Today's Article
'Over 40 million jobs
in the United
States--about one in
pays low wages.'
The American Spark
Unionization Benefits The American Economy: Report

By Cliff Montgomery - Sept. 4th, 2007

In support of the American worker after Labor Day,
The American Spark provides these quotes from a recent
study jointly produced by the
Center for Economic and Policy Research and Inclusion--two liberal think tanks--
which reveals how the average worker benefits from of a unionized marketplace:

"This paper examines the impact of unionization on the pay and benefits in 15 important low-wage
occupations. The data suggest that even after controlling for differences between union and non-union
workers--including such factors as age and education level--unionization substantially improves the pay and
benefits offered in what are otherwise low-paying occupations.

"On average, in the low-wage occupations analyzed here, unionization raised workers' wages by just over 16
percent--about $1.75 per hour--compared to those of non-union workers.

"The union impact on health-insurance and pension coverage in low-wage jobs was even bigger. Union
workers were 25 percentage points more likely to have employer-provided health insurance and 25 percentage
points more likely to be in an employer-provided pension than similar non-union workers in the same low-wage

"These union effects are large by any measure. To put these findings into perspective, between 1996 and
2000--a period of sustained, low unemployment that helped to produce the best wage growth for low-wage
workers in the last three decades--the real wage of 10th percentile workers (who make more than 10 percent
of workers, but less than 90 percent of workers), saw their wages rise, in total, about 12 percent.

"The union wage effect was one third larger (16 percent) than the full impact of four years of historically rapid
real wage growth.

"Over the same boom period in the 1990s, employer-provided health and pension coverage among the bottom
fifth of workers rose only about three percentage points for health insurance (up 3.2 percentage points) and
pensions (up 2.7 percent)--about one-eighth of the impact of unionization on health and pension coverage
among low-wage occupations analyzed here.

"These union effects are particularly impressive given the widespread belief that many of the jobs analyzed
here are inherently incapable of providing decent pay and benefits.

"Our findings demonstrate that workers in low-wage occupations who are able to bargain collectively earn more
and are more likely to have benefits associated with good jobs.

"We conclude that better protection of workers’ right to unionize would help improve the quality of low-wage

"In recent decades, many politicians, policy-makers, and even anti-poverty advocates have come to the view
that low-wage jobs are an inevitable part of a growing economy. Some go so far as to celebrate the growth of
low-wage work and low-wage employers like Wal-Mart as part of a "progressive success story" benefiting
"workers, consumers, and owners of capital" by lowering prices and increasing productivity.

"According to the conventional view, the meager pay and limited benefits of low-wage jobs reflect the
limitations of the workers holding these jobs, and increases in inequality and declines in middle-class jobs are
explained by 'a large increase in the return for skills over the last decades…[that is] driven largely by technology…
[and] globalization.'

"Proponents of this approach typically argue that 'the most fundamental solution' to the problem of increasing
inequality 'is to invest in the education and training necessary to ensure that all workers can succeed in the
global economy.'

"Generally absent from this approach is any focus on low-wage jobs themselves (a notable exception is
support for the minimum wage). While some proponents of the make-work-pay strategy are simply agnostic on
labor-market reform, others openly oppose reforms they characterize as 'intervening' in the labor market.

"A greatly diminished role for labor-market institutions in promoting shared prosperity marks a significant
difference between the recent decades of rising inequality in the United States and the immediate post-World
War II period of mass upward mobility, when institutional concerns were at the forefront.

"[As stated in] Levy and Temin (2007):

    'The current trend toward greater inequality in America is primarily the result of a change in economic
    policy that took place in the late 1970s and early 1980s. The stability in income equality where wages
    rose with national productivity for a generation after the Second World War was the result of policies that
    began in the Great Depression with the New Deal and were amplified by both public and private actions
    after the war. This stability was not the result of a natural economy; it was the result of policies designed
    to promote it.'

"Over 40 million jobs in the United States--about one in three--pay low wages. Even though expanding low-
wage workers’ access to high-quality skills training and education will help more low-wage workers to move into
better jobs, low-wage jobs constitute such a large share of jobs in the economy that expanded access to
training and education provide only one prong of a multi-pronged strategy necessary to maintain and expand
the middle class."

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