Organized labor has been through a tough half-century, as deindustrialization, economic deregulation, and an all-out right-wing attack have decimated union membership across the country. But new research shows how the benefits of organized labor extend far beyond union members’ paychecks: Unions also help fortify the social safety net and push workers’ families and communities toward long-term self-sufficiency.
According to a study by University of Minnesota researchers on the effects of union membership on Uncle Sam’s balance sheets, unionized workers overall contribute more in tax revenue, rely less on welfare, and secure more sustainable jobs. The analysis, which tracks tax and income data from 1994 to 2015, shows a clear immediate payoff: union members’ average yearly income (about $48,000) is roughly $7,400, or 16 percent, more than what nonunion workers earn. In turn, these higher-earning workers also depend less on benefits like food stamps or cash assistance.
Surveying wage trends from 1994 to 2015, for workers and the public purse, “union membership raises private income, lowers public-benefit use, and increases taxes paid, yielding a positive net fiscal impact.” Adding up the net worth of federal benefits programs, including unemployment insurance, cash assistance for poor families, food stamps, disability, and Social Security—which average around $1,400 each year per worker—are basically replaced with added private income negotiated through union contracts. Unionized workers had greater economic security, using about 23 percent less than nonunion peers in public benefits (about $336 annually).
Conversely, the trend of declining wages in recent years has driven increased welfare use among many formerly middle-class workers. In foundering blue-collar mainstays like manufacturing, the researchers observe, “as unionization erodes, working families’ ability to stay clear of the public safety net erodes.” Rising economic frustration has sparked movements such as the Fight for 15 campaign, which blame “nonunion employers’ low pay and meager benefits for making working families reliant on public insurance programs.”
But in addition to boosting economic independence, the “union advantage” also strengthens workers’ aggregate economic power, as it enables members to reach a level of income that boosts the tax revenues they “pay back” to the government. They earn higher private incomes that create a two-fold virtuous circle, boosting household economic security while yielding larger payoffs for public coffers.
Unionization shifts the broader distribution of wealth as well. The government takes in higher tax gains from workers’ increased earnings, which helps offset the legal loopholes and tax breaks that have allowed corporations and investors to siphon off wealth into tax-avoidance schemes over the years. Union members reverse this fiscal drain by winning higher wages and eventually feeding money back into the public treasury.
Aaron Sojourner, a co-author of the study, concludes that the economy as a whole is better off when workers can exercise power through unions: “Promoting collective bargaining is a way to encourage labor and management to negotiate their way to employment relationships that work well in the context of their company, market, industry, community and lives.”
Union-related pay hikes represent both “a change in the overall size of the pie and a change in the way the pie is split” between the shareholder board and the shop floor. The link between wages and the tax base is a win-win: Members earn more at work and pay more as taxpayers into the public trust. Wealth is redistributed progressively toward the lower tiers of the wage scale. Overall, Sojourner argues, labor contracts equalize leverage in the workplace hierarchy, so that “workers have an option to bargain together, the way investors do, to promote balanced bargaining.”
Union-based wage gains also differ from state-led wealth transfers, like minimum wages, because higher income is negotiated within the workplace, yielding greater total economic gains through workers’ own earnings, rather than public policy. Sojourner points out that “private income gains average about three times larger than the costs in terms of extra taxes and lost benefits’ value.” Through collective bargaining,
unionization promotes the transfer of resources from shareholders and managers to workers without the government getting directly involved; it increases workers’ bargaining power in labor relations but leaves the details up to the private negotiations…. It’s a less-blunt instrument than a minimum wage or really any other policy that mandates a uniform outcome or a minimum standard across the economy. It promotes workers’ voices, preferences, and power in finding tailored ways to share the economic value created by employment relationships.
Public benefits will always be necessary for some workers, of course, and our social-welfare system needs to be strengthened. But union power lifts up workers’ wages while also strengthening public finances, which helps maintain social-welfare budgets and public services that support the entire working class. In addition, workers’ growing economic leverage at work may also lead to greater political power and civic influence for workers. More political clout for labor can result in more progressive policy, the study argues, since “organized labor often advocates for larger public budgets” and progressive corporate taxation, and might even get more union members elected to office. It’s worker-led economic democracy, linking labor relations to class politics.
Although organized labor represents just a small slice of the workforce today, unions can help democratize the workplace, and indirectly democratize the economy as a whole. When workers seize power on the shop floor, they collectively turn the levers of workplace power to drive economic justice from the top down, and across the community.