Working Paper: NBER ID: w24587
Authors: Henry S. Farber; Daniel Herbst; Ilyana Kuziemko; Suresh Naidu
Abstract: U.S. income inequality has varied inversely with union density over the past hundred years. But moving beyond this aggregate relationship has proven difficult, in part because of limited microdata on union membership prior to 1973.We develop a new source of microdata on union membership dating back to 1936, survey data primarily from Gallup (N ≈ 980,000), to examine the long-run relationship between unions and inequality. We document dramatic changes in the demographics of union members: when density was at its mid-century peak, union households were much less educated and more non-white than other households, whereas pre-World-War-II and today they are more similar to non-union households on these dimensions. However, despite large changes in composition and density since 1936, the household union premium holds relatively steady between ten and twenty log points. We then use our data to examine the effect of unions on income inequality. Using distributional decompositions, time-series regressions, state-year regressions, as well as a new instrumental-variable strategy based on the 1935 legalization of unions and the World-War- II era War Labor Board, we find consistent evidence that unions reduce inequality, explaining a significant share of the dramatic fall in inequality between the mid-1930s and late 1940s.
Keywords: unions; income inequality; microdata; Gini coefficient
JEL Codes: J51; N32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rise in unionization (J50) | decline in Gini coefficient (D31) |
| unions (J51) | income inequality (D31) |
| union density (J50) | income inequality (D31) |
| Wagner Act (J51) | union density (J50) |
| National War Labor Board (J52) | union density (J50) |
| union households (J51) | family income premium (G52) |