What Do Unions Do for the Middle Class?

Source: Richard Freeman, Eunice Han, Brendan Duke, David Madland, Center for American Progress, January 2016

From the introduction:
….This report examines the role that the decline of labor unions over the past 30 years has played in the hollowing out of the U.S. earnings distribution. We* expect that the decline of unions has reduced the share of middle-class workers because union workers are more likely to be middle class than nonunion workers. Unions represent workers in the middle of the income distribution, which raises the earnings of workers who would otherwise fall below the middle-class threshold. We call the higher share of union workers among middle-class workers the union equality effect.

In this report, we use a technique—known as a shift-share decomposition—that breaks down the falling share of middle-class workers into three factors associated with unionism:
– The first part is due to the decline in union coverage, namely the fact that when a smaller share of workers are in unions, fewer workers benefit from the union equality effect.
– The second part is due to a decline in the union equality effect. As earnings have polarized over the past 30 years, the middle-class share of union workers fell from 83 percent to 72 percent, which is more than the decrease in the share of nonunion workers in the middle class. This reduces the union equality effect.
– The third part is associated with the interaction between the decline in union coverage and the union equality effect.

The decomposition leaves a residual part with no direct connection to unionism that is instead due to the decline in the middle-class share of nonunion workers.

Our main findings are that the decline in union coverage accounts for 35 percent of the falling share of middle-class workers and that the combination of the shrinking share of union workers and the reduction in the union equality effect explains almost half of the decline in middle-class workers. To the extent that union-induced wage increases spill over from union to nonunion workers and that union advocacy produces economic and social policies that benefit the middle class, our results understate the impact of the weakening labor movement on the hollowing out of the U.S. middle class…..