RELEASE: New Economic Research from CAP Strongly Suggests the Decline in Middle Class Workers is Directly Tied to the Decline in Unions

Washington, D.C. — New economic research from the Center for American Progress strongly suggests that one-third of the decline in the share of middle class workers is directly tied to the decreasing share of workers in unions. Released just two days after the U.S. Supreme Court heard Friedrichs vs. California Teachers Association—a case that could further erode union coverage–the report adds to the growing body of economic research that demonstrates how the decline in unions is gravely impacting the size and strength of the American middle class.

“The big question this research raises for Americans troubled by the decline of the middle class is whether the growth and level of inequality can be reduced without a strong labor movement,” said Richard B. Freeman, the Herbert Ascherman chair in economics at Harvard University. “If the answer is no, then what can the United States do to help labor organizations modernize and help balance the power of capital to raise wages and stabilize the economy? Where are the unions when Americans need them most?”

“The key mechanism that enables unions to help the American middle class is that the income distribution of union workers is more concentrated towards the center compared with that of nonunion workers,” said Eunice Han, visiting professor of economics at Wellesley College. “In a society where high income inequality becomes a big issue, unions’ contributions deserve more attention.”

“As previous CAP research has shown, unions are good for economic mobility and opportunity—as well as the middle class,” said Brendan Duke, Policy Analyst at CAP. “As our new analysis shows, the weakening of unions has had a direct impact on the health of the American middle class.”

“The Friedrichs case argued at the U.S. Supreme Court this week has the potential to dramatically undermine public-sector unions, a disturbing development given that we know that the decline of labor unions has contributed significantly to the shrinking of the middle class in the United States,” said David Madland, Senior Fellow at CAP. “To rebuild the middle class, we must look toward solutions that rebuild unions rather than destroy them.”

The CAP analysis—co-authored by Harvard economist Richard Freeman, Wellesley economist Eunice Han, and Brendan Duke and David Madland of CAP—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. The analysis breaks down the falling share of middle-class workers into three factors associated with unions—the decline in the share of workers in unions, known as union coverage; a decline in the share of union workers who are middle class relative to nonunion workers, known as the union equality effect; and the interaction between the decline in union coverage and the union equality effect.

By using an economic technique known as a shift-share decomposition, the researchers find 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, the results of the CAP analysis almost certainly understate the impact of the weakening labor movement on the hollowing out of the U.S. middle class.

The new report is a companion piece to an earlier analysis released by Freeman, Han, Madland, and Duke, titled “Bargaining for the American Dream: What Unions Do for Mobility.” The research in that report suggested that unions play a critical role in intergenerational mobility and used two different data sources to examine whether an association exists between union membership and intergenerational mobility. The report’s research found that areas with higher union membership demonstrate more mobility and that children with union parents earn more than the children of nonunion parents. Taken together, both CAP reports strongly indicate that policies that make it easier for workers to form unions and bargain collectively should be at the heart of any agenda to grow the middle class, boost mobility, and ensure an inclusive economy.

Read “What Do Unions Do for the Middle Class?” by Richard Freeman, Eunice Han, Brendan V. Duke, and David Madland.

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For more information or to speak with an expert, contact Allison Preiss at apreiss@americanprogress.org or 202.478.6331.