Union decline lowers wages of nonunion workers (Long Read)

[J-Nice]

The overlooked reason why wages are stuck and inequality is growing

Executive summary
Pay for private-sector workers has barely budged over the past three and a half decades. In fact, for men in the private sector who lack a college degree and do not belong to a labor union, real wages today are substantially lower than they were in the late 1970s.

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

While we avoid strict causal claims about wage determination, the analytical approaches summarized in this report enable us to assess the independent effects of union decline on wages and lend confidence to our core contention that private-sector union decline since the late 1970s has contributed to substantial wage losses among workers who do not belong to a union. This is especially true for men. And most hurt by the decades-long decline in the nation’s labor movement are those nonunion men who did not complete college, or go beyond high school—groups with the largest erosion of union membership over the last few decades.

Key findings from our report include the following:

• For nonunion private-sector men, weekly wages would be an estimated 5 percent ($52) higher in 2013 if private-sector union density (the share of workers in similar industries and regions who are union members) remained at its 1979 level. For a year-round worker, this translates to an annual wage loss of $2,704. For the 40.2 million nonunion private-sector men the loss is equivalent to $2.1 billion fewer dollars in weekly paychecks, which represents an annual wage loss of $109 billion.
• For nonunion private-sector men without a bachelor’s degree or more education (non–college graduates), weekly wages would be an estimated 8 percent ($58) higher in 2013 if union density remained at its 1979 levels. For a year-round worker, this translates to an annual wage loss of $3,016. As a benchmark, consider that the wage loss from increased trade with low-wage nations (Bivens 2013) among non–college graduates is estimated to be 5 percent.
• For nonunion private-sector men with a high school diploma or less education, weekly wages would be an estimated 9 percent ($61) higher if union density remained at its 1979 levels. For a year-round worker, this translates to an annual wage loss of about $3,172.
• The effects of union decline on the wages of nonunion women are not as substantial because women were not as unionized as men were in 1979. Weekly wages would be approximately 2 to 3 percent higher if union density remained at its 1979 levels for all nonunion women; nonunion, non–college graduate women, and nonunion women with a high school diploma or less education. However the cumulate effects are still sizable. For 32.9 million full-time nonunion women working in the private sector, weekly pay would be a total of $461 million more (and roughly $24.0 billion more per year) in 2013 if unions had remained as strong as they were in 1979.
• The degree of nonunion wage decline reflects how much unionization has declined since 1979 among private-sector men (by two-thirds, from 34 to 10 percent), among women (by more than one-half, from 16 to 6 percent), and especially among non–college degree men (by more than two-thirds, from 38 to 11 percent).
• As unions have receded from the private sector, their effects on the wages of nonmembers (per percent of unionization) have declined. In recent years, these effects have fallen to between one-half and two-thirds of their late-1970s levels.
• Union decline has exacerbated wage inequality in the United States by dampening the pay of nonunion workers as well as by eroding the share of workers directly benefitting from unionization. Earlier research (Western and Rosenfeld 2011) shows that union erosion can explain about one-third of the growth of wage inequality among men and about one-fifth of the growth of wage inequality among women from 1972 to 2007. At least for middle-wage men, the impact of the erosion of unions on the wages of both union and nonunion workers is likely the largest single factor underlying wage stagnation and wage inequality.

Nonunion workers benefit from a strong union presence in their labor market in many ways. Strong unions set pay and benefits standards that nonunion employers follow. Those employers may raise pay for some workers to forestall an organizing drive, which leads to an upward adjustment in wages of workers above them, to maintain relative pay differentials (similar to the effects of minimum-wage increases).

Even absent organizing activities in their spheres, nonunion employers may also follow the standards that unions help establish through politicking for labor-friendly policies, instituting informal and formal rules governing labor conditions, and generally serving as a cultural force arguing for a “fairer share” for working men and women. (For example, highly unionized states helped lift minimum wages above the levels of states where labor was comparatively weak.) Higher pay in organized establishments increases competition for labor so that nonunion firms lift wages to prevent their employees from leaving for higher, union wages. And in setting wages, new market entrants often look to what industry leaders are doing; when organized labor was strong, many of these leaders were unionized.

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

Rest of the study and figures can be found here Union decline lowers wages of nonunion workers: The overlooked reason why wages are stuck and inequality is growing

 

[J-Nice]

Introduction
Pay for private-sector workers has barely budged over the past three and a half decades. This freeze represents a dramatic change from the post-WWII period, when real wages grew steadily. The issue has captured the attention of leading policymakers, academics, and journalists, and promises to play a central role in the upcoming presidential campaign. Yet discussions of the overall trend miss important differences by subgroups. In fact, for certain types of workers, real wages today are substantially lower than they were in the late 1970s. This is especially true for men in the private sector who lack a college education and do not belong to a labor union.

Figure A presents annual median wages relative to their 1979 levels for private-sector full-time workers, disaggregated by sex and education. For all of our analyses, we exclude senior level managers, as our focus is on pay trends among average workers. And for all of our analyses, we exclude the wages of union workers, as this report’s focus is on trends in nonunion pay in the private sector. As the figure shows, private-sector nonunion men have experienced pay stagnation relative to the end of the 1970s; their median wages are down slightly from 1979 levels. This slight decline results from divergent trends for workers with different levels of educational attainment. Pay has increased for nonunion men with a bachelor’s degree or more education (not shown in figure). For those workers with less than a 4-year college degree (non–college graduates), pay is down significantly. And no group has experienced a drop-off in pay as steep as nonunion men with a high school diploma or less education. Their median wages (as of 2013) are approximately 13 percent lower than their wages in 1979.

 

[J-Nice]

The story is different for women, and indeed were it not for steadily rising pay for many women in the private sector, the debate today would not be about the “big freeze” in wages but the “big cut.” Wage growth for nonunion women has been steady, ending around 25 percent higher in 2013 than three-and-a-half-decades earlier. The exception here is among private-sector nonunion women who have a high school diploma or less education. For this group, annual median wages for much of the past decades have been relatively flat. And by 2013, women with only a high school diploma or less education had seen their wages drop below levels that prevailed in 1979.

Existing explanations for recent pay trends include globalization, technological change, and the slowdown in Americans’ educational attainment.1 Each of these accounts describes important developments contributing to pay stagnation and pay decline for certain groups of workers. Yet these explanations ignore a vital contributing factor: the near disappearance of a worker institution that once claimed over one-third of private-sector employees as members. Unions and their effects on wage trends have been studied, but the research focuses on how the shrinking number of private-sector union members reduces the wage gains that accompany membership. (Officially the private-sector unionization rate is 6.5 percent, or roughly 1 in 15 workers, but the official rate is likely overstated due to survey misclassification and therefore we consider 1 in 20 a more accurate estimate.) As Appendix Table 1 shows, the erosion of union membership was particularly severe among men, whose membership density (unionization rate) in the private sector fell from 34 percent in 1979 to just 10 percent in 2013. The erosion was even larger among men without a college degree, falling from 38 percent to 11 percent. Union membership was not as high among private-sector women as men in 1979, just 16 percent, so the drop by 2013 to 6 percent was not as severe (the fall among non–college graduate women was the same).

As a large body of work documents, unions raise the wages of their members, especially private-sector members, relative to nonunion workers. The percent by which their wages exceed nonunion wages is called the “union wage premium.”2 Union decline means that many workers today do not enjoy the wage premium attached to membership that they would have when organized labor remained strong. Thus deunionization—the erosion of the share of workers who belong to a union—has directly contributed to wage stagnation by reducing the fraction of the workforce receiving the union wage premium.

In this report, we take a different approach to the issue of union decline and wages. Our interest lies in the relationship between union strength and nonunion workers’ wages. We contend that unions, especially in industries and regions where they are strong, have indirect effects on wages, helping to establish pay and benefit standards that many nonunion firms adopt. We examine 35 years of data on the American workforce and investigate the relationships between union strength within industries and regions and nonunion workers’ wages. We begin in 1979 for two core reasons. First, research documents a sharp increase in earnings inequality starting around 1979.3 Second, other research suggests a similarly timed pattern regarding deunionization: while union rolls have been declining since the 1960s, Mishel (2012) highlights an acceleration starting in the early 1980s.4 Broadly then, both union decline and wage inequality sped up right around 1979, making it an appropriate year to begin our analyses.5

 

[J-Nice]

In the ongoing debates over wage stagnation, these indirect effects of unions have not received nearly the attention as the oft-cited accounts mentioned above.6 Partly this is due to the difficulty in disentangling the independent effect of unions on nonunion workers’ pay. Globalization, technological advances, and institutional shifts—most notably the dramatic decline of the U.S. labor movement, along with the falling real value of the minimum wage—have all affected average workers’ wages. These developments are intertwined in numerous ways. For example, union decline reduced resistance to offshoring, and offshoring, or the threat thereof, emboldened employers in union negotiations. We reduce potential sources of bias in various ways, but caution that our interest is in describing population-level trends in wages for various groups of workers. Thus while we avoid strict causal claims about wage determination, we believe our various analytical approaches lend confidence to our core contention that private-sector union decline has contributed to wage losses among workers who do not belong to a union. This is especially true for men and for men who did not complete college or complete or go beyond high school who, as shown in Appendix Table 1, saw the largest erosion of union membership over the last few decades.

Why would nonunion workers benefit from a strong union presence in their labor market?
Research has identified various pathways connecting union strength to nonunion workers’ pay. One is through the threat of unionization: nonunion employers worried about a possible unionization drive may match union pay scales to reduce the demand for organization. For example, Eastman Kodak, the leading producer of photographic film for much of the 20th century, was committed to keeping unions out of its major plants. Given that much of the company’s workforce was anchored in highly organized New York state, remaining union-free was no easy task. Part of the firm’s strategy involved spending “substantial sums to secure its workers’ loyalty,” as the economic historian Sanford M. Jacoby recounts.7 Eastman Kodak was not alone. Other major nonunion employers monitored union contracts closely in efforts to forestall organizing campaigns.8 As one large employer reported in the late 1970s, “Because we are such a union target, we find that we have to get our start rate at or almost at the union rate.”9

The adjustments in nonunion wages that result from a strong union presence need not be limited to those workers at risk of unionizing. Research has documented how minimum-wage increases benefit workers who earn more than the minimum, through upward wage adjustments. If a wage floor is increased by, for example, $1.75 per hour, then workers who were earning slightly above the new minimum are likely to benefit from the adjustment in order to maintain relative pay differentials in firms. Assumptions about how far this “ripple effect” extends into the pay distribution differ, but there is general consensus that raising the wage floor leads to substantial upward adjustment of pay for workers earning more than the new minimum.10 Similarly, if a production worker at (nonunion) Eastman Kodak receives a union wage rate in order to forestall an organizing drive, her immediate supervisors likely benefit too. Research has found that lower-level managers—who, being managers, cannot unionize—benefit from a strong union presence in their surrounding labor market.11 In this way union strength may buttress the pay not only of workers at risk of organizing, but a range of other employees as well.

Threat effects are one way in which union strength may benefit employees who do not belong to unions. The economic literature on threat effects tends to conceive of unions as an institutional impediment to market pay rates, with employers endeavoring to minimize wages in the absence of unions, and raising them above their market rate only when forced to through collective bargaining or the threat thereof. We follow more recent research on the topic that challenges this assumption by arguing that the influence of strong unions on nonunion pay scales goes beyond “threat.”12 We conceive of unions as players in a broader “moral economy” that help institute norms of fairness regarding pay, benefits, and worker treatment. These norms can extend beyond the unionized core of the workforce, affecting nonunion workers whose employers follow the standards that unions help establish. This is especially true in those times and places where organized labor is comparatively strong.

Labor movements establish these standards through various means, including politicking for labor-friendly policies, instituting informal and formal rules governing labor conditions, and generally serving as a cultural force arguing for a “fairer share” for working men and women.13 As Western and Rosenfeld write, “When a third of the male labor force was organized, unions were national economic actors who shaped centralized wage policy.”14 They did so in a number of ways. Research has tied federal minimum wage increases to union strength.15 Under various administrations, union leaders, together with heads of employer associations and policymakers, negotiated wage and price targets that affected whole industries.16 At the state level, construction unions pressed to formalize the extension of their agreements to nonunion firms through state-level Davis-Bacon laws that, similar to the federal Davis-Bacon Act, require paying local prevailing wages on public works projects. Highly unionized states helped lift minimum wages above the levels of states where labor was comparatively weak.17 And in his interviews with nonunion employers in the 1970s, Fred K. Foulkes discovered that even those managers facing little threat of unionization in their plants monitored union contracts closely, and moved to match union scales.18 Why? Higher pay in organized establishments increased competition for labor. And in setting wages, new market entrants often looked to what industry leaders were doing in terms of wages and benefit packages. When organized labor was strong, many of these leaders were unionized.

How this report is organized
Our goal is to build on this past research and estimate the relationship between union strength at the industry-region level and nonunion wages for particular groups of workers using various analytical approaches. In our core set of analyses we include an adjustment for labor demand at the industry-region level, helping to differentiate the effects of unions on wages from the effects of industry factors like outsourcing and technological change. And we pay particular attention to how the influence of unions on nonunion wages varies by union density (the share of workers who are union members). We display the effects of unions on nonunion wages across nearly 35 years, starting when unions were comparatively strong, to the present day, when density levels have dropped dramatically.

The report is organized as follows:

• In Section 2, we provide a brief overview of union decline in the United States. We then display updated estimates of the relationship between deunionization and nonunion wages from 1979 to 2013 for the vast majority of private-sector full-time workers. We disaggregate these effects by sex and education level, demonstrating that nonunion men without a college degree and nonunion men with a high school diploma or less suffer the most as unions recede from the private-sector economy. In this section we present the results from what we term our “mid-range” approach to estimating unions’ effects on nonunion workers’ pay.
• In Section 3, we provide the results from our “low-range” and “high-range” counterfactuals, and discuss the benefits and drawbacks of these various approaches.
• In Section 4, we examine whether the relationship between union strength and nonunion wages varies by density level. We display the effects of unions on nonunion wages across years, from a period when unions were comparatively strong to the present day.
• In Section 5, we offer concluding remarks, and discuss limitations and debate rival explanations for some of our core findings.
• In the Methodological Appendix, we provide further details on our analytical strategy, and include a figure based on counterfactuals dating to 1973, one of the earliest years in which we have comprehensive individual-level unionization data.

 

[88m3]

If you're opposed to unions you aren't shyt.

 

[David_TheMan]

These figures are cherry picked. The height of union membership was in the 50s.

Its been declining since 53 or 54.
I can't show it clearly, but what you'll be able to summarize from the next graph is that real wages were rising until the mid 70s.

So asked yourself, what happended in the 70s that caused a drastic decline in real wages and inflation of the US currency that has seen wage figures increase while real wage stay stagnant.

It isn't union membership, there is not causation effect there.

Its something else.
Nixon shock - Wikipedia, the free encyclopedia

They have people talking about union membership when everyone is getting fukked. If it wasn't for the chinese and the cheap goods due global trade to make the cost of living drop quickly, we the US population would have instantly felt the direct effect of the unwise money policy the Fed and US government has taken that is harming all of us.

========

That said I disagree on a pure philosophical base on why you think union membership benefits society or the argument presented by your argument. Mainly due to basic supply and demand concerns on labor in a given industry, and where the union sets price. On top of that there are political concerns ignored by the article with regard to unions being used to restrict labor of black people in this country and kick them out of the job market in favor of well connected whites.

A more in depth economic breakdown is found here.
Labor Unions Are Anti-Labor