State of the Unions
On Sept. 14, the United Auto Workers announced targeted strikes against the Detroit Three automakers. This adds another to the list of high-profile collective labor actions in 2023, which includes those by Hollywood writers and actors, parcel delivery drivers, and airline pilots. In this week's post, we look at the impact of unions on wage gains for workers and what trends suggest for the road ahead.
The Bureau of Labor Statistics collects data on the union membership of wage and salary workers, along with the median weekly earnings of full-time wage and salary workers according to their union affiliation. We use these data to calculate the union wage premium for private sector full-time workers — computed as the difference between median weekly earnings for full-time workers represented by unions and those of non-union workers — as a percentage of non-union median weekly earnings. Workers represented by unions refer to workers who are union members, as well as non-union workers whose jobs are covered by union contracts.
Figure 1 below shows the union wage premium for the period 2000-2022. As of 2022, private sector workers represented by unions earn 12.5 percent more than their non-union counterparts, up from a premium of 11.9 percent in 2021 but declining from a peak of 24.9 percent in 2007.
The declining trend observed in Figure 1 isn't evident across every industry. For example, union-represented workers in accommodation and food services earned 19 percent more than their non-union counterparts in 2022, with no clear trend in the union wage premium for these workers in data going back to 2000, as seen in Figure 2 below.
In other industries, union wage premiums have declined from their peaks to such an extent that they have completely evaporated. Some have even dipped into negative territory and become a union wage penalty. Figure 3 below shows that the union wage premium for workers in durable goods manufacturing was slightly negative in 2021 and 2022, compared to an average of 6 percent from 2000 through 2020.
Table 1 below presents additional industry-level detail on union wage premiums, comparing their most recent observations to levels seen one and two decades ago. The fifth column shows an estimate of how the union wage premium has changed per year on average from 2000 through 2022. The rate of change is statistically significant when the associated confidence interval in the sixth column does not contain zero.
| Table 1: Union Wage Premiums Over Time, by Industry | |||||
|---|---|---|---|---|---|
| Industry | Latest data | 10 years ago | 20 years ago | Long-run trend | 95% confidence interval |
| Other Services | 36.93 | 23.46 | 33.20 | 0.09 | (-0.49, 0.67) |
| Construction | 33.81 | 48.06 | 47.36 | -0.58 | (-0.89, -0.26) |
| Transportation & Warehousing | 29.59 | 25.20 | 30.90 | 0.12 | (-0.05, 0.29) |
| Local government | 24.63 | 28.97 | 29.92 | -0.15 | (-0.3, 0) |
| Food Services & Drinking Places | 22.11 | 27.45 | 9.24 | -0.04 | (-0.64, 0.57) |
| Telecommunications |
15.32 |
11.93 | -1.07 | 0.28 | (-0.17, 0.74) |
| State government | 14.11 | 17.51 | 16.11 | 0.09 | (-0.06, 0.24) |
| Health Care & Social Assistance | 13.97 | 15.89 | 10.79 | 0.26 | (0.06, 0.46) |
| Real Estate & Rental & Leasing | 13.49 | 4.40 | 0.51 | 0.05 | (-0.35, 0.46) |
| Private wage and salary workers | 12.48 | 19.97 | 19.14 | -0.39 | (-0.54, -0.23) |
| Nondurables Manufacturing | 8.57 | 13.16 | 5.16 | -0.32 | (-0.56, -0.07) |
| Accommodation | 8.26 | 15.56 | 15.80 | -0.01 | (-0.32, 0.3) |
| Information | 6.37 | 12.53 | 10.13 | -0.08 | (-0.45, 0.29) |
| Management, Administrative & Waste Services | 5.16 | 22.70 | 20.35 | -0.71 | (-1.35, -0.08) |
| Educational Services | 2.97 | 9.24 | 12.99 | -0.34 | (-0.61, -0.07) |
| Utilities | 2.55 | 10.87 | 9.78 | 0.10 | (-0.23, 0.43) |
| Durable Goods Manufacturing | -0.71 | 7.94 | 4.84 | -0.28 | (-0.49, -0.08) |
| Finance & Insurance | -2.18 | -11.97 | -5.97 | -0.11 | (-0.54, 0.32) |
| Retail Trade | -2.21 | 1.01 | 8.54 | -0.51 | (-0.7, -0.32) |
| Arts, Entertainment & Recreation | -5.06 | 4.38 | 14.63 | -0.64 | (-1.01, -0.27) |
| Wholesale Trade | -6.59 | -2.67 | 1.46 | -0.28 | (-0.62, 0.06) |
| Professional & Technical Services | -7.00 | -2.75 | -2.15 | -0.32 | (-0.69, 0.04) |
| Federal government | -11.91 | -6.11 | -2.24 | -0.46 | (-0.56, -0.35) |
| Source: Author's calculations using Bureau of Labor Statistics data via Haver Analytics | |||||
According to Table 1, in addition to durable goods manufacturing workers, union workers in wholesale trade; retail trade; professional and technical services; finance and insurance; arts, entertainment and recreation; and federal government have all seen union wage premiums decline into a union wage penalty. Durable goods manufacturing; retail trade; arts, entertainment and recreation; and federal government union workers have also experienced a statistically significant estimate of long-run trend decline.
The calculations presented here just give a rough picture of the union wage premium. A more careful analysis would consider factors like the types of jobs being compared within each industry, or non-wage benefits like health care and leave. Other research suggests that the union wage premium should be considered in terms of a worker's lifetime earnings, not just earnings at a point in time.
Nevertheless, the trends discussed in this post may give added context to recent headlines about union negotiations. For instance, unions may be more contentious during the negotiation process as they seek to restore their historical wage premiums. Whatever the outcome of these negotiations may be, it seems the staggered and messy process of wage adjustment that the labor market has seen during the pandemic is poised to continue.
