Union Membership Narrows the Racial Wealth Gap for Families of Color

Tuesday, September 4, 2018
Center for American Progress

Wealth is critical to families’ immediate and long-term economic well-being. It helps families pay their bills if their income drops due to unforeseen events such as a layoff or medical emergency. It also allows them to invest in their future by sending their children to college; moving to a desirable neighborhood due to, for instance, better schools; switching jobs; or starting a business. Yet wealth is highly unequally distributed in the United States—particularly by race and ethnicity. (see Appendix for more information) White families, for instance, have significantly more wealth than nonwhite families.1 There are a few institutions that help shrink this systematic divide; unions are one such institution.

Unions help increase the wealth for all workers. Indeed, previous Center for American Progress Action Fund research showed that a typical worker covered by a union contract has roughly twice the wealth of a typical nonunion worker.2 And new Center for American Progress analysis shows that unions boost wealth the most for those who are nonwhite.

Being a union member creates a number of venues for workers to build more wealth than would be available for nonunion members.4 Union members bargain collectively for wages, benefits, and procedures that affect their employment, such as when and how an employer can fire an employee. As a result of being covered by a collective bargaining agreement—the contract that employers and unions regularly sign and that governs these employment-related issues—union members have higher wages, on average; more benefits; and more stable employment than is the case for nonunion members.

Higher wages then translate into more savings in absolute terms, as well as more tax incentives to save.5 Furthermore, more job-related benefits—such as health insurance, defined benefit plans, and life insurance—mean that union members need to spend less money than do nonunion members to protect their families against future income losses. Therefore, they can save more money to pursue their own goals, such as paying for their children’s college education.6 Lastly, union membership leads to greater employment stability and job protections that translate into longer tenures with one employer.7 This employment stability translates into more savings, as union members are more likely to be eligible for key benefits such as retirement savings and can better plan for their futures.8

This issue brief considers the relevant data broken down by union membership separately for whites and nonwhites. The data show that:

  • Union members have greater wealth than nonmembers, and the difference is much larger for nonwhites than whites. From 2010 to 2016, nonwhite families who were also union members had a median wealth that was almost five times—485.1 percent, to be exact—as large as the median wealth of nonunion nonwhite families.9The difference between union and nonunion white families was much smaller, with the former having a median wealth that was only 139 percent that of the latter during that period. (see Table 1)
  • Union members have higher earnings, more benefits, and more employment stability than nonunion members. Union members’ total annual earnings are between 20 percent and 50 percent greater than those of nonunion members. (see Table 2)
  • The gap in income, benefits, and employment stability by union membership is larger for nonwhite families than for white families. The chance of having a 401(k) plan, for instance, is about 50 percent greater for nonwhite union members compared with their nonunion counterparts, but the gap among whites is only 21.7 percent. (see Table 1)

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