Union Workers earn 10-20% more than Non-Union

Written by WVMFT 

A large empirical study by economists at Columbia and Princeton, tracking millions of workers over decades, found that unionized workers typically earned 10 percent to 20 percent more than similar workers. 

Early in Barack Obama’s recent Netflix documentary series about American jobs, viewers meet a housekeeper at the Pierre Hotel in New York named Elba. She spends her shifts cleaning hotel rooms, and she talks about the job’s challenges, including back pain and guests’ occasional misbehavior. Elba is meant to be a symbol of difficult service-industry work in today’s economy.

But when she mentioned how much money she made, I will admit that I was surprised: Elba earns about $4,000 a month, or roughly $50,000 a year. While modest, that income still allows for something approaching a middle-class lifestyle, especially when combined with the income her husband, Francisco, makes at his job in the Pierre Hotel’s cafeteria.

“I don’t worry too much about money,” said Elba, who recently became a grandmother, “because I know I can count on my paycheck.”

Many other service workers earn far less. Full-time Starbucks baristas in New York City often earn less than $35,000 a year, while many Walmart employees make even less. Across New York City, the median household income is about $75,000 — which is less than Elba and Francisco make.

How is it that they earn a living wage while so many other Americans do not? The biggest part of the answer is that Elba belongs to a labor union.

A living wage

Unions are a much smaller part of the American economy than they once were, representing only 6 percent of private-sector workers. Still, unions allow their members to earn substantially more than similar workers who are not unionized. Consider this data from the federal government:

At workplaces where workers don’t belong to a union, an employer has far more leverage over employees. The company can more easily outsource jobs — like cleaning or cafeteria work — to contractors that pay as little as possible. The company can also hold down wages for its own workers, effectively daring them to quit and find a better-paying job.

Economic theory may suggest that market forces take care of these problems and pay workers their true value. But the economy doesn’t really work the way that tidy theories imagine. Similar workers often earn different wages, and union status is a major reason.

A large empirical study by economists at Columbia and Princeton, tracking millions of workers over decades, found that unionized workers typically earned 10 percent to 20 percent more than similar workers. (Here’s a Times article on the study.) The results also suggested that much of the money came out of business profits and executive pay. Unions reduce economic inequality by effectively shifting money out of stock returns (which disproportionately flow to the affluent) and top incomes and into wages.

Obviously, unions can overreach and demand wages so high, or working conditions so inefficient, that a company can’t survive. But those situations are the exception, not the norm. In most situations, unions give workers the bargaining power that they lack when they try to negotiate their pay individually. An employer has a harder time rejecting the requests of hundreds of workers at the same time.

If you are trying to understand why income inequality has soared over the past half-century, the decline of unions is a central part of the story.

This chart compares the share of workers who belong to a union with the share of income flowing to high earners:

And in L.A. …

I wanted to tell you Elba’s story this morning because it’s connected to a recent news development in Southern California. About a month ago, 15,000 hotel workers in Unite Here, the same national union to which Elba belongs, voted to authorize a strike. Most of them walked off their jobs and took to picket lines for three days over the July 4 weekend before returning to work on Wednesday.

The workers, who include housekeepers and cafeteria workers, now typically earn $20 to $25 an hour, which they say is often not enough for them to afford convenient housing. “We can’t afford to live in the place that we work,” Ayden Vargas said. Vargas works at the Fairmont Miramar in Santa Monica and lives in San Bernardino, almost 80 miles away.

The workers are asking for an immediate $5 raise, followed by $3 annual raises in later years, as well as better health coverage and pensions. The hotels have countered by offering a $2.50 initial raise, followed by smaller annual raises.

The largest hotel in Los Angeles, the Westin Bonaventure Hotel & Suites, settled with its Unite workers before the July 4 strike and gave them unspecified wage increases and pension improvements. Unite officials say that workers at the other hotels may go on strike again soon. Already, the July 4 strike was the largest in the U.S. hotel industry in 50 years.