Unions, Jack!
Does middle-class America need unions?
If the narrative of mainstream news were to be believed, the American middle class should have been dead and buried long ago — the consequence of a workforce shifting away from organized labor. Yet despite alarmist calls of its demise going back at least as far as the 1980s, the middle class persists.
According to the Bureau of Labor Statistics, while one in five workers belonged to a union in 1983, that number was down to less than one in 10 as of 2023. This trend has been met with shock and concern. Over the years, the news media frequently surmised, “Without strong unions, the middle class is in trouble,” echoing a common sentiment that decries the death of unions.
Pew Research Center found earlier this year, for instance, that over half of all Americans believe that falling union rates have been bad for the country, but even particularly bad for working people. Democrats are especially concerned that declining unionization means workers are prone to wage exploitation and stagnation, endangering the middle class.
But if organized labor was indeed what made and sustained the middle class, declining union membership would have been followed by catastrophe. Instead, household incomes have grown, albeit inconsistently. Adjusted for inflation, the U.S. median household income in 1984 was $56,780. In 2022, it reached $74,850 — nearly $20,000 higher. Meanwhile, during the same period, union membership fell by half, going from about 20 percent to under 10 percent.
Looking at the booming pre-pandemic economy, it becomes apparent that organized labor has little, if anything, to do with America’s progress.
In 2019, for example, a growing economy propelled the U.S. median household income to $78,250 — the highest recorded level since 1984. Poverty reached the lowest recorded rate since 1959 as unemployment declined to 3.5 percent, its lowest level since 1969. Interestingly, in the same year that Americans were experiencing possibly the best economy in history, union membership for all employees dipped below 10 percent for the first time in history and has kept declining. Among private employees, membership declined by two-thirds, reaching 5.9 percent in 2019 — also the lowest rate in the pre-pandemic period.
On average, union workers make more money than their non-union counterparts. However, the high wages that union workers enjoy often come at the expense of non-union workers and the rest of the economy because unions are cartels that raise wages above competitive levels by hamstringing businesses, not by increasing productivity. By raising costs for businesses, unions raise costs for consumers and reduce the number of jobs available in the economy. Higher labor costs also undercut business investment and innovation, making everyone, even union workers, worse off in the long run.
One working paper from the University of Maryland looking at manufacturing plants between 2010 and 2017 found, for example, that while unionized plants paid higher wages, they had “lower wage growth and higher closure rates” compared to non-unionized plants. This is because unionized plants were less productive and had less capital investment, a finding supported by previous research. Many times, union demands have killed businesses and weighed down state and local government budgets, causing trouble for taxpayers.
Hostess — maker of the beloved Twinkies snack cake — filed for bankruptcy in 2012 partly due to the Bakers Union refusal of pay and benefits cuts to save jobs as the company was facing financial difficulties due to rising labor costs. American Airlines, General Motors, Firestone, as well as several steel companies have also been forced into similar situations by overzealous unions. Detroit, Mich. and San Bernadino and Stockton, Calif. are some of the cities that, thanks to generous union contracts, have had to declare bankruptcy as rising payroll costs met declining tax revenues.
While it is concerning that less skilled, less educated American workers appear to be losing ground, this is a problem rooted in the culture. After accounting for the country’s progressive taxes and generous government benefits, the popularly purported “rising inequality” significantly goes down and incomes among low-income households rise. And while the middle class has shrunk — when looking at pre-tax income — this is mainly because Americans have become richer and moved into the upper-income class.
Working Americans have not only survived the death of unions — long thought to be labor’s biggest friend and protector — but are thriving. In a world that’s more interconnected than ever, technologically advanced, and constantly changing, the unions’ decline should give workers and employers more freedom to engage in mutually beneficial trade. That’s an American idea everyone should be able to support.