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Inequality and Institutions

Paper Session

Sunday, Jan. 7, 2024 1:00 PM - 3:00 PM (CST)

Grand Hyatt, Crockett C/D
Hosted By: Labor and Employment Relations Association
  • Chair: Ashley Orr, Carnegie Mellon University

Do Unions Have a Role to Play in Decreasing Earnings Inequality?

Phanindra V. Wunnava
,
Middlebury College
Austin Gill
,
Analysis Group

Abstract

It will be instructive to examine overall trends in inequality and union membership/density. Over the last 50 years the overall union density in the U.S. has decreased from 24% to 10.3% while the U.S.-- Gini index has risen 7 points, a larger jump than most OECD countries (Hirsch and Macpherson 2021; World Bank 2022). This large decline in overall union density is driven by a significant decline in union strength in the private sector, which has fallen from 24.2% to 6.1% (Hirsch and Macpherson, 2021). The public sector on the other hand has witnessed a modest increase in union density and remained relatively stable around 35% (Hirsch and Macpherson, 2021). One of the notable economic trends since the late 1990’s is a dramatic rise in earnings inequality. A number of researchers concluded that a significant source of earnings inequality is due to a large decrease in the unionized fraction of the labor force. The focus of this paper is to investigate impact of union density, unemployment, and demographic characteristics on income inequality (i.e., Gini index). Preliminary results, based on a pseudo-panel of Metropolitan Statistical Areas in the United States between 2010 and 2018, indicate that the union membership rate has an equalizing effect on income inequality. Demographic controls also seem to affect income inequality. By disaggregating union density, we find the magnitude of its effect on income inequality is larger in the private sector relative to the public sector. The aggregate effect of union density on Gini is driven by the private sector due to its larger share of employment. Accordingly, the recent upswing in private sector union drives with the backdrop of a tight labor market may have a major role to play in reducing inequality in the coming years.

No Rest for the Weary: Measuring the Changing Distribution of Retirement Wealth

Teresa Ghilarducci
,
New School for Social Research
Siavash Radpour
,
Stockton University
Jessica Forden
,
New School for Social Research

Abstract

Distribution of Retirement Wealth

Since 1992 wealth for the bottom 90% of households nearing retirement has fallen. The only source of wealth helping the bottom 90% is Social Security. Despite pro savings policies and generous tax breaks for savings, the share of the bottom 50% having any retirement account didn’t change in 20 years -- 46% in 1992 and 47% in 2016.

Even the middle class suffered; the share of the next 40% with retirement savings fell from 85% in 1992 to a low of 71% in 2016. Housing ownership increased a bit for the bottom 50% but fell among the middle class and upper middle class. Home equity for the working and middle class fell. Using SCF and HRS data over 20 years, we find the bulk of working-class wealth is government social insurance. Economists should not exclude social insurance from wealth calculations. We find social insurance is the most important source of wealth for most families. Government policies and institutions have failed wealth building for most American households with workers.

Keywords: Household Wealth, Retirement, Home Ownership, distribution, Inequality, Racial Inequality, Portfolio Composition
JEL Codes: D14, D32, H55, J14, J15
ion

Discussant(s)
Alicia Modestino
,
Northeastern University
Yuci Chen
,
W.E. Upjohn Institute for Employment Research
JEL Classifications
  • H5 - National Government Expenditures and Related Policies
  • J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining