The Correlation Between Union Density and Income Inequality

One of the main reasons we should be concerned about the decline of union memberships is because there has been a consistent trend between union membership and income inequality.

It’s a little known fact that when union membership declines, income inequality rises. A certain rate of the income gets kicked back to the top 10% of earners in the U.S., and that rate only rises when union membership declines. For each average yearly declination of union membership, it’s about the equivalent of the top 10% receiving an average yearly increase in income of 0.00016%. On the other hand, for every 1% increase in union membership, we see a decrease in income going to the top 10% of 0.000514%. Overall, union membership declination is the reason for about 5% of the increase in income going towards the top 10%. I should mention that the fluctuation in union membership is the defining factor in how much income will go towards the top 10%. It is not the other way around. For example, if there is an increase in income going towards the top 10%, it will not cause union membership to decline, and if there is a decrease in income inequality, it does not mean that more unions will form. Union membership is the sole cause of what will happen to the income inequality rate.

How can more union membership decrease income inequality? One of the main things that unions do is attempt to increase their members’ wages. When they succeed, their members that were originally receiving a low wage are now receiving significantly more, which in turn decreases the amount of income that the top 10% are receiving. Unions also tend increase the wages of their lowest paid members more than they increase the wages of their higher paid members. This will cause less of a wage gap between unionized workers. Also, when employers need to pay their employees a higher wage as a result of collective bargaining, they will often try and make up for this with charging their customers higher in prices. This often ends up backfiring, and the higher wages of workers will have lowered profits by a certain amount, essentially decreasing the income going towards the top 10%.

This is why we should be concerned about the decline in union membership. If unions continue to decrease, the top 10% will just continue to bring in income shares that should be distributed among the working class, the ones who actually need it. The top 10% do not need the shares of income they are currently being given. The more this happens, the more workers’ rights are being infringed upon.

However, there may be some hope for labor unions under the Biden Administration. What kind of political activity has been going on, and what does it mean for the future of labor unions?

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