Even as the labor market expanded in 2012, union membership fell again, both in the private and public sectors, according to data released this morning by the BLS.
–Among all workers, 11.3%, or 14.4 million were union members in 2012, compared to 11.8% (14.8 million) in 2011.
–The share of union members in the public sector remains much higher than that of the private sector: in 2012, private sector unionization was 6.6%; the public sector rate was 35.9%.
–Comparing last year’s median weekly earnings for full-time workers reveals a 27% union premium—this has remained relatively constant over the last decade. (The measure, however, is unadjusted for worker characteristics, as discussed below.)
The first figure shows the long, sad, decline in unionization in America, at least outside of the public sector. Some of this is a result of industry employment shifts from more heavily unionized sectors, like manufacturing, but that’s not the whole story. As you can see, manufacturing itself is increasingly less unionized. In fact, it’s seen a larger than average decline since the early 1970s.
Public sector unions are of course fighting existential battles with hostile governors and legislatures, and their share also took a hit last year, falling from 37% in 2011 to just below 36% last year. On the other hand, as the figure shows, their share has wiggled around the past few years while avoiding the declining trend we see in the first figure.
The final figure plots the earnings premium as noted above, but economists prefer—for good reason—to control for other factors, including education and age in estimating the union wage advantage. Statistical analysis by the Economic Policy Institute (see table 4.33 here) shows these union wage premia:
EPI also shows a dimension of the union premium that is increasingly important: health, retirement, and paid leave. Union workers are far more likely to get such benefits than comparable non-union workers (see EPI’s tables 4.34, 4.35).
There’s no question that deunionization is related to the decline in job quality and increase in inequality faced by many in today’s workforce (ergo, my use of “sad” above in describing the trend). It is not the whole, or even half, of the full story, but then again, neither is any other single factor.
But if you’re thinking about this like an economist, you may be thinking, a) we can’t support these union premiums in a competitive, global economy, and b) the declines in unionization I bemoan here must be associated with more job creation, right? We’re squeezing out an inefficient market interference and thus moving down a demand curve, getting workers’ wages more aligned with their efficient market wage and thus generating more jobs.
I disagree. There are many other advanced economies with far more union coverage that are extremely competitive—more so than we are. Germany is the classic example, though it should be noted that their unions have often been willing to restrain wage growth in the name of competitiveness. Though let’s also be clear that their manufacturing workers are paid more than ours, so this is not a simple race-to-the-bottom story.
In terms of wage inefficiencies, you don’t see systematic differences in job creation favoring, for example, countries or states with low versus high unionization rates. You’d need a counterfactual to do it right, but deunionization in manufacturing hasn’t been associated with job growth in the sector, while careful research has revealed a significant role for our large manufacturing trade deficits in factory job losses. In other words, demand matters more than unions for job creation. Some highly non-union states, like Texas, have quite clearly exploited a low-road model (sliding down the demand curve), but highly unionized states like NY and CA have seen employment booms (and busts) over the years as well.
The fact is that union density is much more a national policy decision than an act of nature. Unions are an institution that an advanced economy can or cannot decide to foster or suppress. More so than other advanced nations, we have taken the suppression route in recent decades. And that’s one of the reasons why American working families, despite their relatively high productivity levels, benefit significantly less from the fruits of their labor.