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Weaker Unions Likely Would Mean Greater Income Inequality

November 20, 2015: We’ve updated this post.

The Supreme Court is considering a case that could have implications for income inequality, which has grown 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 while public employees cannot be required to join unions, they can be required to pay a “fair share” or “agency fee” to cover the expenses the union incurs in representing them.

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.  Thus, it would suppress wage gains and likely increase income inequality.

In recent years, the share of national income going to profits, and hence benefitting mainly those at the top of the income scale, has risen at the expense of the share going to workers.  In addition, salaries at the very top have risen substantially while wages of ordinary workers have stagnated — due to longer periods of high unemployment (which reduce workers’ negotiating power), more foreign competition, and a decline in higher-paying manufacturing jobs.  

A range of studies (see here and here for examples) have concluded that falling union membership has played a significant role in this growing inequality.  In addition, a recent International Monetary Fund study of unionization in major countries found that lower levels of unionization are associated with higher concentrations of income at the top.

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.