, and soil. New manufacturing investments also can mean significant changes to the demand for housing in a community. A new plant or factory can drive up the cost of living for nearby residents without yielding any economic benefits to a local community. Labor, community, and environmental groups need to collaborate on shared solutions to effectively address these intertwined challenges.

Labor-community coalitions can obtain commitments that ensure “economic development” means shared prosperity for all

Labor-community coalitions organizing around manufacturing projects can secure commitments that offer direct economic benefits to workers and communities, while also establishing groundwork for the growth of worker and community power in the area. While a campaign to win a CBA can be the impetus for forming a local labor-community coalition, the alignment and relationships built through this shared work can lead to longer-term, sustainable coalitions capable of transforming local and state power relationships.

The following section analyzes a set of commitments that can be included in a CBA for a manufacturing project. The CBA framework is flexible and allows for the inclusion of many different types of commitments prioritized by particular groups of workers, community members, and environmental groups. This report focuses on key types of commitments including union neutrality agreements, living wage floors, equitable workforce development practices (such as local or targeted hire policies and programs to expand pathways to apprenticeship training), affordable housing provisions, child care benefits, and environmental protections. Each type of commitment is analyzed in terms of its economic impacts and effectiveness in reshaping local economic development to ensure that public investments generate broadly shared community benefits.

The construction phase and Project Labor Agreements (PLA)

This report mostly focuses on community benefits for workers during the operational phase of a manufacturing plant. Nevertheless, it is just as vital to set high labor standards during the construction phase. Strong community benefits agreements are ideally developed in tandem with strong project construction labor standards set via project labor agreements (PLAs). A PLA is a multiparty agreement between a project owner and a coalition of labor unions that sets out labor standards and dispute resolution procedures to promote stability and efficiency on complex infrastructure projects while also ensuring the project will generate good jobs. PLAs ensure that construction projects run smoothly, are safer, and pay workers fairly (Mangundayao, McNicholas, and Poydock 2022). By setting negotiated wage and benefit levels for each type of work on a project, PLAs level the playing field in highly competitive construction bidding processes; they ensure that contractors base bids on their ability to deliver on quality and efficiency, rather than low-ball cost estimates that reflect intent to pay substandard wages or cut corners on safety. By standardizing wage and benefit levels and taking them out of the competition in the bidding process, PLAs incentivize the use of skilled union labor, which is 14% more productive than nonunionized construction work (McFadden, Santosh, and Shetty 2022). PLAs typically set wages, fringe benefits, and working conditions but can also include requirements to utilize certain numbers of apprentices, hire locally or from certain target worker populations, and/or provide child care or other benefits that open up pathways to good union construction jobs for members of underrepresented groups.

Several of the types of standards for construction workers typically included in a PLA have analogous labor standards in the operational phase. For instance, a CBA can secure commitments for local or targeted hiring and the development of registered apprenticeship programs in a manufacturing facility, extending equitable recruitment and high-quality training requirements that a PLA typically sets for construction into the operational phase of a project.

Removing obstacles to unionization: Neutrality and labor peace agreements

Protecting workers’ freedom to unionize has historically been key to turning manufacturing jobs into good jobs. This remains just as true today. However, like workers across the country, Southern manufacturing workers continue to face formidable obstacles—including weak labor laws, powerful anti-union corporations, and hostile politicians—to exercising their legally protected rights to form or join a union. Employers are charged with violating federal labor law in more than 40% of union elections and spend more than $400 million a year on “union avoidance” consultants (McNicholas et al. 2019; McNicholas et al. 2023). Because existing weak labor laws do not effectively deter employers from union busting, these tactics are treated by many employers as a normal cost of doing business—stacking the deck unfairly against workers seeking to exercise their rights to organize and collectively bargain.

Union neutrality agreements can help safeguard workers’ right to form unions free of the types of interference employers often deploy. Under a neutrality agreement, an employer agrees to remain “neutral” and not interfere with workers’ decisions on whether to unionize. Such agreements typically include joint commitments to a “card check” process for verifying whether a majority of employees have indicated interest in forming a union. Unions and employers sometimes also enter into a labor peace agreement, where unions agree not to engage in certain types of picketing, work stoppages, or other economic disruptions during the organizing process in exchange for employer neutrality.

Employers can also choose to commit to union neutrality as a matter of principle or company policy. Union neutrality—providing workers a more free and fair choice to decide whether to unionize—has been a key component of successful unionization drives in Southern manufacturing. To take two recent examples:

• In 2024, workers at the Volkswagen (VW) Chattanooga plant voted to join the United Auto Workers. Like many European corporations, the German-based VW has an established policy of maintaining neutrality in union election processes, although workers still voiced concerns that in its U.S. facilities, VW management tried to intimidate and dissuade workers from forming a union (Bomey 2024).
• In tandem with community benefits agreement negotiations with New Flyer in Anniston, Alabama, the United Steel Workers and Communications Workers of America negotiated three neutrality agreements with New Flyer and its subsidiaries in 2022. Over the two years that followed, these union neutrality agreements enabled workers to pursue five successful union drives, including at the New Flyer facility in Alabama (Last 2025; Sasha 2024).

Successful recent instances of union organizing in Southern manufacturing facilities have been powerful enough to generate their own backlash. Because of the threat that union neutrality agreements represent to the reigning Southern economic development model, several conservative state legislatures in the South have used model legislation developed by the American Legislative Exchange Council to pass laws intended to interfere with these agreements (Sachs 2024). While the legality of such measures remains in question and has not yet been tested, Alabama, Tennessee, and Georgia now all have legislation in place stating that employers who agree to a union neutrality agreement will be barred from receiving state economic development funds, disincentivizing companies from participating in these agreements (Stephenson 2024).

Importance of unionization to improve manufacturing jobs and wages

Securing unionization in Southern manufacturing can have significant wage benefits for workers. Unionized manufacturing jobs are more likely to provide family-sustaining wages. Unionization in manufacturing is associated with a 17.9% wage premium for workers (Scott et al. 2022). This means that compared with similar workers in terms of education, occupation, experience, race, and ethnicity, unionized manufacturing workers are paid almost a fifth more per hour than their nonunionized counterparts.

Table 1 translates this union premium into how much more unionized workers in the South could make on an hourly, annual, and plant-wide basis. The average nonunionized manufacturing worker in the South earns $34.50 an hour, so with the typical union premium, that worker would be earning an additional $6.18 an hour. If that worker works full time, year-round, the hourly premium translates to $12,846 more a year. To illustrate the potential impact of unionization in an entire plant, we take the example of the BlueOval auto manufacturing investment in Tennessee, which is projected to create 6,000 jobs (TN Office of Governor 2023). For a plant of that size, unionization could mean more than $77 million in additional wages for workers.

Table 1

Wage gains from successful unionization are not hypothetical for manufacturing workers in the South. For example, in 2024, workers at New Flyer in Anniston, Alabama, ratified a union contract with significant pay raises, with some workers gaining raises of up to 38% through 2026 (CWA 2024). Establishing a union contract with transparent pay ladders will also help New Flyer workers combat persistent pay gaps between white and Black workers in Anniston’s manufacturing industry (Erickson 2021).

The benefits of unionization go far beyond hourly wage increases. The workers at New Flyer also achieved significant gains in terms of vacation time and retirement contributions. Unionized workers secure critical benefits like health care and sick days at greater rates than their nonunion peers. Adjusting for differences in industry, sector, and region, union workers are 18.3% more likely to have employer-covered health insurance than their nonunion counterparts (EPI 2021). Almost 9 in 10 private-sector union workers have paid sick days, compared with less than three-fourths of nonunion private-sector workers (EPI 2021).

Unions also contribute to safer and healthier working conditions across a wide range of industries (Dean, McCallum, and Venkataramani 2022). By strengthening workers’ voice on the job, unions empower workers to report safety issues and demand better protocols. One example of this is that unionized construction sites experience significantly lower rates of Occupational Safety and Health Administration (OSHA) violations than nonunionized sites (Manzo IV, Jekot, and Bruno 2021). This is despite the fact that unionized workplaces actually experience greater rates of OSHA inspections than other workplaces, likely because many unions maintain active health and safety committees and because unionized workers have greater access to education on how to recognize safety hazards and are less afraid of reprisals from their employer for reporting them (Leigh and Chakalov 2021).

As the New Flyer agreement demonstrates, a strong CBA includes (or is negotiated in tandem with) union neutrality commitments ensuring that workers have a free and fair choice to unionize, without employer interference or retaliation. Securing a pathway to unionization can provide direct benefits to workers at a particular facility, while also increasing local organizing capacity and coalition strength for future negotiations over new projects and local development decisions. Not only is a new union a legally recognized institution that can monitor and hold the company accountable for commitments in the CBA, but it can also play a critical role in amplifying demands of workers and communities outside of the workplace and building power for working people more broadly.

Living wage floor

CBAs can also include commitments to minimum wage floors for the workers who will operate a new facility. For example, the 2018 Nashville Soccer CBA in Tennessee included a commitment to an hourly wage of at least $15.50 for stadium workers (SUN 2018). This provision set the stadium’s wage floor well above the minimum wage in Nashville, where workers—like all Tennessee workers and many across the South—are otherwise subject to the federal minimum wage of $7.25 an hour.

If a wage floor set by a CBA is high enough, it can help workers achieve a living wage in the place that they live. What constitutes a living wage must be determined by labor and community partners (Gould, Mokhiber, and DeCourcy 2024). For example, a living wage could be defined narrowly as covering the necessities for a single adult, or more broadly as including the needs of a working parent and their children. A living wage target must also make assumptions about nonwage income such as health care benefits and government transfers. Manufacturing workers in the South can also rightfully seek wages that not only cover bare necessities but provide the family-sustaining resources needed to be healthy and thrive.

Figure D shows the share of manufacturing workers in the South earning less than $30 an hour, or $62,400 a year in wages for a full-time worker. More than 3 in 5 (60.8%) manufacturing workers in the region earn less than $30 an hour. Around 80% of Southern Black and Hispanic manufacturing workers earn below the $30 threshold. Women in manufacturing are also more likely to earn below $30 an hour (71.8%) than men (59.1%).

Figure D

A $30 wage floor exceeds the minimum costs for a single adult in most jurisdictions in the U.S., but still barely covers needs for many families with children in manufacturing-dense counties nationwide. EPI’s Family Budget Calculator estimates living wage standards by county that cover modest but necessary costs families face like food, rent, and transportation in the United States. Table 2 shows three Southern counties with significant clean energy manufacturing investments in recent years (CET 2025). Each county has significant manufacturing employment, exceeding the U.S. average for manufacturing employment density. For each county, living wage standards from the Family Budget Calculator are listed for different family types. In Morgan County, Georgia, and Maury County, Tennessee, a single adult with a child must earn at least $30 an hour to cover basic needs. For a single economic provider to cover the costs of a four-person family, they must earn over $35 an hour in all the counties listed. These living wage standards indicate that a $30 wage floor would provide significant economic security for workers with smaller families or multiple wage-earners.

Table 2

A CBA that secures a strong living wage standard in a manufacturing facility can create a virtuous cycle that brings about greater prosperity in the area. Higher wages for low- and middle-income workers boost spending in the local economy because these workers spend a greater share of their paycheck than high-income workers (Anderson 2014). Other employers in the area might have to raise their wages to compete for workers with the CBA-bound employer. The establishment of a living wage also demonstrates to other workers in the area that higher wages are a feasible goal through collective action.

Local and/or targeted hire policies

Local and targeted hiring refers to policies that prioritize recruitment of individuals from the local community, or workers from specific groups who are otherwise underrepresented in a given workforce relative to local population demographics, such as women, people of color, veterans, low-income workers, formerly incarcerated workers, or workers with disabilities (Lawliss, Finfer, and Sherer 2022). A local hire policy can require that a certain percentage of hours worked on a project be completed by local workers. These policies can also require giving local workers the first option to apply for jobs on a project. For the prosperity created through manufacturing investments in the South to be shared equitably, it is important that local community members have access to the jobs that are created during both the construction and operation phases of a development. Workforce policies also should be designed to remove barriers to employment for groups of workers—especially workers of color and women—who have historically been excluded from many construction and manufacturing career opportunities. Increasing access to these well-paying jobs can increase economic mobility for workers with more limited opportunities.

Despite these benefits, some state policymakers have been hostile to local hire as a public policy. In 2015, Nashville voters passed a ballot initiative that required city-funded construction projects to dedicate 40% of construction hours to Nashville residents, with 25% of those hours going to low-income Nashville residents (Blair et al. 2020). The Tennessee state legislature then quickly passed a bill that preempted the city from creating its own local hire policy.

As Figure E shows, the harm of Tennessee’s preemption of local hire falls disproportionately on workers of color. The construction workforce in the Nashville metro area has a higher share of workers of color and immigrant workers compared with the state construction workforce overall. Black workers are 8.2% of the construction workforce in Davidson County, but 5.5% of the overall state workforce. More than half (51.5%) of construction workers in Davidson County are Hispanic, compared with less than a quarter (20.1%) of the state overall. Davidson County construction workers are also more than twice as likely to be immigrants (40.2%) than in all of Tennessee (14.8%). State preemption of local hire prevented Nashville from ensuring that public spending would benefit local workers. However, private agreements like CBAs offer an opportunity to incorporate local hire and/or targeted hire requirements into publicly subsidized developments, even in heavily preempted jurisdictions.

Figure E

In 2018, three years after the preemption of Nashville’s local hire policy, the labor-community coalition Stand Up Nashville was able to leverage $275 million in public subsidies for a new professional soccer stadium into a successful CBA (SUN 2018). The Nashville Soccer CBA included commitments to local hire for stadium workers, particularly workers from “Promise Zones,” i.e., high-poverty areas with fewer economic opportunities (SUN 2020). Through the CBA, Nashville Soccer Holding, LLC agreed to consider qualified Promise Zone resident referrals for jobs at the stadium. So far, the program has succeeded in hiring Promise Zone residents. In 2023, Nashville Soccer Club had hired 180 employees, 80 of whom were residents of Promise Zones (SUN 2023).

CBAs in the South and throughout the country are securing similar commitments to local and targeted hiring in clean energy and manufacturing investments. In Alabama, the New Flyer CBA commits the company to ensuring that at least 45% of new hires and 20% of promotions are members of “Historically Disadvantaged Groups” (Sabin 2022).4 In Massachusetts, a new offshore wind terminal entered into a CBA with the City of Salem—setting targets for hiring of local workers, workers of color, and women workers (Sabin 2024). The CBA for Maine Aqua Ventis, an offshore wind facility, includes local hiring opportunities for residents of Monhegan, Maine (Sabin 2017). 

These types of agreements help ensure that local residents benefit from large investments in their communities, particularly when policymakers have invested public dollars in the form of tax breaks or corporate subsidies to support a new facility. Ensuring local workers are prioritized in training programs and hiring processes for newly created jobs also helps community members stay in the area when housing costs are driven up by a large new manufacturing investment. And in the longer term, providing pathways for local workers to benefit directly from these investments strengthens the labor and community alliances needed to hold developers and corporations accountable over time.

Equitable workforce development through apprenticeships and pre-apprenticeships

In addition to local hire policies, which help create equitable pathways for local workers to secure good jobs at a manufacturing site, construction and manufacturing projects require a skilled workforce to operate safely and productively. A robust ecosystem of registered apprenticeship and pre-apprenticeship programs can help ensure both that employers find the skilled workers they need in a large new manufacturing facility, and that local workers can access pathways to newly created jobs.

Registered apprenticeship programs are training programs vetted by federal or state agencies to ensure use of high-quality, best-practice training standards and approved curriculum aligned with skills needed to succeed in a particular occupation. Registered apprenticeships combine paid on-the-job and classroom training and result in a recognized, portable credential certifying that a worker has the skills and experience necessary for a specific occupation. Pre-apprenticeship programs (also known as apprenticeship readiness programs) recruit and prepare participants for registered apprenticeships—often partnering with community organizations—to open pathways to apprenticeship for women, Black and brown youth, immigrants, workers with disabilities, or others historically excluded from skilled trades occupations. The best practice is for these apprenticeships and pre-apprenticeships to be joint programs between unions and employers, providing high-quality instruction tailored to industry needs and training that leads to placement in a high-quality job with wages, conditions, and benefits negotiated into a union contract. Often, a vital building block for successful manufacturing apprenticeship programs is the establishment of a unionized workforce at a facility.

Unlike lower-quality workforce development programs, registered apprenticeships pay workers fairly for their labor during their training—and in joint apprenticeship programs, the wages and benefits of apprentices are negotiated into a union contract and typically include scheduled increases as apprentices progress through the training program. Registered apprentices (across joint and non-joint programs) typically see their earnings increase 49% between the year before they enter the program and the year after completing it (Walton, Gardiner, and Barnow 2022). These increases in earnings are greater than for similar workers who do not enter the apprenticeship during the same time period (Katz et al. 2022). Apprenticeships can also be particularly attractive to workers because they are debt-free. Most apprentices (60%) consider debt avoidance the most important reason for choosing to enroll in an apprenticeship (Walton, Gardiner, and Barnow 2022).

Apprenticeships can be a powerful tool for increasing the diversity of construction and other industry workforces. While participation of women and workers of color in apprenticeships has grown in recent years, this growth has been painfully slow for decades (CEA 2024). Research finds that union-based (joint) apprenticeship programs have been more successful than other types of apprenticeships at increasing diversity in the construction industry (Ormiston and Bilginsoy 2024). Joint apprenticeships enroll a higher share of women, Black workers, and Hispanic workers than non-joint programs, and have higher program completion rates for all workers, including for women and workers of color. Community benefits agreements can secure commitments and partnerships that equitably grow this pipeline of workers and set enforceable local and targeted hiring goals which in turn spur diversification of construction and manufacturing apprenticeship programs.

For instance, the New Flyer CBA creates a partnership between the company and coalition partners to develop pre-apprenticeship and technical training programs that expand access to manufacturing jobs for workers with low incomes and from disadvantaged groups (Sabin 2022). For these programs to succeed, community groups and educational institutions must have an active role in shaping the programs and connecting workers to these opportunities. The development of a growing skilled workforce and a robust, high-quality workforce development ecosystem can in turn be a strong incentive for bringing more facilities to an area over time. In 2015, Polaris stated that a significant factor in its decision to choose Huntsville, Alabama, for a new production facility was the area’s skilled workforce (Polaris 2015). As more workers participate in high-quality training programs that lead to union jobs, the organized workforce of the region will grow, strengthening labor-community coalitions the next time there is an opportunity to shape new development in the region.

Child care

Child care is an essential but extremely costly expense for many working families across the South. Average annual infant care costs in the South range from $6,868 in Mississippi to $14,277 in Virginia.5 The Department of Health and Human Services recommends that 7% or less of family income go toward infant child care costs, but typical Southern families spend significantly more. In Alabama, infant care costs are 9.8% of median family income, while in Oklahoma the share is 15.4% (EPI 2025b).

Increasing access to high-quality, affordable child care not only makes work more accessible to parents (and especially to women, who on average continue to assume disproportionate care responsibilities), but is a powerful investment in children’s development that can help narrow class and racial inequalities (Morrisey 2020). In addition, child care workers tend to work for very low wages and experience poverty at greater rates than the typical worker.

A large manufacturing investment in a locality might produce a significant number of jobs, and in turn increase the demand of workers and their families to live nearby. This is likely to increase the need for child care services in the region. However, data show that child care employment has not kept up with manufacturing growth in Southern counties. Table 3 compares counties with high manufacturing density, where manufacturing employment makes up more than the national average (9% in 2009), with those with lower manufacturing employment density (EPI 2025c).

Table 3

Between 2009 and 2024, manufacturing employment in high-manufacturing-density counties in the South grew 15.9%, achieving faster growth than similar counties in the U.S. overall (12.1%). However, over the same period, child care employment only grew 4.5% in Southern high-manufacturing-density counties, far below the national rate of 14.2%. Child care employment growth in the South for low-manufacturing-density counties (22.3%) is also below the national level (28.5%). The South systematically underinvests in child care, despite its importance to a healthy economy in the region.

CBAs and PLAs have been used to secure both the construction of physical child care spaces and financial support for actual services. The Nashville Soccer CBA reserved 4,000 square feet for the development of a child care center (SUN 2020). In 2001, the CBA for the North Hollywood Commons mixed-use development project in Southern California secured a commitment to an on-site child care center. Fifty child care spaces at the center were reserved for low- and moderate-income families (Sabin 2001). In the Boston area, unions have secured Project Labor Agreements that seek to address the unique child care needs of the construction industry. The PLA for the Winthrop Center in Boston established a child care access fund to research, develop, and implement alternative child care models within the construction industry, with a particular focus on assisting single mothers with child care while supporting their career (NEREJ 2019).

These types of investments are vital supports for working families, particularly mothers, seeking to balance professional and care work. Combined with union neutrality for the child care workers at these facilities, commitments to providing child care can further elevate worker power in the region and help large new facilities recruit and retain the skilled, experienced workforces they need to succeed.

Affordable housing

Without strategies to address the housing needs of a community impacted by a new manufacturing investment, local residents can experience increased economic precarity or forced displacement. The local housing impacts of a large industrial investment can be complex. A significant manufacturing investment can make a local community more attractive as workers move into the area to be close to their place of work. Manufacturing investments are also likely to be paired with prospective real estate investments in anticipation of future development around the original project. State and local governments might use eminent domain and other purchasing mechanisms to secure land for roads and other new infrastructure. These dynamics can increase housing costs for residents, particularly renters who are most vulnerable to the impacts of housing speculation and prospective rent increases. For instance, the BlueOval development in West Tennessee is already reported to have increased property prices and housing rents (TCG 2023). Homeowners, particularly those with fixed incomes, can also be more burdened with housing costs as higher demand in the area increases property tax valuations (Payne 2019).

On the other hand, extreme proximity to an industrial site can expose residents to environmental hazards and noise pollution, and may be considered unsightly, which decreases property values (Currie et al. 2016; Upton and Talpur 2024). The exact distribution of these changes in demand for housing across a community will depend on the type of industry and any other types of development included in the project.

Industrial investments like manufacturing facilities tend to take place in rural and semirural areas, in part because land is relatively inexpensive (Wiley 2015). While the counties with a higher share of manufacturing employment tend to have lower housing costs than urban areas, housing affordability remains a significant issue for workers. On average, across high-manufacturing-density counties in the South, a two-adult, two-child household must cover more than $14,000 a year in housing costs.6 A large share of renters in high-manufacturing-density counties in the South still are cost-burdened by housing, meaning they spend more than 30% of their income on rent, utilities, and other housing costs. As shown in Figure F, across the Southern states, the share of cost-burdened households in high-manufacturing-density counties ranges from 28% in Arkansas to 47% in Florida. More than 2 in 5 (42%) of Texas renters in these counties are also housing cost-burdened.

Figure F

A strong CBA will secure commitments to build a certain number of affordable housing units or dedicate a share of housing at the site as affordable. The Nashville Stadium CBA created agreements that at least 12% of residential units in the development would be affordable and that 20% of those units would be three-bedroom units to accommodate families (SUN 2020). The Staples Center CBA in Los Angeles, California, was another successful example of strong affordable housing benefits. The 2001 agreement for the development of an expanded convention center, theater, and surrounding housing, hotel, and retail space secured commitments that 20% of housing units would be affordable. The developer also agreed to provide $650,000 in interest-free loans to nonprofit affordable housing developers in the local community (WRI 2001).

Even in situations where a labor-community coalition is unable to reach a final CBA with a company, coalition organizing around community demands can still deliver meaningful affordable housing victories. Between 2002 and 2006, a labor-community coalition in Denver pressured Cherokee Investment Partners to provide community benefits as part of their redevelopment of the site of the Gates Rubber Company. The coalition leveraged zoning changes necessary for the project and a potential subsidy package from the city to extract benefits including an affordable housing plan for hundreds of rental and for-sale affordable housing units (Ingram and Hong 2011; PowerSwitch Action 2025).

In 2005, the labor-community coalition organized by Georgia STAND-UP was able to attach community benefits to an Atlanta city ordinance allocating $2 billion in public funding for the Atlanta Beltline transit-oriented development project. The city resolution shaped by the coalition established an affordable housing trust fund and a goal of developing 5,600 affordable housing units (PowerSwitch Action 2025). As of 2024, more than 4,100 affordable units have been created as part of the project (Atlanta Beltline, Inc. 2024).

Labor-community coalitions can also pursue other land-use commitments beyond the development of affordable housing. The BlueOval Good Neighbors coalition in West Tennessee has demanded commitments to protect land for farmers in the area. The development of the Ford factory has pushed Tennessee’s Department of Transportation to pursue land for new roadways through purchase and eminent domain. The area targeted for new roadways is a majority Black farming community, and several farmers are engaged in lawsuits with the state over the state’s meager compensation offers for their land (Wadhwani 2023). The coalition has demanded that farmers be offered replacement land in exchange for their sold land, as well as the creation of a 10,000-acre community land trust (BlueOval Good Neighbors n.d.).

Creating or protecting affordable housing is essential for protecting the communities that are necessary for any effective labor-community coalition. Large developments can cause instability within the community as new residents arrive, and existing residents are buffeted by rising housing costs. Because of historic and ongoing racial discrimination in housing policy, labor policy, and real estate practices, the costs of these changes are most likely to impact Black and Hispanic workers. Black families and other workers of color are the most likely to be cost-burdened by housing (JCHS 2024). Creating housing for workers and families to remain in the area is vital for continued collective action to secure benefits from developers and hold those developers accountable for their promises.

Environmental standards, funding, and monitoring

Large-scale manufacturing projects often have significant environmental impacts, both during construction and once they are in operation. Air, noise, and groundwater pollution; harm to wildlife habitats; and residents’ exposure to toxic byproducts are just a few examples of common concerns, and these consequences can be severe when projects are approved without sufficient environmental consideration. The consequences of large manufacturing projects often disproportionately harm communities of color and low-wealth areas throughout the South (Brouk 2024). For decades, poor and Black residents in the region have been exposed to toxic chemicals, pollution, and other environmental dangers at alarming rates (Bergman 2019).

In 2021, the Tennessee governor approved the construction of a General Motors lithium battery supplier in the city of Spring Hill, on the banks of the Duck River. Though the project was seen as an economic success, the plant’s operation has taken a toll on the fragile river ecosystem. The lithium battery factory is not the only strain—just eight companies along the river drain tens of millions of gallons of water daily (Wadhwani 2024). This enormous water usage has lowered river water levels, threatened biodiversity, and harmed local tourism and recreation. Advocates for the river’s health blame the state’s prioritization of manufacturing expansion without regard to the long-term environmental or economic consequences for local residents or other existing local industries.

CBAs are a tool that may help community-labor coalitions address the environmental impacts of data centers in the South. Data centers are booming across the United States, but particularly in Southern states like Georgia, Texas, and Virginia (Walker and Goldsmith 2026). New centers are heavy users of water and energy, create noise and air pollution, and are driving up electricity costs nationwide both by increasing demand for energy and requiring utilities to invest in new infrastructure paid for by all ratepayers (Merchant and Guerra 2025; Bizo et al. 2021; AI NOW 2025; Reed 2025). For example, in Virginia, electric bills were on track to increase as much as 25% in 2025 because of data centers (Penn and Weise 2025).

Growing community concerns surrounding data centers could create leverage for labor-community coalitions to pursue CBAs and other community benefits strategies. In 2025, community opposition blocked or delayed $64 billion in data center projects across the nation (Data Center Watch 2025). As community resistance to data centers continues to grow, more developers may recognize the need to come to the table with local coalitions to negotiate binding commitments on environmental and economic outcomes to secure project approvals. A handful of localities have begun to create agreements with data center developers regulating water use and securing commitments to green energy use (Turner Lee and West 2026).

Past development projects provide examples of how communities have used CBAs to secure long-term commitments to clean energy transition and protection of local natural resources in a multitude of ways, from mandating that any new construction must meet specific sustainability standards to requiring companies to contribute a set dollar amount to a city’s renewable energy transition fund. In Virginia, the City of Richmond Resort Casino CBA ensured the developing and operating company would design and construct all project buildings to Leadership in Energy and Environmental Design (LEED) Silver standards and would use previously existing pavement where possible (WRI 2021). The agreement also required the developer to attempt to reduce the urban heat island effect by planting shade trees along sidewalks and using other landscaping methods (WRI 2021). These agreements can mitigate additional environmental harm in areas that have already been polluted. A CBA between the Town of Waterloo, New York, and Seneca Meadows, Inc. regarding a landfill expansion commits the waste management company to pay for the development of new public water lines and other potable water infrastructure if existing public water wells become contaminated (WRI 2005).

CBAs can also be used to expand the positive impact of an already climate-friendly project. In New York, a CBA with an offshore windfarm developer stipulates that the company must contribute $2 million to the town of East Hampton’s Ocean Industries Sustainability Program (WRI 2018). Additionally, Deepwater Wind South Fork, LLC must spend $200,000 to establish an Energy Sustainability and Resilience Fund to support East Hampton’s transition to 100% renewable energy (WRI 2018). CBAs with environmentally focused companies provide valuable opportunities for communities looking to address climate change, especially where state governments have failed to invest in environmental programs.

A CBA can achieve a variety of climate and environmental commitments from a company but is also a strong starting point for building local capacity to monitor resource use, pollution, and other environmental priorities. A strong coalition of community, labor, and environmental groups can play essential roles in implementing and enforcing CBA commitments in contexts where understaffed government agencies have limited ability to monitor or investigate pollution and other environmental harms. Instead, workers and community members are often the first to report harmful practices and safety concerns. A strong CBA can provide opportunities for labor and environmental groups to work together to monitor and protect worker and community health, natural resources, and ecosystems.

Conclusion

For decades, Southern economic policies shaped by dominant business and corporate interests have resulted in poor working conditions and failed to ensure that profits generated by publicly subsidized development are shared with local workers and communities. Confronting the deep, long-standing imbalances of power that have entrenched this failed economic development model will require significant organizing and coalition-building to increase the collective power of workers and community members to shape different outcomes from the latest Southern manufacturing boom. Building new forms of worker and community power will be equally necessary to counter escalating authoritarian actions of the Trump administration, which closely parallel many features of the failed Southern economic development model that by design prioritizes corporations over workers and communities.

Our analysis shows that community benefits agreements could be powerful tools for Southern labor and community groups building the shared power necessary to reshape local and eventually regional economies. When strong coalitions of labor, environmental, faith-based, and other grassroots community organizations are able to build the necessary power to bring a company or developer to the table to negotiate an enforceable agreement, such coalitions can secure measurable economic benefits like higher wages, respect for workers’ rights to unionize, local or targeted hiring, protection of natural resources, or more affordable housing. Such economic gains are beneficial in themselves, but they also raise expectations, build local capacity to pursue additional gains, and demonstrate to the community at large that local residents can shape their own economic futures, and that these types of victories are achievable in the face of the Southern status quo.

While the urgent project of upending the Southern economic development model will require vigorous and persistent organizing across many sectors and geographies, community benefits agreements are one key strategy for turning manufacturing jobs into good jobs, ensuring long-term local economic gains from new industrial investments, and even renewing democracy in contexts where it has long been suppressed. Forming strong, long-lasting labor-community coalitions is essential to winning concrete gains for local workers as well as reshaping the political fabric of Southern communities and increasing working people’s influence over broader state or regional economic policy decisions. Winning and implementing any strong CBA requires the formation of an empowered labor-community coalition, which ideally endures and gains greater strength, experience, and influence over time. Just as the economic benefits of unionization extend far beyond an individual workplace, establishing a strong CBA coalition can create broader positive impacts across a community or region—delivering higher-quality jobs; more equitable tax systems; stronger public services; and healthier, more inclusive political systems.

Acknowledgements

The authors wish to thank the AFL-CIO Center for Transformational Organizing for their partnership and invaluable contributions in the production of this report. The authors are also grateful to Athena Last and Ian Elder at Jobs to Move America and Ben Beach at PowerSwitch Action for their expert feedback.

Appendix

Appendix Table 1

Notes

1. Clean energy manufacturing includes manufacturing of batteries, electric vehicles, mineral products, solar energy products, and wind energy products.

2. Workers in Southern states experience lower wages than in other regions even after adjusting for cost-of-living differences (Childers 2023).

3. The facilities covered by these agreements included plants in Alabama, California, Kentucky, Minnesota, New York, and Wisconsin.

4. This category includes workers who are Black, Indigenous, and/or people of color; women; LGBTQ+ persons; systems-impacted people (formerly incarcerated people); persons emancipated from the foster care system; residents of Anniston, Alabama, lacking GED or high school diploma; and veterans.

5. Southern states excluding D.C., Delaware, and Maryland.

6. EPI analysis of Family Budget Calculator and Quarterly Census of Employment and Wages data.

References

Abrams, Cynthia. 2025. “As West Tennessee Community Pressures Ford for Promises, Lawmakers Curb ‘Community Benefits Agreements’.” WPLN News, March 25, 2025.

AI NOW. 2025. “North Star Data Center Policy Toolkit: State and Local Policy Interventions to Stop Rampant AI Data Center Expansion.” December 2025.

Anderson, Sarah. 2014. “Wall Street Bonuses and the Minimum Wage.” Institute for Policy Studies, March 12, 2014.

Aquiles-Sanchez, Pablo, and Laura Dresser. 2022. Worker Power Levels the Playing Field: Community Benefits for Public Subsidies in the Iron District. High Road Research Center, November 2022.

Aquiles-Sanchez, Pablo, and Laura Dresser. 2024. From Community Benefits, to Collective Bargaining, and Back: Building Worker Power in Milwaukee. High Road Research Center, March 2024.

Atlanta Beltline Inc. 2024. Relentless Momentum, Undeniable Results: 2024 Annual Report.

Barrett, Jim, and Josh Bivens. 2021. The Stakes for Workers in How Policymakers Manage the Coming Shift to All-Electric Vehicles. Economic Policy Institute, September 2021.

Bayard, Kimberly, Tomaz Cajner, Vivi Gregorich, and Maria Tito. 2022. Are Manufacturing Jobs Still Good Jobs? An Exploration of the Manufacturing Wage Premium. Federal Reserve Board, March 2022.

Bergman, Megan Mayhew. 2019. “‘They Chose Us Because We Were Rural and Poor’: When Environmental Racism and Climate Change Collide“. Guardian, March 8, 2019.

Bizo, Daniel, Rhonda Ascierto, Andy Lawrence, and Jacqueline Davis. 2021. Uptime Institute Global Data Center Survey 2021. Uptime Institute, September 2021.

Blair, Hunter, David Cooper, Julia Wolfe, and Jaimie Worker. 2020. Preempting Progress: State Interference in Local Policymaking Prevents People of Color, Women, and Low-Income Workers from Making Ends Meet in the South. Economic Policy Institute, September 2020.

BlueOval Good Neighbors. n.d. “Community Benefits Agreement Demands Summary.” Accessed September 5, 2025.

Bomey, Nathan. 2024. “Volkswagen on Factory Unionization Efforts: ‘Neutral Doesn’t Mean Silent’.” Axios, February 15, 2024.

Brouk, Allison. 2024. “Wood Pellet Manufacturing in the South Harms Communities and the Environment.” Earthjustice, October 11, 2024.

Clean Economy Tracker (CET). 2025. Clean Economy Tracker. Accessed July 15, 2025.

Childers, Chandra. 2023. Rooted in Racism and Economic Exploitation: The Failed Southern Economic Development Model. Economic Policy Institute, October 2023.

Childers, Chandra. 2024a. Southern Economic Policies Undermine Job Quality for Auto Workers. Economic Policy Institute, September 2024.

Childers, Chandra. 2024b. The Evolution of the Southern Economic Development Strategy. Economic Policy Institute, May 2024.

Childers, Chandra. 2025. The Ongoing Influence of Slavery and Jim Crow Means High Poverty Rates and Low Economic Mobility in the South. Economic Policy Institute, April 2025.

City of Cleveland. n.d. “Community Benefits Ordinance” (web page). Accessed December 4, 2025.

City of Detroit. n.d. “Community Benefits Ordinance” (web page). Accessed December 4, 2025.

Communication Workers of America (CWA). 2024. “A New Dawn: Union Victory at New Flyer in Anniston, Alabama.” May 20, 2024.

Council of Economic Advisors (CEA). 2024. “All Aboard the ApprenticeSHIP: Assessing the Changing Face of Registered Apprenticeships.” Biden White House Archives, November 20, 2024.

Currie, Janet, Lucas Davis, Michael Greenstone, and Reed Walker. 2015. “Environmental Health Risks and Housing Values: Evidence from 1,600 Toxic Plant Openings and Closings.” American Economic Review 105, no. 2 (February 2015): 678–709. doi: 10.1257/aer.20121656.

Data Center Watch. 2025. “$64 Billion of Data Center Projects Have Been Blocked or Delayed Amid Local Opposition.” Accessed February 24, 2026.

Dean, Adam, Jamie McCallum, and Atheendar Venkataramani. 2022. Unions in the United States Improve Worker Safety and Lower Health Inequality. Washington Center for Equitable Growth, December 2022.

Economic Policy Institute (EPI). 2021. “Unions Help Reduce Disparities and Strengthen Our Democracy” (fact sheet). Economic Policy Institute, April 23, 2021.

Economic Policy Institute (EPI). 2025a. “Workers’ Rights Preemption in the U.S.” Accessed July 1, 2025.

Economic Policy Institute (EPI). 2025b. “Child Care Costs in the United States.” Accessed July 1, 2025.

Economic Policy Institute (EPI). 2025c. “State of Working America data.” Accessed June 25, 2025.

Economic Policy Institute (EPI). 2026. “Family Budget Calculator.” Accessed February 15, 2026.

Erickson, Emily. 2021. Are Good Jobs Possible in the Deep South? Jobs to Move America, March 2021.

Fazili, Sameera, Pronita Gupta, and Doug Bloch. 2025. “How Community Benefits Agreements Can Reduce Project Delivery Risk.” UtilityDive, October 15, 2025.

Gould, Elise, Zane Mokhiber, and Katherine DeCourcy. 2024. What Constitutes a Living Wage? Economic Policy Institute, January 2024.

Hickey, Sebastian Martinez. 2024. “Leveraging the Gulf Coast Hydrogen Hub Community Benefits Plan to Empower the Texas Workforce.” Comments submitted on behalf of Economic Policy Institute to Texas Climate Jobs Project Community Commission on Truth and Transparency in Texas Hydrogen, December 5, 2024.

Ingram, Gregory K, and Yu-Hong Hong. 2012. Value Capture and Land Policies. Lincoln Institute of Land Policy.

Joint Center for Housing Studies of Harvard University (JCHS). 2024. America’s Rental Housing. Harvard University, 2024.

Katz, Batia, Robert Lerman, Daniel Kuehn, Jessica Shakespeare. 2022. Did Apprentices Achieve Faster Earnings Growth Than Comparable Workers? Brief prepared for U.S. Department of Labor, Employment and Training Administration. Rockville, MD: Abt Associates; and Washington, DC: Urban Institute, August 2022.

Last, Athena Nicole. 2025. A Case Study of the New Flyer of America Inc. Community Benefits Agreement. Jobs to Move America, July 2025.

Lawliss, Michael, Lew Finfer, and Jennifer Sherer. 2022. Using Local and Economically-Targeted Hire to Promote Good Jobs through the Infrastructure Investment and Jobs Act. Jobs to Move America, September 2022.

Leigh, J. Paul, and Bozhidar Chakalov. 2021. “Labor Unions and Health: A Literature Review of Pathways and Outcomes in the Workplace.” Preventative Medicine Reports 24, no. 101502. https://doi.org/10.1016/j.pmedr.2021.101502

Mangundayao, Ihna, Celine McNicholas, and Margaret Poydock. 2022. “Project Labor Agreements on Federal Construction Projects Will Benefit Nearly 200,000 Workers.” Working Economics Blog (Economic Policy Institute), February 9, 2022.

Manzo IV, Frank, Michael Jekot, and Robert Bruno. 2021. The Impact of Unions on Construction Worksite Health and Safety. Illinois Economic Policy Institute, November 2021.

Mast, Nina. 2025a. Forced Prison Labor in the “Land of the Free.” Economic Policy Institute, January 2025.

Mast, Nina. 2025b. How Anti-Worker Policies, Crony Capitalism, and Privatization Keep the South Locked Out of Shared Prosperity. Economic Policy Institute, June 2025.

McFadden, Michael, Sai Santosh, and Ronit Shetty. 2022. Quantifying the Value of Union Labor in Construction Projects. Mechanical Industry Advancement Fund, December 2022.

McNicholas, Celine, Margaret Poydock, Julia Wolfe, Ben Zipperer, Gordon Lafer, and Lola Loustaunau. 2019. Unlawful: U.S. Employers are Charged with Violating Federal Law in 41.5% of All Union Election Campaigns. Economic Policy Institute, December 2019.

McNicholas, Celine, Margaret Poydock, Samantha Sanders, and Ben Zipperer. 2023. Employers Spend More Than $400 Million per Year on ‘Union-Avoidance’ Consultants To Bolster Their Union-Busting Efforts (fact sheet). Economic Policy Institute, March 2023.

McNicholas, Celine, Margaret Poydock, Heidi Shierholz, and Hilary Wething. 2025. Unions Aren’t Just Good for Workers—They Also Benefit Communities and Democracy. Economic Policy Institute, August 2025.

McNicholas, Celine, Margaret Poydock, and Heidi Shierholz. 2026. Workers’ Resolve Drives Increase in Unionization in 2025. Economic Policy Institute, February 2026.

Merchant, Zach, and Adrian P. Guerra. 2025. “Data Center Boom Impacting Georgia’s Water Resources.” 11Alive, April 14, 2025.

Mickey, Robert. Paths Out of Dixie: The Democratization of Authoritarian Enclaves in America’s Deep South, 1944-1972. Princeton, N.J.: Princeton Univ. Press, 2015.

Mishel, Lawrence. 2017. “The Increased Diversity of New York City Union Construction Employment.” Working Economics Blog (Economic Policy Institute), January 19, 2017.

Morrissey, Taryn. 2020. Addressing the Need for Affordable, High-Quality Early Childhood Care And Education for All in the United States. Washington Center for Economic Growth, February 2020.

New England Real Estate Journal (NEREJ). 2019. “MP Boston and Building Trades Unions sign Project Labor Agreement for Winthrop Center.” NEREJ, November 15, 2019.

O’Brien, Connor. 2023. “Factory Boom in the Mountain West and Upper Midwest Accelerated into the Spring.” Economic Innovation Group, June 13, 2023.

Ormiston, Russell, and Cihan Bilginsoy. 2024. “Measuring Diversity in Construction Apprenticeship Programs.” Working Economics Blog (Economic Policy Institute), November 21, 2024.

Partnership for Working Families and Community Benefits Law Center (PWF and CBLC). 2016. Common Challenges in Negotiating Community Benefits Agreements and How to Avoid Them. January 2016.

Payne, Mat. 2019. “When Nowhere Becomes Somewhere: Gentrification in Rural Communities and How Proactive Community Planning and a Progressive Property Valuation System Can Stem the Tide.” Kentucky Law Journal 207, no. 4: 727–745.

Perez, Daniel. 2015. Voter Suppression Makes the Racist and Anti-Worker Southern Model Possible. Economic Policy Institute, October 2024.

Penn, Ivan, and Karen Weise. 2025. “Big Tech’s A.I. Data Centers Are Driving Up Electricity Bills for Everyone.” New York Times, August 2025.

Polaris. 2015. “Polaris Industries Inc. Announces Expansion of Manufacturing Operations.” January 9, 2015.

PowerSwitch Action. 2025. “Community Benefits Agreements Examples.” Accessed September 1, 2025.

Reed, Rachel. 2025. “How data centers may lead to higher electricity bills.” Harvard Law Today, September 2025.

Rhinehart, Lynn, and Celine McNicholas. 2020. Collective Bargaining Beyond the Worksite: How Workers and Their Unions Build Power and Set Standards for Their Industries. Economic Policy Institute, May 2020.

Sabin Center for Climate Change Law (Sabin). 2001. North Hollywood Mixed-Use Redevelopment Project Community Benefits Agreement.

Sabin Center for Climate Change Law (Sabin). 2017. Monhegan Plantation et al. and Maine Aqua Ventis Community Benefits Agreement.

Sabin Center for Climate Change Law (Sabin). 2022. New Flyer of America, Greater Birmingham Ministries, and Jobs to Move America Community Benefits Agreement.

Sabin Center for Climate Change Law (Sabin). 2024. City of Salem and Salem Wind Terminal LLC Community Benefits Agreement.

Sachs, Benjamin. 2024. “Hey ALEC, Be Careful What You Wish For.” On Labor, March 8, 2024.

Saha, Devashree. 2024. Community Benefits Snapshot: New Flyer Community Benefits Agreement. World Resources Institute, December 2024.

Scott, Robert, Valerie Wilson, Jori Kandra, and Daniel Perez. 2022. Botched Policy Responses to Globalization Have Decimated Manufacturing Employment with Often Overlooked Costs for Black, Brown, and Other Workers of Color. Economic Policy Institute, January 2022.

Sherer, Jennnifer, and Elise Gould. 2025. It’s Time for Colorado to Remove Barriers to Unionization. Economic Policy Institute, February 2025.

Stand Up Nashville (SUN). 2018. “Historic Community Benefits Agreement Reached!” SUN, September 4, 2018.

Stand Up Nashville (SUN). 2020. Nashville MLS Soccer Community Benefits Agreement.

Stand Up Nashville (SUN). 2023. Community Advisory Committee Community Benefits Agreement Annual Report 2023.

Stephenson, Jemma. 2024. “Alabama Senate Bill Would Punish Companies That Voluntarily Recognize Unions.” Alabama Reflector, March 27, 2024.

Tennessee Office of Governor. 2023. “Gov. Lee, Ford Celebrate Historic BlueOval City in West TN” (press release). March 23, 2023.

The Chesapeake Group, Inc. (TCG). 2023. Haywood Market Assessment Section for Growth Strategies. September 2023.

Todd, Patricia. 2021. The Hidden Costs of Alabama’s Tax Incentives. Jobs to Move America, August 2021.

Turner Lee, Nicol, and Darrell West. 2026. Why Community Benefit Agreements Are Necessary for Data Centers. The Brookings Institution, January 2026.

Upton, Greg, and Sarang Talpur. 2024. Literature Review on the Impact of Utility-Scale Solar on Housing Prices. Louisiana State University, August 2024.

Wadwhani, Anita. 2023. “Black Farming Community Fights to Get Fair Deal as State Takes Land for Ford Plant Roadways.” Tennessee Lookout, April 3, 2023.

Wadhwani, Anita. 2024. “Water Wars: Groups Challenge ‘Unsustainable’ Withdrawals from Duck River.” Tennessee Lookout, May 6, 2024.

Walker, Carla, and Ian Goldsmith. 2026. “From Energy Use to Air Quality, the Many Ways Data Centers Affect US Communities.” World Resources Institute, February 2026.

Walton, Douglas, Karen Gardiner, and Burt Barnow. 2022. Expanding Apprenticeship to New Sectors and Populations. Prepared for the U.S. Department of Labor, Employment and Training Administration. Rockville, MD: Abt Associates, August 2022.

Wiley, Jonathan. 2015. The Impact of Commercial Development on Surrounding Residential Property Values. J. Mack Robinson College of Business, April 2015.

World Resource Institute (WRI). n.d. “Database of Community Benefits Frameworks Across the US.” Accessed September 5, 2025.

World Resources Institute (WRI). 2001. Staples Center Community Benefits Agreement.

World Resources Institute (WRI). 2005. Community Benefits Agreement between the Town of Waterloo and Seneca Meadows Inc.

World Resources Institute (WRI). 2018. Community Benefits Agreement between Deepwater Wind and the Town of East Hampton.

World Resources Institute (WRI). 2021. Resort Casino Host Community Agreement by and between the City of Richmond, Virginia and RVA Entertainment Holdings, LLC.

World Resources Institute (WRI). 2025. Atlanta Beltline. Accessed September 29, 2025.

Zessoules, Daniella, and Olugbenga Ajilore. 2018. Wage Gaps and Outcomes in Apprenticeship Programs. Center for American Progress, December 2018.

The American Rescue Plan Act (ARPA) was enacted on March 11, 2021. Among other provisions, ARPA allocated $350 billion for State and Local Fiscal Recovery Funds (SLFRF). SLFRF was a recognition of the stark reality that the COVID-19 pandemic had wreaked havoc on state and local government finances (McNicholas, Bivens, and Shierholz 2020). SLFRF was also a reflection of lessons that policymakers learned from recent history. In the years following the Great Recession, inadequate fiscal support to state and local governments resulted in massive budget cuts, public-sector job losses, and reduced spending that dragged on the economy, delaying economic recovery by years (Shierholz and Bivens 2013). With the prospect of potentially devastating COVID-19-induced state and local budget shortfalls, Congress and the Biden administration made the decision to spend at the scale of the problem by making sure SLFRF was large enough to meet its recipients’ needs.

Of the $350 billion in fiscal recovery funds, $195.3 billion went to state governments, $65.1 billion to counties, $45.6 million to cities, $20 billion to tribal governments, $4.5 billion to territories, and $19.5 to small units of local government, mostly towns and villages. They could use the funds for five purposes: responding to the public health emergency caused by COVID-19; responding to the negative economic impacts of COVID-19; providing premium pay to “essential” workers; improving water, sewer, and broadband infrastructure; and replacing public-sector revenue lost by the economic downturn that accompanied COVID-19. Recipient governments had until December 31, 2024, to obligate those funds and until December 31, 2026, to spend them.

By any objective assessment, SLFRF was a transformative success. It averted a potential crisis. It empowered state and local leaders to address long-standing community needs. It helped millions of working families. It saved lives during the COVID-19 pandemic. The design and implementation of SLFRF offer many important lessons to future policymakers.

This report will highlight the smart design of SLFRF, which made it well positioned to address the needs of state and local governments in 2021 and beyond. The report will also note ways in which future policymakers could improve upon SLFRF’s design. The report will describe how SLFRF funds were deployed, showcasing the breadth and variety of uses to which they were put. State and local fiscal recovery funds were a vital part of the U.S. economic recovery post-2020. They provide a shining example of what government can achieve when it has adequate resources, and when the needs of communities and families are the main drivers of investment decisions.

SLFRF played a vital role in preventing a second Great Recession

The pandemic recession that began so suddenly in March 2020 was the biggest economic shock the country has seen since the Great Recession that started in 2008. Comparing the distinctly different policy responses to those two crises demonstrates how important SLFRF was to speeding the economic recovery and to preventing a second Great Recession.

First, SLFRF was vital in preserving and rebuilding the public-sector workforce. In the wake of the Great Recession, state and local governments faced devastating budget cuts that resulted in significant reductions in staffing and services. All faced fiscal crises because of sharp revenue declines caused by the Great Recession, but public services were further strained in many states by deliberate policy decisions, predominantly by Republican-controlled state governments, to cut taxes and slash public services (Cooper, Gable, and Austin 2012). State and local government employment peaked in July 2008, then fell for five straight years. It took a total of 11 years to reach July 2008 levels again (Cooper 2020). By contrast, the peak in state and local governments jobs before the pandemic was in February 2020. By October 2023—just three years and eight months later—state and local public sector employment had fully recovered to pre-pandemic levels.

In the first year following the passage of ARPA, there is evidence that the pace of a state’s SLFRF spending was positively correlated to the recovery of its public workforce:

Table 1

After that, the direct correlation between SLFRF spending and public-sector jobs faded, but that is hardly surprising, given all the other variables that impact job markets.

Second, this rapid recovery mirrored the recovery of the overall job market. The typical U.S. state needed 77 months after the start of the Great Recession for its job numbers to recover; it only took 29 months after the beginning of the COVID-19 pandemic for the same level of recovery. Of course, SLFRF was hardly the biggest factor in the overall economic recovery, but Cooper (2020) has shown that disinvestment in the public sector drags on growth in the private sector as well, and on economic growth overall. SLFRF supported conditions that made the private-sector economic recovery possible.

Third, SLFRF allowed states and localities to enact programs of social insurance and income support that directly responded to immediate community needs. In just the first two years of SLFRF’s operation alone, more than 4.5 million households received mortgage, rent, or utility assistance. Emergency programs offered housing to people who had been displaced by the pandemic and direct government assistance to food pantries and other programs that helped people facing food insecurity. These programs were valuable tools for helping working families in need.

Fourth, SLFRF has helped state and local governments and communities become more resilient against future downturns. Many states upgraded their unemployment insurance (UI) systems to make it easier to cope with an influx of claimants in the future. Some local governments created greater tenant protections and used recovery funds to give tenants facing eviction the right to free legal counsel. Several cities invested in pre-apprenticeship programs to help people in underserved communities gain access to high-quality infrastructure and climate jobs. These investments and others like them will help state and local governments to quickly distribute social insurance benefits when the next crisis hits and provide additional safety for working families put in jeopardy through job loss, illnesses, or natural disasters. (Kamper 2025).

SLFRF’s innovative program design meant funds could be used where they did the most good

The SLFRF program had two unusual characteristics that helped make it successful.

First, unlike previous iterations of state and local aid, SLFRF funds went directly to individual state and local governments. While payments to smaller cities were distributed first to states and then passed on to those cities, states were prohibited from imposing conditions on that distribution and could not hold back the payments; their role was purely administrative.

On previous occasions when federal money was allocated to local governments, it was much more common for the state government to hold federal aid on behalf of local governments. This was, for example, the mechanism behind the COVID-19-era financial assistance to school districts: the Elementary and Secondary Schools Emergency Relief Fund (ESSER, which had three iterations in 2020 and 2021, called ESSER I, ESSER II, and ESSER III respectively). A state’s department of education held ESSER funds and only parceled them out to school districts after the district had made a qualifying expenditure. The districts were not free to spend ESSER funds on their own. With SLFRF, however, recipients received funds before they needed to make expenditures and had complete control over how to use them.

This leads to a second important characteristic of SLFRF: Recipients were given broad latitude in how to use their funds. Under the legislation and the rules put out by the U.S. Department of the Treasury, SLFRF could be used for:

1. responding to the public health emergency caused by COVID-19
2. responding to the negative economic impacts of COVID-19
3. providing premium pay to “essential” workers
4. improving water, sewer, and broadband infrastructure
5. replacing public-sector revenue lost by the economic downturn that accompanied COVID-19

In 2023, the eligible uses for local governments were broadened to include government-built (or renovated) housing, surface transportation projects, and natural disaster relief, though in the end only a small share of recovery funds was used for those purposes.

Treasury rules also made the process simpler for smaller local governments by allowing up to $10 million to be used as public-sector revenue replacement without having to account for specific losses of funding—the SLFRF equivalent of the standard deduction on one’s taxes. Those rules also made clear that “negative economic impacts” could include existing inequities that predated the pandemic, such as long-standing racial employment and wage gaps (Economic Policy Institute 2025).

The combination of these two characteristics—state and local governments had the money within their control before making spending decisions, and great latitude in how to use it—meant that recipients could tailor the focus and pace of SLFRF spending to meet particular local needs. Given the extremely fluid state of the pandemic and the economy when ARPA was passed, this was the right decision to meet the pressing needs of the COVID-19 crisis. Overly prescriptive rules or additional bureaucratic hurdles to accessing and disbursing funds would have made it much harder for state and local recipients to respond rapidly to their specific needs.1

Lessons to apply for future policy design

Despite the great freedom given to recipients to use SLFRF in ways that best met their needs, of the roughly 31,000 local government recipients, almost 600 local government recipients did not report using their fiscal recovery funds at all and a further 600 reported using less than 99%. Another 220 local governments failed to file a single report on their use of fiscal recovery funds, and 1,089 more have been delinquent in filing for at least a year.

At least part of the explanation is that while ARPA guidance allowed for fiscal recovery funds to be used for myriad reasons, recipients (especially smaller local governments) with little experience in receiving money directly from the federal government often struggled to understand Treasury rules on allowed uses of funds. Unlike state governments with experienced personnel deeply versed in Treasury’s complex rules and how to navigate them, many local governments had no such in-house expertise. Advocacy organizations reported, again and again, that even in 2024, as the deadline to obligate ARPA funds was approaching, many local policymakers were still raising questions about how funds could be used and what was allowed (Rochford, Bauer, and Wallace 2024).

Relatedly, Treasury officials who talked with EPI noted that many of the smallest local governments did not have a website or internal email system. Because all SLFRF reporting was supposed to be done electronically, some of these recipients struggled to properly report their expenditures. Sometimes the departure of a single municipal official created significant problems because that person was the only one who knew the electronic passwords.

An abundance of reports from across the country make clear recipients struggled to choose from among many appealing options, creating a kind of paralysis of choice. This is completely understandable; the needs communities were facing at this time were myriad and diverse, and prior to SLFRF, most local government officials had likely never had access to such flexible resources before then.

These challenges were exacerbated because the Treasury Department made a conscious decision not to offer specific technical assistance regarding recipient governments’ possible uses of fiscal recovery funds. When local government officials reached out to Treasury to seek guidance on whether a particular idea was within the scope of the law, Treasury rarely offered definitive answers. This was understandable given that more than 31,000 governmental units received their own fiscal recovery funds; Treasury could not possibly handle detailed queries from more than a fraction of them. What this meant, though, is that many opportunities to use fiscal recovery funds in innovative and imaginative ways were missed. Many local governments chose caution over ambition, out of fear that particular uses of the funds would not be permitted and the funds rescinded.

To prevent a similar situation in the future, policy designers might do well to study Colorado’s Regional Grant Navigator program. Colorado chose 13 community and nonprofit organizations across the state to help local governments find ways to best access funds from the 2021 Infrastructure, Investment and Jobs Act and the 2022 Inflation Reduction Act. These navigators helped local governments understand the complex regulations around the laws, helped them design proposals to apply for funding, and offered advice on which programs might be best suited to the needs of those communities (Colorado n.d.). A similar model might allow local governments to get unbiased and timely assistance from organizations committed to helping them make the most of their funds.

A final challenge of the SLFRF policy design was the lack of clear definition of what “obligating” the funds meant. As advocates, policymakers, and others reported throughout 2022, 2023, and 2024, many local governments understood “obligation” to mean something similar to “budgeting” or “allocating”—making a formal decision as to how to use the funds (Kamper 2024). Recipients unfamiliar with the language used by Treasury could and did make that mistake. It was not until May of 2024 that Treasury explicitly stated in a webinar that “obligating” funds is not the same thing as budgeting (Treasury 2024). “Obligation” required not just a budgetary decision, but concrete steps to implement the decision, such as signing a contract with a vendor or an interagency agreement to send the funds to a particular department. Future fiscal recovery efforts should be more conscious of the need to clearly define terms, especially when plain-language definitions may not match Treasury’s technical definition.

How were fiscal recovery funds used?

General spending trends

The primary use of fiscal recovery funds—approximately 50% of state allocations and 60% of local government allocations—was revenue replacement, (replacing state and local funds that were lost because the economic shock of COVID-19 reduced tax and fee revenues). Revenue replacement had not been an allowed use of previous iterations of COVID-19 fiscal relief funds. Most notably the CARES Act, the first COVID-19 relief measure passed in 2020, did not allow use of Coronavirus Relief Funds for revenue replacement.

State and local governments face considerable constraints on their ability to raise revenues. Measures like Colorado’s Taxpayer Bill of Rights and California’s Proposition 13 often prohibit states from raising taxes or require legislative supermajorities to do so (Jefferson 2025). Local governments face even more constraints, with few policy levers available to raise revenues. As such, any shock to state and local government revenues can take a long time to reverse, a lesson we learned in the aftermath of the Great Recession. By allowing revenue replacement, SLFRF made it much easier for state and local governments to maintain adequate levels of funding, even as the pandemic recession lowered income from taxes. Revenue replacement was an important innovation in ARPA that should be replicated in the future.

Although the interim rules for ARPA put out by Treasury soon after the law was enacted required complex accounting of lost revenue, the final Treasury rule made the process much easier. For amounts less than $10 million, recipients did not need to calculate lost revenue. They could simply designate funds as revenue replacement and use them as needed. The appeal of this rule to local governments is evident in data summarizing subsequent uses of SLFRF; the smaller a recipient government, the more likely they were to use their fiscal recovery funds for revenue replacement.

Table 2

After revenue replacement, the next most popular use of SLFRF was addressing negative economic impacts of the pandemic. Once again, the flexibility given to recipients under this category was almost certainly a key factor encouraging use of funds for such purposes.

Table 3

Infrastructure was the third-largest use of fiscal recovery funds, and here there is a notable regional variation—state and local governments in the South allocated a far greater share of their funds to infrastructure than those in the rest of the country. In particular, 82% of all state funds obligated for broadband were in Southern states (not shown in Figure A).

Figure A

Not only is water and sewer infrastructure essential for people’s health, these investments are vital to a well-functioning economy. As EPI has extensively documented in its Rooted in Racism series, Southern states have long underinvested in in basic physical infrastructure (Childers 2023–2025). These spending choices likely reflect, at least in part, a need to address the long-standing underinvestment in the region—underinvestment driven by Southern lawmakers’ antipathy toward raising adequate revenue.

Aside from infrastructure spending in the South, there are no clear regional trends in how fiscal recovery funds were used. This is not surprising, given the flexibility of the funding (a feature EPI has long supported) (Bivens 2020). When ARPA was enacted in early 2021, there was simply no way for the federal government, or state and local governments, to know what their needs would be. ARPA’s flexibility was the right decision. The ability of recipient governments to immediately fill unanticipated budget holes via revenue replacement meant hundreds of thousands of state and local jobs were preserved, vital public programs were maintained, and a deeper economic crisis averted. The most notable success of ARPA SLFRF lies in what did not happen: a collapse in basic public services, massive long-term unemployment, and an extended economic depression.

Innovative SLFRF investments supported working families

In all, SLFRF funded more than 159,000 different projects across the country. Some were gigantic, like a $787 million program in New Jersey to provide rental assistance to low- and moderate-income tenants, and some were very small, like the $28 that St. Clair County, Michigan, provided to help renovate the Port Huron Township Museum.

There are many examples of state and local governments using fiscal recovery funds to make transformative investments to build an economy that supports working families. Several types of uses deserve special attention: fighting the COVID-19 pandemic, investing in public health, and addressing problems with food access and nutrition.

First, ARPA SLFRF went a long way to address the health emergency the country faced in 2021. States, cities, and counties were on the front lines of keeping people safe, providing access to new vaccines once they became available, and saving lives throughout the COVID-19 pandemic.

Over $1.8 billion in SLFRF was used to test, trace, and vaccinate people against COVID-19. Much of this money was used to deal with the practical and logistical challenges of testing and vaccination. Cities and counties, especially, bought personal protective equipment for government employees, especially first responders. Scores of governments purchased testing kits and lab equipment and worked to engage the public to encourage vaccination and tracing outbreaks. For example, Milan, Illinois, rented a meeting hall in town for $43,200 to host their vaccine clinic. Jefferson County, Missouri, hired a nurse for every public school district to oversee a contact-tracing program to track COVID-19’s progress through schools. Monroe County, Indiana, was one of many governments that instituted wastewater monitoring to check for COVID-19 surges While any individual expenditure may seem minor, together these measures did much to reduce COVID-19 infections and deaths.

Second, SLFRF allowed recipient governments to make long-term upgrades to infrastructure that both mitigated COVID-19 threats and made public spaces permanently safer, healthier, and more accessible. Almost $4.3 billion was obligated to upgrade the air quality and safety of public and private facilities. At least 550 projects upgraded HVAC systems in schools, nursing homes, public buildings, and correctional facilities. Governments invested in digital communications tools to reduce the need for in-person meetings. Typical examples include Peoria, Arizona, which allocated $124,996 to install touchless drinking fountains in public buildings, and Stafford County, Virginia, which spent $115,255 to add a glass partition to the entrance of the Commissioner of Revenue’s office so that the administrative staff could be protected from visitors’ virus transmission.

The freedom given to local governments to innovate was particularly evident in the way multiple localities sought to address problems related to food access and nutrition—an issue that has received tremendous public attention resulting from New York City Mayor Zohran Mamdani’s plan to establish municipally operated grocery stores. While one commentator claimed such a project would resemble “the old Soviet Union” (McArdle 2025), the fact is that many SLFRF recipients used public funds to increase access to food for low-income communities, including by opening their own stores.

For example:

• Sioux Falls, South Dakota, set up a mobile grocery market that would operate in underserved parts of the city.
• The small town of Cutler, Illinois, set up a Community Commissary to make it easier to buy food without having to travel a long way.
• Branson, Colorado (population 74 in the 2010 census), constructed a community greenhouse to grow and sell fresh fruits and vegetables for the town and school.
• Charleston, West Virginia, opened a community grocery store that would provide access to fresh groceries for 14,000 residents, and the city of Austin, Texas, did something similar.

There were, in addition, scores of grants to food pantries and other nonprofits that help people find the food they need. The proposal for New York City fits well with how these communities used SLFRF to address food access.

Above are just a handful of the tens of thousands of useful projects made possible by fiscal recovery funds. Some uses were more effective than others, however. For example, although modernizing state unemployment insurance systems was a useful endeavor (see above), more than $22 billion was also spent replenishing state unemployment insurance trust funds, which was unnecessary. UI trust funds hold UI taxes paid by businesses, to make sure funds are available to pay UI claims during spikes in unemployment. While those funds had, indeed, been depleted by the pandemic recession, state UI trust funds are designed to be self-correcting.2 They have automatic mechanisms to raise employer payroll taxes when the trust fund has been drawn down, to rebuild the funds and be prepared for future downturns. It was wholly unnecessary to use fiscal recovery funds to refill trust funds that would have returned to full strength on their own. Spending SLFRF to refill trust funds was a missed opportunity to support economic growth and strengthened public services (Banerjee, Martinez Hickey, and Sawo 2021). Future fiscal recovery projects should not make refilling UI trust funds an allowed use, though they should continue to support modernization of and upgrades to UI systems.

SLFRF accomplished its goals without driving inflation

Finally, it is worth noting that, despite politically motivated claims to the contrary, there is little evidence that SLFRF, or indeed the entire $1.9 trillion American Rescue Plan, was a significant contributor to inflation. As Bivens, Banerjee, and Dzholos (2022) show, the rise in inflation starting in 2022 was a global phenomenon, one that impacted countries, regardless of whether they provided fiscal relief to their economies during COVID-19. Nor was inflation correlated with the rapid decrease in unemployment the U.S. saw, thanks in part to ARPA. Rather, inflation was primarily driven by the dramatic supply shocks to various sectors of the economy caused by COVID-19, and then exacerbated by the Russian invasion of Ukraine in early 2022. Given the scale of the crisis policymakers were confronted with in early 2021, they were right to spend at the scale of the problem, and critiques blaming that spending for inflation are not backed up by the data. Moreover, policy measures that prioritized lowering inflation would have led to either lower employment or lower real wage growth, as there was no policy option that would have lowered inflation, increased wage gains, and supported the strong job growth of 2021–2024 (Bivens 2024).

Conclusion

ARPA’s State and Local Fiscal Recovery Fund was a great success. By spending at the scale of the problem, the federal government aided the economic recovery, supported the maintenance of public services, and gave myriad governments the chance to make innovative choices that have improved the well-being of their communities. A smaller SLFRF would have slowed our economic recovery and made governments more cautious about enacting bold policies to protect working families.

By giving recipient governments so much flexibility in using the funds, the Biden administration allowed every state, county, city, territory, and tribal government to fashion the response most appropriate to their particular needs. When faced with a crisis that had so much unpredictability, this was the right decision.

We don’t know when the next economic downturn, global pandemic, or climate disaster will hit. Whenever it does, federal policymakers should seek to emulate the model set by ARPA.

Notes

1. The devastating Flint, Michigan, water crisis of the 2010s is a prime example of a situation in which too many bureaucratic hurdles worsened a disaster. Flint was facing a serious fiscal crisis and therefore lacked the internal capacity to apply for federal funding (which they would have received) that might have prevented lead contamination of the water supply. See GAO 2015 for more details.

2. At least they should be, provided policymakers have set adequate UI tax base rates. See Perez 2025 for more information.

References

Banerjee, Asha, Sebastian Martinez Hickey, and Marokey Sawo. 2021. “States Are Choosing Employers over Workers by Using COVID Relief Funds to Pay Off Unemployment Insurance Debt: Policymakers Shouldn’t Be Afraid to Increase Taxes on Employers to Improve Unemployment Insurance.” Working Economics Blog (Economic Policy Institute), November 19, 2021.

Bivens, Josh. 2020. “Getting Serious About the Economic Response to COVID-19.” Working Economics Blog (Economic Policy Institute), March 9, 2020.

Bivens, Josh. 2024. “The Post-Pandemic Recovery Is an Economic Policy Success Story: Policymakers Took the Best Way Through a Rocky Path.” Working Economics Blog (Economic Policy Institute), October 1, 2024.

Bivens, Josh, Asha Banerjee, and Mariia Dzholos. 2022. “Rising Inflation Is a Global Problem: U.S. Policy Choices Are Not to Blame.” Working Economics Blog (Economic Policy Institute), August 4, 2022.

Callaghan, Peter. 2021. “The Minnesota Legislature Approved $250 Million for Pandemic Worker Bonuses. Should the State Give Away More Than That?” Minnpost, August 12, 2021.

Callaghan, Peter. 2022. “How the Legislature’s Deal on Pandemic Worker Bonuses and Unemployment Insurance Got Done.” Minnpost, May 4, 2022.

Childers, Chandra. 2023–2025. Rooted in Racism and Economic Exploitation (report series). Economic Policy Institute, October 2023–June 2025.

Colorado, State of. n.d. “Regional Grant Navigators” (web page). Accessed December 3, 2025.

Cooper, David. 2020. “Without Federal Aid, Many State and Local Governments Could Make the Same Budget Cuts That Hampered the Last Economic Recovery.” Working Economics Blog (Economic Policy Institute), May 27, 2020.

Cooper, David, Mary Gable, and Algernon Austin. 2012. The Public-Sector Jobs Crisis: Women and African Americans Hit Hardest by Job Losses in State and Local Governments. Economic Policy Institute, May 2012.

Economic Policy Institute. 2025. Racial and Ethnic Disparities in the United States: An Interactive Chartbook. Economic Policy Institute. October 2025.

Jefferson, Rita. 2025. Anti-Tax Revolts Backfire: What We’ve Learned from 50 Years of Property Tax Limits. Institute on Taxation and Economic Policy, July 2025.

Kamper, Dave. 2025. “Some States and Localities Will Be Better Prepared to Fight a Possible Recession Because of How They Used ARPA Fiscal Recovery Funds.” Working Economics Blog (Economic Policy Institute), April 30, 2025.

Kamper, Dave, and Emma Cohn. 2024. “Time Is Running out for State and Local Governments to Obligate American Rescue Plan Funds.” Working Economics Blog (Economic Policy Institute), October 17, 2024.

McArdle, Megan. 2025. “Zohran Mamdani Has a Seriously Bad Idea—for Grocery Stores.” Washington Post, July 1, 2025.

McNicholas, Celine, Josh Bivens, and Heidi Shierholz. 2020. “The Next Coronavirus Relief Package Should Provide Aid to State and Local Governments, Protect Employed and Unemployed Workers, and Invest in Our Democracy.” Working Economics Blog (Economic Policy Institute), April 27, 2020.

Perez, Daniel. 2025. Holding the Line: Unemployment Insurance. Economic Policy Institute, September 29, 2025.

Rochford, Patrick, Julia Bauer, and Michael Wallace. 2024. “Obligate It or Lose It! Preparing for the Upcoming ARPA SLFRF Obligation Deadline.” National League of Cities, October 1, 2024.

Shierholz, Heidi, and Josh Bivens. 2013. “Four Years into Recovery, Austerity’s Toll Is at Least 3 Million Jobs.” Working Economics Blog (Economic Policy Institute), July 3, 2013.

U.S. Department of the Treasury (Treasury). 2024. “State and Local Fiscal Recovery Funds: New Obligation FAQs Webinar” (web page). Accessed December 3, 2025.

U.S. Department of the Treasury (Treasury). 2025. “Public Data: State and Local Fiscal Recovery Funds” (web page). Accessed December 11, 2025.

U.S. Government Accountability Office (GAO). 2015. Municipalities in Fiscal Crisis: Federal Agencies Monitored Grants and Assisted Grantees, but More Could Be Done to Share Lessons Learned. Publication number 15-222, March 2015.

Wakeley, Dev. 2021. “Alabama Is Making a Costly Mistake on COVID-19 Recovery Funds. Here’s a Better Path Forward.” Working Economics Blog (Economic Policy Institute), November 8, 2021.

The Council was preparing to discuss a wage adjustment in June 2025 when the chair resigned. It is expected to take up the issue when the governor names a new chair, which has yet to happen. Given that almost two years have passed since the initial setting of the $20 wage standard—a year and a half that has seen continued inflation—the Council should prioritize this cost-of-living adjustment in 2026 to prevent rising prices from erasing the gains made by fast-food workers. One impediment to this adjustment is opposition from fast-food restaurant operators, who argue that raising workers’ pay to $20 damaged their businesses and that they cannot absorb any further increases.

This debate in California between fast-food workers and employers highlights the importance of regular and automatic adjustments to wage standards (like minimum wages) that ensure inflation-adjusted living standards for low-wage workers do not erode over time.

Indexation is often an afterthought in debates over wage standards. But it can turn out to be the most important part of any policy that sets a wage standard. This report examines salient issues related to indexing wage standards and offers recommendations for policymakers. Its key arguments are:

• Wage standards are necessary and efficient because of unbalanced power in labor markets.
• Wage standards that are fixed in nominal terms and have no automatic adjustment (like the federal minimum wage) get weaker every single year that passes without a legislated increase. The cumulative erosion of inflation-adjusted wage standards often exceeds the initial legislated increase.
  • For example, in inflation-adjusted terms, the federal minimum wage today is lower than it was in 2007, the last time a new standard was passed into law.
• Mandating higher wages for any group of workers will set off a chain of adjustments elsewhere in labor and product markets. What these adjustments eventually mean for relative incomes, prices, and employment is an empirical question.
  • Thankfully, minimum wage increases are some of the most well-studied events in economics, and the weight of empirical evidence is that they do not measurably increase overall inflation or lead to significant job loss, but they do raise the inflation-adjusted pay of targeted workers.
• Adjusting wage standards only for increases in inflation is actually a conservative policy in the sense of minimizing potential burdens on low-wage employers. More ambitious targets for adjustment—like wages or even productivity—could be preferable depending on the specific case.
  • In the case of the California Fast Food Council, providing a price-based adjustment to account for inflation since the initial adoption of the $20 minimum wage in April 2024 is an appropriate and modest step.
  • A 3.5% increase in the wage standard—the maximum adjustment the Council can recommend—is also conservative because it will only partially offset the actual 4.2% cost of living increase since April 2024 and because it does not account for ongoing productivity improvements in the sector.
• Over the past decade—and continuing since April 2024—the inflation rate faced by lower-income households has been higher than the overall inflation rate, largely because housing is a higher share of lower-income households’ budget. This means indexing based on the average inflation rate would fail to fully restore the affordability lost to fast-food workers since the enactment of the $20 wage standard, making such an adjustment even more modest (and even more necessary).

Wage standards are necessary because of unbalanced labor market power

Modern labor markets—particularly those that low-wage workers participate in—are characterized by significant employer power. Low-wage employers rarely if ever negotiate pay with workers, instead posting take-it-or-leave-it wage offers. Further, when a given employer lets its own wages lag those of potential competitors, workers’ exit from the lower-wage firm is far less common than would be predicted under truly competitive labor markets where employers robustly compete for workers.

The seminal source for modeling labor markets as situations where employers have substantial wage-setting power is Manning (2003), who describes this situation as one of “monopsony” power in labor markets.The literal definition of monopsony is a market with a single buyer. At points in history (think 19th century “company towns” in rural and isolated areas) this kind of literal monopsony may have existed. But Manning and those who have built on this work point to several features and frictions in real-world labor markets that make it hard for workers to effectively search for better jobs. These job search barriers effectively grant employers excess market power over workers even when there are numerous employers. Some of these frictions include things like lack of information about wages and other policies of alternative employers, transportation restrictions that require workers to look for jobs only in places near their home or public transit nodes, child care considerations that require a job’s location be compatible with picking up kids at a regular time, along with many other factors.

Employers use these barriers to employees finding better outside options to “mark down” wages below what would be necessary for employers to attract and retain workers in competitive labor markets. These markdowns can be large enough to push workers’ pay well below the value they produce for the employer, making pay levels inefficient.

At the level of the total economy, the excess power of employers in labor markets and their ability to markdown wages can be seen in the gap between economy-wide productivity (the amount of income generated in an average hour of work in the economy) and the hourly pay (including benefits) of typical workers.

Figure A

Wage standards—like minimum wages—can correct for this excess employer power. This leaves low-wage workers with higher pay and living standards and moves the economy to a more efficient allocation of workers across jobs. It can in theory even lead to an increase in employment. This degree of employer power in labor markets and the inefficiency of labor market outcomes without wage standards help explain the general empirical finding that minimum wage increases in the United States have not caused significant employment declines, a finding that is counter to what one would expect if labor markets were competitive.1

California’s fast-food minimum wage has had minimal employment effects

Current evidence suggests that California’s fast-food minimum wage is no different in that it has raised wages without causing large, negative employment reductions. There are four studies on the specific wage and employment effects of the California fast-food minimum wage. Three studies show both sizable earnings effects and limited-to-no employment changes. One analysis, in contrast to the other three studies, shows moderately negative employment effects, but also found the policy raised the total earnings of fast-food workers.

Schneider, Harknett, and Bruey (2024) surveyed fast-food workers in large chains and showed that relative to other states, the California policy raised wages and had no effect on the usual number of hours of fast-food workers in the quarter after the minimum wage change. With data from Equifax, Hamdi and Sovich (2025) compared fast-food establishments within large firms across different states and found that California fast-food establishments raised wages by about 12% and increased employment by a statistically insignificant 2%. Sosinskiy and Reich (2025) used data from the Quarterly Census of Employment and Wages (QCEW) to study employment and earnings trends in fast-food restaurants in California relative to those in other states and to full-service restaurants in California, which are not directly bound by the fast-food minimum wage. The authors’ preferred specification estimated a wage increase of about 7% and an employment decline of just under 1% that was statistically indistinguishable from zero. Finally, Clemens, Edwards, and Meer (2025) used QCEW data and estimated a similar wage increase of about 8%, but also a statistically significant employment decline of over 3%.2

In interpreting employment changes from a minimum wage increase, it’s best to compare the size of estimated wage effects with the estimated employment effects. The ratio of these two estimates—the own-wage elasticity of employment3—helps to gauge whether any employment changes were small or large relative to how much the policy actually raised wages. When the ratio is more positive than -1, total fast-food worker earnings rose even after accounting for potential employment losses. Standardizing the estimates by dividing employment and wage effects also allows us to make consistent comparisons across these studies and with studies of other minimum wage increases.

For the three studies where it is possible to calculate them, the own-wage elasticities are 0.19 (Hamdi and Sovich 2025), −0.12 (Sosinskiy and Reich 2025), and −0.40 (Clemens, Edwards, and Meer 2025). The first two are consistent with small or no employment impacts, but the last one moves into “medium negative” territory. All three studies’ estimates imply that the policy increased the aggregate earnings of fast-food workers, but the last study implies that employment losses caused fast-food workers to receive only about 60% of the potential earnings increase spurred by the minimum wage hike.

Even though Sosinskiy and Reich (2025) and Clemens, Edwards, and Meer (2025) use similar data, one important difference is that the Sosinskiy and Reich (2025) study controls for population changes. Net immigration rapidly fell after the implementation of the policy, disproportionately affecting California’s population levels. For example, according to the latest Census estimates, California’s resident population did not grow in 2025, whereas the rest of the country’s population grew by about 0.5%. Not accounting for these different population trends between California and elsewhere could cause an analysis to overstate any employment declines stemming from the policy, particularly if fast-food employment levels are sensitive to falling labor supply or a shrinking customer base. In their appendix, Sosinskiy and Reich (2025) find that ignoring population changes causes their estimates to be more negative.

In addition, when selecting a comparison group for fast-food workers, Clemens, Edwards, and Meer (2025) use fast-food workers in other states and high-wage industries in California, but they do not directly compare the California fast-food sector with the California full-service sector, which is not covered by the policy. Comparing the two sectors would be especially useful for capturing underlying economic trends if slowing population growth is driving declines in both fast-food and full-service employment levels. Indeed, Clemens, Edwards, and Meer (2025) show that the policy did not raise wages in the California full-service sector, but full-service employment in California declined by close to 2%. Failing to account for this decline in full-service employment also causes the Clemens, Edwards, and Meer (2025) estimates to be more negative.

Regardless of the source of these differences, the average own-wage elasticity across the three studies is −0.11, suggesting that the fast-food policy was successful in raising wages without causing sizable job losses. This point estimate is very similar to the median elasticity of all published minimum wage studies on restaurants (see Dube and Zipperer 2025). However, even if the policy were associated with larger employment reductions, measured job losses may still overstate the consequences for low-wage workers. First, lower headcount employment in the fast-food sector does not automatically translate into reduced employment or lower wages for low-wage workers if they move to other low-wage jobs, like retail, where they must be paid at least the California $16.90 minimum wage. Second, a measured decline in headcounts in a high turnover sector like fast-food is more likely to manifest as more weeks in between jobs rather than being shut out of work completely; in that case, some fast-food workers would indeed be working less but earning more money over the course of the year due to higher hourly wage rates.4

Why wage standards need to be automatically adjusted

If wage standards stay fixed in nominal terms, they are reduced in real (inflation-adjusted) terms every year inflation is nonzero. When there is a burst of rapid inflation, these real wage cuts get large very quickly. In fact, steady inflation can combine with policy inaction to leave wage standards lower in real terms than they were the last time a legislated increase happened.

Take the example of the federal minimum wage. Its current value of $7.25 came into effect in 2009. Today’s inflation-adjusted value of the federal minimum wage is almost 40% lower than its historic peak. It reached this peak in 1968, in an economy where productivity (the income generated in an average hour of work in the economy) was just 46% as high as it is in 2025. 5

Figure B

Adjusted for inflation, the 2025 value of the federal minimum wage is in fact lower than it was in 2007 when the U.S. Congress and president last signed a legislated increase into law. Put simply, without effective and automatic indexation, higher wage standards can be eroded almost entirely over time.

Today’s debate over the cost-of-living adjustment to the California Fast Food Council’s minimum wage often frames such adjustments as imposing new burdens on low-wage employers. But inflation since April 2024 means that the real minimum wage paid to California’s fast-food workers has been steadily cut since then. From April 2024 to January 2026, as measured by the consumer price index for all urban wage earners (CPI-W), this cut amounts to 4.2%. Without indexation, any burden on employers from this wage standard has fallen considerably since its adoption, providing a windfall to low-wage employers at the expense of their frontline employees. A failure to regularly index for inflation is essentially a backdoor method for unraveling the wage standard that policymakers passed into law.

Price indexing wage standards is a necessary and conservative policy

Raising wage standards each year by an amount equal to inflation holds low-wage workers’ living standards steady at the level that prevailed when the wage standards were set. For example, the $20 minimum wage for fast-food workers in large chains in California came into effect in April 2024. If these wages are indexed regularly to account for inflation since then, this will keep California fast-food workers’ living standards frozen at April 2024 levels going forward.

This is a clear improvement compared with outright erosion of living standards. But it remains the case that price indexing wage standards is a conservative policy in the sense that it minimizes any potential burdens on low-wage employers. It is a conservative policy for two reasons: (1) indexed wage changes are very small relative to the initial phase-in of wage standards, and (2) indexing for prices allows productivity growth in the wider economy to steadily reduce any potential burden or need for adjustment imposed by wage standards.

Price indexations are very small increases to wage standards

The increases to wage standards that result from price indexation are significantly smaller than the increases that result when the standards are initially phased in. For example, say that the last federal minimum wage increase in 2009 also indexed for subsequent price changes. The initial phase-in of the higher federal minimum wage saw it rise from $5.15 to $7.25 between 2007 and 2009. This constituted an average annual change of 19% for these two years. The average annual inflation rate (measured by the consumer price index for all items) between 2007 and 2024 was just 2.5%.

If the initial introduction of higher wage standards does not cause problematic outcomes, then it is very hard to see how the much smaller changes spurred by indexation for price changes would cause any.

The research on minimum wages provides very little reason to worry that changes in the United States in recent decades have caused any such problematic outcomes. The most commonly expressed worries about minimum wage increases are employment losses and upward price pressure.

We noted earlier that studies looking specifically at the California wage standard continue a common pattern in research on the employment effects of phased-in minimum wages: Employment declines caused by these minimum wage changes tend to be extremely modest or even zero on average. If one applied the modest measured employment losses stemming from the large initial increase in fast-food wages to the much smaller indexed adjustments, these already small employment losses become totally trivial.

The same logic holds regarding potential upward price pressures stemming from indexation: Compared with the initial setting of wage standards, indexed changes are very small and therefore unlikely to push up prices.

It is a fact that one person’s income is another person’s cost, so as low-wage workers’ pay rises, this raises costs for their employers. These employers could pass on these costs (in part or in full) to their customers by raising prices. But even if the entirety of the wage increases driven by price indexing wage standards was passed on in the form of price increases, overall price pressures would be extremely modest and low-wage workers would still unambiguously come out ahead.

Say that low-wage workers’ pay constitutes a third of labor costs in the fast-food sector, and that labor costs in turn constitute a third of total costs of fast food.6 If low-wage workers’ pay rises by 3.5% due to price indexing, this would increase prices the employer charges customers by less than 0.4% even if the full amount was passed on as price increases. Because fast food accounts for less than 3% of the overall inflation consumption basket, even a 0.4% increase in fast-food prices would raise overall prices by only 0.01%.

Price indexing still sees reductions in low-wage workers’ relative pay and allows productivity growth to steadily erode any potential burden on low-wage employers

We noted earlier that price indexing a minimum wage essentially holds low-wage workers’ pay frozen thereafter at the level that prevailed when the wage was introduced. Again, this is better than allowing inflation to erode the real value of pay, but average incomes throughout the overall economy are not frozen over time in real terms. Instead, they rise faster than prices over any reasonable period. Inequality often keeps this growth in average living standards from reaching many (or even most) workers and families in the economy, but the potential for living standards to rise is generated every year of positive economic growth.

This means that even when wage standards are indexed to prices, low-wage workers’ relative standing in the economy still falls over time. Further, because low-wage workers’ earnings are a cost to their employers, this means that even with price indexing, any potential burden of wage standards on low-wage employers slightly declines any year that productivity rises. In this sense, price indexing of wage standards—providing regular cost-of-living adjustments based on price growth—is a conservative policy that allows the costs and benefits of wage standards to slowly erode over time relative to developments in the larger economy.

A quick example can help make this point. Say that pay for low-wage workers at a particular employer amounts to 20% of the final price of the firm’s output. Say that productivity (how much output is generated with each hour of work) rises by 2% per year. If low-wage workers’ pay rises only with inflation (and not with productivity) and all other firm costs rise with inflation and productivity, this implies that over 10 years the share of low-wage workers’ pay in total costs would fall to just 16.4% of total costs. Employers could use this decline in real costs to either lower their prices to consumers or raise their profit margins. Either way, so long as there is any growth in productivity, the burden of low-wage workers’ pay to employers falls even when this pay is indexed to inflation.

Price indexing is not the only option for adjusting wage standards. One could, for example, index growth in minimum wages to growth in wages at other parts of the wage distribution—growth in the median wage for example.7 An even more ambitious indexing choice would be to match wage changes to changes in average wages or even economy-wide productivity.8

The obvious benefit of using these alternative wage indexations would be faster wage growth and higher living standards for low-wage workers. The potential downside is that they do not allow any potential burden from higher wages for employers to relent over time—meaning that if the initial setting of wage standards is high enough to cause problematic outcomes (job losses or rapid price increases), then this would not smooth over time with wage indexation. Price indexation, conversely, would actually allow any higher than optimal initial wage standard to become less binding over time. In this sense, it is a conservative choice that is highly responsive to the pressures faced by low-wage employers.

In the case of the California Fast Food Council, the $20 minimum wage enacted in 2024 was an admirably ambitious standard. There is little persuasive evidence that it is too high in that it has caused any problematic outcomes on either the employment loss or price increase fronts. Yet it was high enough to provide a significant wage boost for affected workers. For these types of ambitious standards, indexing to prices seems necessary to protect workers’ gains yet conservative in that it puts declining pressure on low-wage employers over time. Further, since 2019, the limited-service restaurant sector has seen significant productivity growth—roughly 2% per year—which should allow any price indexation to be easily absorbed with no wrenching adjustments for employers.9

Different groups face different inflation rates: The case for discretion in indexing

The benefit of indexing wage standards for inflation is the protection it provides for the living standards of low-wage workers. The costs are the various adjustments or burdens forced onto employers. Because the group of low-wage workers and employers are heterogenous, and because inflation is measured by the aggregation of price changes across the entire economy, there remains room for judgement and discretion in balancing these costs and benefits.

The California Fast Food Council has some discretion, as they can either index wages up to 3.5% for inflation or they can decline to index these wages and let them be eroded.

We noted before that indexing only for prices (as opposed to indexing for wages or productivity growth) results in a steady reduction in any economic burden wage standards might place on employers. So long as these employers see any growth in productivity (the efficiency with which each hour of labor generates output), then having some portion of their wage costs fixed in real terms will see these costs become a progressively smaller share of total output over time. In this sense, simply choosing to index by prices means the cost of wage standards to employers is set to shrink consistently over time.

In terms of the benefits to low-wage workers, recent years have seen a large jump in the overall price level. Any given episode of inflation is likely to have uneven effects across groups in the economy. For example, the inflation of the 1970s was actually accompanied by an increase in real wages, even for low-wage workers.10 The inflationary spike in 2021 and 2022, conversely, was largely driven by large increases in profit margins, which meant that real wages for most workers fell in those years.

More systematically, inflation faced by various groups in the economy can diverge if they have different consumption baskets that skew average price growth in a predictable way. For example, housing makes up a larger share of consumption spending for lower-income households than higher-income households, and in recent decades the price of housing as measured by the consumer price index has slightly outpaced overall price growth. This implies that inflation faced by lower-income households has likely been systematically higher than that faced by higher-income households. This makes the overall CPI that informs discussions of wage indexation inadequate for fully protecting lower-wage workers from inflation in recent years.

Concretely, the CPI-W, which is the price index the Council can target, has risen by 4.2% since April 2024. This means that a 3.5% cost of living adjustment—the largest that can be granted by the Fast Food Council—would not quite neutralize the affordability losses experienced by workers since the $20 minimum wage was enacted. Research from the Federal Reserve Bank of New York (2025) indicates that households in the bottom 40% of the income distribution saw inflation between April 2024 and August 2025 (the most recent data point available) that averaged 0.2% higher than overall inflation. This means actual inflation faced by many fast-food workers in California exceeded 4% since the introduction of the $20 wage standard.

The bias in actually experienced inflation stemming from housing runs even deeper. The housing component of the CPI essentially assumes everybody is paying market rent for their housing. There are good reasons for this decision, but it means that discretion and judgement must enter into using the CPI for different purposes. Well over half of the U.S. population owns their homes, and these people have significantly higher incomes on average than renters. Homeowners either have no monthly housing payment or pay a mortgage that is fixed over time and therefore experiences no inflation. By assuming these homeowning households experience the average amount of rental inflation each month the CPI overstates actually experienced inflation for homeowners.

This means when weighing the interests of low-wage workers against other economic actors—including consumers facing potential price increases stemming from wage standards—the real gap in living standards growth is likely larger than what would be implied by assuming all households face the same CPI inflation. Given this, there is a strong case for policymakers to use their discretion to put a countervailing thumb on the scale by boosting low-wage workers’ pay.

Notes

1. For a review of the estimates of employment loss caused by minimum wage increases, see Dube and Zipperer 2025.

2. There is an additional study by Pandit (2026) that estimates the fast-food minimum wage caused an 8% decline in staffing intensity based on long-duration visits from mobile phone location data. However, the study finds almost all of the estimated effect occurred before the actual policy went into effect, with little-to-no change in the proxy for employment activity after the effective date of the minimum wage increase on April 1, 2024. It is hard to believe that in a very high turnover industry like fast food—where employers can adjust employment levels rapidly by reducing hiring—that businesses would reduce staffing levels several months before being compelled to pay higher wages, but then not change employment levels at all after actually being required to increase wages. The study also provides no evidence on wage changes, cannot distinguish between headcounts and hours reductions, and excludes new businesses that may have started during the policy period.

3. For an explanation of the importance of the own-wage elasticity in interpreting studies of the minimum wage’s effect on employment, see Dube and Zipperer 2024.

4. See Cooper, Mishel, and Zipperer 2018 for the importance of accounting for turnover rates when assessing the likely implications of any measured employment decline.

5. See Economic Policy Institute 2025a for data on productivity levels over time.

6. Both of these assumptions are likely close to true or overstate the actual price pressure that would be experienced from price indexing wage standards in fast food. For the leisure and hospitality sector—the larger sector in which fast-food (or limited-service) restaurants are embedded—aggregate weekly payrolls are roughly $10 billion. To estimate low-wage workers’ aggregate pay, we took the number of leisure and hospitality sector workers making less than $17 per hour in 2024 (5.7 million) and multiplied this by $17 and by 35 hours per week. All of these (the high $17 threshold for defining “low-wage”, the assumption that all making under $17 were making exactly $17, and the 35 hours per week) likely increase the estimate of low-wage workers’ wage bill in the sector. Making these generous assumptions yields a weekly wage bill of roughly $3.4 billion, or just over a third of the total wage bill in the sector. For total labor costs as a share of total output in the sector, we used the Composition of Gross Output by Industry table from the GDP by Industry accounts of the Bureau of Economic Analysis.

7. Growth in wages has been used to index some labor standards. Under the overtime rule enacted by the Obama administration the salary threshold for being granted automatic rights to overtime protections was set at the 40th percentile of annual earnings in the lowest-wage region of the country.

8. Social Security uses an “average wage index” to deflate workers’ past earnings to calculate their initial Social Security benefit amount. This implicitly credits recipients for overall economic growth (overwhelmingly determined by productivity) over the course of their working life.

9. This figure calculated from data provided by the Detailed Industry Productivity database from the Bureau of Labor Statistics.

10. See Economic Policy Institute 2025b, specifically the wages for workers at the 10th percentile.

References

Bivens, Josh. 2022. “Corporate Profits Have Contributed Disproportionately to Inflation: How Should Policymakers Respond?” Working Economics Blog (Economic Policy Institute), April 21, 2022.

Clemens, Jeffrey, Olivia Edwards, and Jonathan Meer. 2025. “Did California’s Fast Food Minimum Wage Reduce Employment?” NBER Working Paper no. 34033, July 2025.

Cooper, David, Larry Mishel, and Ben Zipperer. 2018. Bold Increases in the Minimum Wage Should Be Evaluated for the Benefits of Raising Low-Wage Workers’ Total Earnings. Economic Policy Institute, April 18, 2018.

Dube, Arindrajit, and Ben Zipperer. 2024. “Own-Wage Elasticity: Quantifying the Impact of Minimum Wages on Employment.” NBER Working Paper no. 32925, September 2024.

Dube, Arindrajit, and Ben Zipperer. 2025. Minimum wage own-wage elasticity repository, Version 2025.9.1., https://economic.github.io/owe.

Economic Policy Institute. 2026. “The Productivity-Pay Gap” (web page). Last updated January 16, 2026.

Economic Policy Institute. 2025a. State of Working America Data Library, “Productivity and pay levels – Productivity and pay, real dollars per hour (2024$).”

Economic Policy Institute. 2025b. State of Working America Data Library, “Minimum wage – Real minimum wage (2024$).”

Economic Policy Institute. 2025c. State of Working America Data Library, “Hourly wage percentiles – Real hourly wage (2024$).”

Federal Reserve Bank of New York. 2025. “Economic Heterogeneity Indicators.” Accessed January 2026.

Hamdi, Naser, and David Sovich. 2025. “The Wage and Employment Effects of California’s Fast-Food Minimum Wage.” SSRN, March 28, 2025.

KFF. 2025. “Population Distribution by Citizenship Status.” Accessed January 23, 2026.

MacDonald, Daniel, and Eric Nilsson. 2016. “The Effect of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context.” Upjohn Institute Working Paper no. 16-260, June 2016.

Manning, Alan. 2003. Monopsony in Motion: Imperfect Competition in Labor Markets. Princeton, N.J.: Princeton Univ. Press.

Pandit, Hitanshu. 2026. “Simply Can’t Wait: Evaluating the Effect of California’s Fast-Food Minimum Wage Increase.” SSRN, February 23, 2026. 

Schmitt, John. 2013. Why Does the Minimum Wage Have No Discernible Effect on Employment? Center for Economic Policy and Research.

Schneider, Daniel, Kristen Harknett, and Kevin Bruey. 2024. Early Effects of California’s $20 Fast Food Minimum Wage: Large Wage Increases with No Effects on Hours, Scheduling, or Benefits. The Shift Project, October 2024.

Sosinskiy, Denis, and Michael Reich. 2025. “A $20 Minimum Wage: Effects on Wages, Employment and Prices.” Institute for Research on Labor and Employment Working Paper, September 2025.

United States Census Bureau (Census). 2026. Annual Estimates of the Resident Population for the United States, Regions, States, District of Columbia and Puerto Rico: April 1, 2020 to July 1, 2025. NST-EST2025-POP. Accessed January 27, 2026.

Zipperer, Ben. 2024. “Most Minimum Wage Studies Have Found Little or No Job Loss.” Working Economics Blog (Economic Policy Institute), September 9, 2024.