A recent study finds that wage inequality for hourly workers is due to declining union membership, and is not just a result of education or technology. Critics are not persuaded, however, saying most research is inconclusive and often leaves the observer wondering which came first, the chicken or the egg.
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The role of unions as a wage-equalizing force in the labor market has been underscored, once again, in a study published in the August issue of the American Sociological Review.
The authors of "Union Decline Accounts for Much of the Rise in Wage Inequality" write that the plunge in union membership since the early 1970s accounts for about one-fifth of the increase in hourly wage inequality among women and about one-third among men.
Co-authors Bruce Western, a professor of sociology at Harvard University, and Jake Rosenfeld, a professor of sociology at the University of Washington, use data from the Current Population Survey (a monthly poll of about 60,000 U.S. households conducted by the U.S. Census Bureau) to examine the effects of union decline on both between-group inequality and within-group inequality. (Between-group compares people from different demographics and industries; within-group looks at people from the same demographics and industries.)
"Most researchers studying wage inequality," says Western, "have focused on the effects of educational stratification -- pay differences based on level of education -- and have generally underemphasized the impact of unions."
Looking at full-time, private-sector workers, the authors find the decline of union membership and educational stratification each explain about 33 percent of the rise in within-group inequality among men. Among women, sagging membership explains about 20 percent of the increased inequality and education explains more than 40 percent.
Part of the reason for this gender discrepancy, the writers say, is that men have experienced a much larger decline in private-sector union membership -- from 34 percent in 1973 to 8 percent in 2007 -- whereas women's membership went from 16 percent to 6 percent during the same period.
"For generations, unions were the core institution advocating for more equitable wage distribution," says Rosenfeld. "Today, when unions -- at least in the private sector -- have largely disappeared, that means that this voice for equity has faded dramatically. People now have very different ideas about what's acceptable in terms of pay distribution."
Interestingly, the study finds union decline explains little of the rise in between-group inequality. Western says that's because unions "standardize wages so people with similar characteristics -- if they're union members -- tend to have similar wages ... ."
The authors also find that nonunion workers, if they're in highly unionized industries or geographic areas, tend to have fairly equal wages, partly because nonunion companies tend to keep wages at the union level to discourage unionization.
David Madland, director of the American Worker Project for the Center for American Progress, says this study "is an important advance because people have long argued that technology and education alone were responsible for wage inequality. This study shows unions have also had just as big and significant an impact."
In fact, he says, this study's conclusion that "union strength brings wages up for all" confirms the results of his own nationwide, state-by-state study conducted in April of this year, Unions Make the Middle Class.
In that, he found that, for every percentage point raised in union membership statewide, average incomes of all middle-class residents -- both union and nonunion -- went up $150 per year.
"In the past 20 or 30 years, we've made it much harder for people to join unions and enjoy representation," says Madland. "What's important about both studies is [the suggestion] that public policy matters."
D. Mark Wilson, a principal with Washington-based Applied Economic Strategies and a consultant to the Washington-based HR Policy Association, cautions, however, that anyone looking into the increase in wage inequality needs to consider which came first, the chicken or the egg.
"Both the Congressional Budget Office and the Organization for Economic Cooperation and Development have concluded," he says, "that ... widening income disparities have come from ... technological changes and the large shift in demand for high-skilled employees and away from low-skilled labor ... .
"Other research on the significance of international trade, immigration, unions and executive compensation," says Wilson, "are inconclusive and these factors appear to have had only a modest, if any, effect on the distribution of wages."
In other words, he says, there are two competing conclusions: one, that lower wages have been caused by "declining unionization which has led to technological change, productivity growth and widening income disparities;" or two -- which flips the argument around -- that technological change and productivity growth have led to declining unionization and widening income disparities.
Michael Eastman, executive director of labor law policy for the U.S. Chamber of Commerce in Washington, says the arguments that link the decline in unionization with increased wage inequality are not accounting for other employment benefits workers receive.
A recent Chamber white paper, Responding to Union Rhetoric: The Reality of the American Workplace, he says, notes that "in addition to wages, total compensation includes health benefits, contributions to retirement plans, paid vacations" and more.
Granted, rising wage inequality exists, says Eastman, and "these sorts of arguments are not new. Unions have been making them for a long time."
"However," he says, "the fact is that higher union density is not a panacea."
August 17, 2011
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