Falling Union Membership and Rising Wage Inequality: What's the Connection?

Abstract

This paper presents new evidence on the effects of changing union membership on trends in wage dispersion in the U.S. labor market. I use data from the mid-1970s and early 1990s to compare union membership rates for workers in different deciles of the wage distribution, and to calculate the effects of shifting unionism on wage inequality. Among men, union rates have fallen for most groups, with larger declines among the lowest-wage workers. I estimate that the decline in unions explains 10-20 percent of the rise in male wage inequality over the past 25 years. Among women, union membership has fallen for low-wage workers but risen for high-wage workers, with little change overall. Shifting union patterns have therefore had little effect on female inequality, and may have actually accentuated the rise in inequality. Economy-wide trends in union membership mask a sharp divergence between the private sector, where unions have been declining, and the public sector, where union membership rates have actually risen for most groups. Calculations by sector suggest that unions have been a significant force in forestalling the rise in wage inequality among public sector workers of both genders.