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Weaker Unions Could Lead to More Income Inequality in States

The Supreme Court will consider a case next week that could have implications for income inequality, which has been growing across the country and in individual states since the 1970s, as we’ve documented here and here.

The case, Friedrichs v the California Teachers Association, concerns unions that represent state and local employees.  The Supreme Court has long held that public employees cannot be required to join unions.  If they don’t, however, they can be required to pay a “fair share” or “agency fee” to cover the expenses the union incurs in representing them.

Individual states currently can choose whether to allow these fair share fees for public employees.  The vast majority of state and local employees (80 percent) work in states that allow them.  But 25 states, where the remaining 20 percent of state and local employees work, have outlawed them.  That’s one reason why public sector unionization rates vary dramatically by state.  Public workers in states that allow fair share fees are twice as likely to join a union (see chart).

Public employee unions’ ability to collect this fee is at risk in the Friedrichs case.  The demise of agency fees would curtail unions’ ability to bargain collectively with employers to raise low- and middle-income workers’ wages and thus would suppress wage gains and likely increase income inequality.

A range of studies (see here and here) have concluded that falling union membership has played a significant role in growing inequality.  In addition, reduced unionization in the public sector would disproportionately affect women and people of color as states and local governments have historically provided more equitable opportunities for these workers.

Federal and state policymakers can push back against these trends by enacting (and enforcing) stronger labor standards, reforming immigration policies to bring workers out of the shadows, promoting full employment, adopting state earned income tax credits, and, importantly, protecting workers’ rights to organize.  Depending on the Supreme Court’s ruling in Friedrichs, this task could soon become more difficult.