The Shrinking American Labor Union - Emily Lundberg

Since the 1970’s, private sector union membership has declined from nearly 25% to 6%. Decreased union participation may be because of global trade, technology, or less domestic manufacturing. Shrinking labor union participation does not only affect union workers, but affects non-union laborers as well.  We can estimate that the decrease in collective bargaining would have a greater impact on men compared to women, and uneducated workers compared to those with a college degree. Industries where labor is a small share of costs creates a more inelastic labor demand, incentivizing unions to form to set wage standards through collective bargaining. As people shift towards those industries receiving higher pay, the supply of other industries will contract, putting upward pressure on wages for nonunion workers as a result. With lower union participation, there are fewer resulting spillover effects to the rest of the economy.  

The decline in union participation could be used to explain the stagnation in middle class wages, a large contributing factor to the United State’s growing inequality issue. Since the 70’s, productivity has greatly increased while compensation has increased at a slower rate. The economy can afford higher pay, but is not providing it. This divergence in productivity and pay could be explained by a decline in collective bargaining, and decreasing real wages of union and non-union workers. Generating real wage growth is a critical step to tackling inequality. To grow real wages, collective bargaining through private sector membership needs to strengthen.