One big reason for stagnant wages and rising inequality

Anemic gains in wages have plagued U.S. workers not just since the Great Recession ended seven years ago but for years before it as well. The underlying factors vary, but research just out suggests that a major culprit is lost in the noise over jobs going offshore, immigration and the minimum wage.

The research points to the decline of organized labor, which is hitting American paychecks across the board. Some 73.1 million full-time nonunion private sector workers are losing $133 billion in wages a year due to weakened unions, according to a report released Tuesday by the liberal-leaning Economic Policy Institute (EPI).

“At least for middle-wage men,” the report said, “the impact of the erosion of unions on the wages of both union and nonunion workers is likely the largest single factor underlying wage stagnation and wage inequality.”

“It’s hard to find another reason that has as much power as we find in the data,” said Jake Rosenfeld, a sociologist at Washington University and co-author of the report, which examined the effects of private sector union erosion on the wages of nonunion workers.

Collective bargaining helps increase the wages of all workers by settings pay and benefit standards that nearby nonunion employers also adopt. “Strong unions can mean higher wages for union members and nonunion members alike,” said Rosenfeld, thanks to the “spillover effect.”

But that boost has weakened along with union membership, which stands at 1-in-20 private sector workers today, down from 1-in-3 in the 1950s. 

The findings were especially troubling for men in the private sector who lack union membership and college degrees. Their real wages are substantially lower than they were in the late 1970s. 

Nonunion men lacking a college degree would have earned 8 percent, or $3,016 annually, more in 2013 if unions had remained as strong as they were in 1979. Female wages would be 2 percent to 3 percent higher if unions had maintained their 1979 levels, according to the findings.

While unions are becoming rarer and rarer, Rosenfeld finds some reasons for optimism. He noted the success of the Fight for 15 minimum wage campaign, which began as a unionizing drive, as well as the recent National Labor Relations Board (NLRB) ruling siding with graduate students seeking to unionize and moves in some states to reclassify private workers as public employees. “Unionization rates in the public sector are much higher than in the private sector,” he said.  

Another report released a week ago illustrates the anemic pay picture, finding that average U.S. wages inched up just 1.9 percent over the last year, according to the Joint Economic Committee of Congress. 

In nine states and the District of Columbia, inflation-adjusted wages actually fell during the past year.

Average hourly earnings for private sector workers declined 1.8 percent in Alaska, 1.3 percent in Colorado and 0.1 percent in the District of Columbia. In Kentucky, they’re taking home 0.6 percent less, while in Michigan, earnings are down by 0.7 percent. Pay in Nevada declined 1 percent, Texas earnings slid 0.3 percent and Vermont saw a drop of 1.3 percent. Earnings fell 0.1 percent in West Virginia and 0.4 percent in Wyoming. 

The slow growth in pay comes amid a healthy labor market. The July employment report from the federal government showed the nation’s jobless rate holding at 4.9 percent.