The Decline of Unions

The decline of American union membership from a peak of approximately 35% of the workforce in the mid-1950s to under 10% today is not simply a story of structural economic change -- the shift from manufacturing to services, the rise of the knowledge economy -- though those changes played a role. It is also a story of deliberate political choices that made organizing more difficult, enforcement of labor law more lenient, and the consequences of anti-union activity less severe.

The signal event was President Reagan's dismissal of 11,381 striking air traffic controllers in August 1981. The Professional Air Traffic Controllers Organization (PATCO) had gone on strike for higher wages and better working conditions, violating a federal law against strikes by public employees. Reagan issued an ultimatum, the controllers refused to return, and Reagan fired them all -- permanently. The message to private-sector employers was unambiguous: aggressive anti-union action would not be punished and might be rewarded. A wave of "union avoidance" consulting, expanded use of permanent striker replacements, and more aggressive tactics in organizing campaigns followed.

The National Labor Relations Board, which adjudicates unfair labor practices, became progressively less able and less willing to protect organizing rights over the subsequent decades. Employers who illegally fired organizing workers faced modest penalties -- back pay, reduced by any interim earnings -- that were easily incorporated as a cost of doing business. The median time between an unfair labor practice charge and resolution exceeded two years, enough to dissipate any organizing momentum. The formal rights guaranteed by the National Labor Relations Act increasingly existed only on paper (Bronfenbrenner, 2000).

When union power falls, wages for all workers fall -- union and non-union alike. Unions set wage norms that extend beyond their membership. Their decline is inseparable from the stagnation of middle-class incomes since 1980.Adapted from Lawrence Katz and Alan Krueger, The Rise and Nature of Alternative Work Arrangements (2019)

The economic consequences of union decline were substantial and well-documented. Economists generally estimate that union membership raises wages for covered workers by 10-20% above comparable non-union workers. The wage-setting norm effect extends further: in industries and regions with high union density, non-union employers feel pressure to match union wages to retain workers and deter organizing. As union density fell, this norm effect weakened, contributing to wage compression at the bottom of the income distribution and expanding inequality throughout.

The decline of collective bargaining also removed an institutional counterweight to the power of management in large corporations. The postwar period of high union density was characterized by what economists call "compressed" wage structures -- relatively small differences between executive and worker pay, partly because unions negotiated wage floors that constrained the bottom while also limiting the gap between shop floor and management compensation. The widening of executive-to-worker pay ratios since 1980 -- from roughly 20:1 in 1965 to over 300:1 today -- reflects, in part, the removal of institutional constraints on executive compensation that strong unions had previously provided.