Unions and Inequality

An important paper by Bruce Western and Jake Rosenfeld which is forthcoming in the American Journal of Sociology finds that the decline in private sector union density in the US  (from 34% to 8% for men, and from 16% to 6% for women) explains one fifth to one third of the increase in inequality of hourly earnings over the period 1973 to 2007. This shows declining union density to be a much greater causal factor than most studies have found.

The novel contribution of the authors is to show empirically through a sophisticated quantitative analysis that a fall from high to lower union density in industrial/regional clusters is associated with rising  levels of wage inequality among non union workers in those clusters.

The path from strong unions to greater equality among non union workers likely runs through two channels. The first is fear, non union employers in a strong union environment will pay higher wages to lower paid workers in order to avoid unionization. The second and likely stronger channel is norms. Strong unions establish norms of fair wage differences between management and workers and between groups of workers which spill over into the non union sector.