Unions can rebuild the middle class and narrow the racial wealth gap

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To commemorate Labor Day, President Joe BidenJoe BidenSocial media making political polarization worse: report Biden and UK’s Johnson to meet for talks this month: report Toyota, Honda knock union-made EV incentive in Dems’ spending package MORE remarked that “unions built the middle class” and argued that, to revitalize the middle-class today, we need to strengthen the labor movement, noting that “worker power is essential to building our economy back better than before.” The president is clearly right that unions are key to strengthening and rebuilding the middle class. New research we conducted with our colleague Christian Weller finds that unions play a critical role in building wealth for middle-class families and reducing wealth gaps that disadvantage Black and Hispanic families. 

Our analysis of the Federal Reserve’s Survey of Consumer Finances found that the median union family has over double the wealth of the median nonunion family. Wealth is a critical measure of the status of the middle class, as it enables families to buy a home, retire with dignity and invest in their children’s education. Wealth can also be a lifeline during times of crisis, such as the COVID-19 recession. Additionally, we found that the wealth gap between white families and Black and Hispanic families was significantly smaller for union households compared to nonunion households, illustrating how unions help make the middle class accessible to all.

Right now, the middle class is shrinking and remains out of reach for tens of millions of American families. The top 5 percent of households own around 250 times the wealth of the median family, and roughly 40 percent of Americans would struggle to come up with $400 to pay for an unexpected expense.  American wealth is also starkly divided by race and ethnicity: The median white household has 10 times the wealth of the typical Black family and eight times that of the typical Hispanic family. 

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Of all the steps that the United States can take to build a more equitable future, strengthening unions stands out as a way to increase wealth for everyone and narrow the racial wealth gap.

Unions have long offered workers a route out of poverty and into the middle class. Union members enjoy higher wages and access to more and better benefits such as health insurance and pensions, as well as job protections ranging from discrimination protection to dispute resolution that create more stable jobs. These features of union membership — higher wages, better benefits and greater job stability — allow union households to build much more wealth over time than nonunion households. 

The results are quite dramatic. The typical union household in our analysis has $270,000 in net wealth, compared to $120,000 for the typical nonunion household.

Our research also finds that unions bridge the racial wealth divide by offering even greater wealth premiums for Black and Hispanic families than those enjoyed by white families. We found that, at the median, Black union families had roughly three and a half times the wealth of nonunion Black families ($100,933 v. $28,865), and union Hispanic families had over five times the wealth of those not covered by a union contract ($124,630 v. $24,072). 

Cognizant of these benefits, Black and Hispanic workers are often at the forefront of the labor organizing movement. Black workers have long joined unions at a greater rate than any other racial or ethnic group and fought tirelessly for their rights in some of the biggest organizing drives in U.S. history. 

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Union improvements to family finances are broader than even the median wealth figures suggest. Union members are much less likely to have no or negative net wealth, a stressful situation that diminishes a family’s ability to support themselves through sudden emergencies like a job loss or an illness in the family. For Black families, in particular, unions reduce the rate of having no wealth from 20.2 percent for nonunion families to 12.5 percent for union families.

Unions alone cannot close the wealth gap, but they are a key part of a comprehensive package of reforms needed to correct systematic biases that make it difficult for Black, Hispanic and other or multiple race families to generate and keep wealth.

Still, the results of our study present American lawmakers with a clear way forward for strengthening the middle class, boosting wealth and financial freedom for America’s working families, and closing the racial wealth gap: help build stronger unions. There are many, many steps policymakers can take to strengthen unions and ensure more workers are covered by a collective bargaining agreement. Biden has emphasized two of the most important and urgent efforts: passing the PRO Act, which would remove barriers that workers too often face trying to join a union, and ensuring that government investments in his Build Back Better agenda lead to good, union jobs. 

In short, strengthening unions is a critical policy goal because it would significantly boost the wealth of all American workers and help close the racial wealth gap.

Aurelia Glass is a research assistant for the Economic Policy team at American Progress with a focus on the American Worker Project. 

David Madland is a senior fellow and the senior adviser to the American Worker Project at American Progress.

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