The Union Advantage for Young Workers: Higher Wages and More Benefits

09/01/2022 10:15am

Key Findings

  • Between 2016 and 2021, the median hourly wage for a young worker represented by a union was $23.86 ($2021), substantially higher than the wage for a young worker not represented by a union ($17.27). 
  • Young union workers were much more likely than young nonunion workers to have employer-provided health insurance (71.1 percent vs. 46.8 percent) and retirement benefits (54.5 percent vs. 24.5 percent). 
  • Using standard regression techniques to adjust for underlying differences between union and non-union young workers, union representation is associated with an 11.3 percent wage premium, a 37.9 percent increase in employer-sponsored health insurance coverage, and an 89.8 percent increase in employer-sponsored retirement coverage. 
  • Union representation is associated with wage and benefit premiums for both young men and young women. The wage and retirement plan premiums for young men are notably higher than for young women, but the health insurance benefit premium is similar. 
  • Union representation is associated with wage and benefit premiums for young workers across four ethnic and racial groups: Asian, non-Hispanic; Black, non-Hispanic; Hispanic, any race; white, non-Hispanic. Union wage premiums are highest for young Hispanic and Black workers (nearly 20 percent and 14 percent, respectively). Union benefit premiums are highest for young Hispanic and Asian workers.  

Introduction

Though originally designed to neutralize the potency of May Day, Labor Day in 2022 comes at an inflection point for US workers in general and for younger US workers in particular. Amid an upswell in union enthusiasm and increased attention to union organizing in the popular press, the trajectory of the labor movement going forward has especially significant ramifications for adult workers under the age of 35. These younger workers have now endured multiple economic shocks during formative stages in their lives. Unions have the potential to both mitigate some of the damage done by recent economic crises and to provide a mechanism for building worker power to create lasting structural change. 

Evidence suggests that those who enter the labor market during economic crises may suffer persistent economic harms due to delayed or derailed career progress during this crucial beginning stage. Many workers between the ages of 18 and 34 will have entered the labor market during either the Great Recession or the COVID-19 pandemic, raising the potential for economic scarring across an especially large cohort. Union representation presents a potential counter. Since union wage advantages often match or exceed earnings setbacks related to economic shocks, increased union density could serve as a bulwark against longer term earnings suppression. Previous research has found union wage effects that would have been equivalent to six years of fast-paced wage growth for young workers prior to the Great Recession.  

Union representation is also associated with higher levels of employer-sponsored health insurance and retirement plan coverage. Though the availability of these benefits traditionally exerts less labor market influence on younger workers, their absence can have profound long-term effects. Medical care is expensive in the United States, and the COVID-19 pandemic has highlighted some of the danger of gaps in insurance coverage, although a provision in the Affordable Care Act (ACA) ensuring that young adults remain eligible to continue health coverage under a parent’s plan until the age of 26 has admittedly made securing employment-based coverage less urgent for many under that age threshold. No such provision exists for retirement, and young workers reap enormous benefits from early investment. By negotiating health and retirement benefits, unions play a significant role in ensuring their members’ financial security in the present and the future. 

Trends in Union Membership and Coverage of Young Workers

The engagement of younger workers is important for rebuilding the labor movement overall and for younger workers. Increased union presence can dovetail nicely with other social movements, with younger workers helping to facilitate hybridized collective action that addresses inequality and injustice on multiple fronts. However, opportunities for this remain limited due to precipitous declines in union membership and coverage across workers of all ages since 1983 (Figure 1). These declines have culminated in especially low rates of union coverage for younger workers, who started out at lower levels even before the downturn.

Figure 1

Recent data from the Current Population Survey Outgoing Rotation Group indicates that union density in the United States returned to its (very low) pre-pandemic level in 2021, with membership and coverage rates of 10.3 percent and 11.6 percent, respectively. Yet signs increasingly point to a latent union resurgence, especially among younger adults. Between 2019 and 2021, the union membership rate for the youngest prime-age workers (ages 25 to 34) increased by 0.7 percentage points, more than for any other age group. This was also the only age group that added union members during this period. 

Recently-released poll data from Gallup indicate that 72 percent of those ages 18 to 34 hold favorable views toward labor unions, slightly more than the average approval level across all age groups. Meanwhile, high-profile, successful organizing campaigns at companies like Amazon and Starbucks have notably been led by younger workers, and these efforts have begun to show up in certain forms of official data. The National Labor Relations Board (NLRB), the agency responsible for overseeing many private sector union elections, is processing more petitions than it has in years, with a 58 percent increase in filings over the first three quarters of fiscal year 2022 alone.

Nevertheless, union representation for workers younger than 35 remains below 10 percent. Studies have found evidence of unmet demand for unions among younger workers internationally since at least 2005, and the disparity between the share of young workers who are union members and the share who approve of unions is another sign of this. 

Young Workers Covered by Union Contracts Earn More and are More Likely to Have Health and Retirement Benefits

Using data from 2016 to 2021, a period that includes both pre-pandemic and pandemic years, Table 1 documents that union coverage among young workers is associated with higher median hourly earnings and increased inclusion in employer-sponsored health insurance and retirement plans.

Table 1: Wages, Health Insurance, and Retirement Coverage for Workers Ages 18 to 34, 2016–2021
  Union Coverage   Median Hourly Wages   Employer-Sponsored Health Insurance   Employer-Sponsored Retirement Plan
  Rate   (2021$)   (percent)   (percent)
  (percent)   Union Nonunion   Union Nonunion   Union Nonunion
All Young Workers 8.9   23.86 17.27   71.1 46.8   54.5 24.5
Ages 18 to 24 5.6   18.02 13.55   46.6 22.8   39.5 13.5
Ages 25 to 34 10.5   25.47 20.67   77.3 59.0   58.3 30.1
                     
Women 8.1   22.39 16.44   71.5 44.5   54.1 24.5
Men 9.6   25.02 18.34   70.8 48.8   54.8 24.5
                     
White 9.4   24.97 18.75   71.9 49.6   54.6 26.9
Black 9.2   20.38 15.24   63.1 44.3   47.6 19.8
Hispanic 7.8   21.92 15.48   71.2 35.2   57.3 17.4
Asian 7.7   26.50 23.74   73.5 52.2   51.9 25.1

Notes: Author’s analysis of Current Population Survey Outgoing Rotation Group and Annual Social and Economic Supplement, 2016–2021. Union refers to union membership or representation. Wage data includes overtime, tips, and commissions and excludes imputed values. Health insurance indicates that the person is a policyholder for an employer-sponsored plan. Those with employer-sponsored health insurance through someone outside of their household are excluded from the calculation. Retirement plan refers to participation in an employer-sponsored plan, with or without employer contribution. Health and retirement coverage refer to 2015–2019; wages refer to 2016–2021.

The second and third columns in Table 1 show the median hourly earnings for union and nonunion wage and salary workers between the ages of 18 and 34 during the six year period from 2016 to 2021. Median hourly earnings for young workers with union coverage were 38.2 percent higher than their nonunion counterparts, a difference of $6.59 per hour. 

Union representation was associated with compensation bumps for both women and men and across racial and ethnic groups. The magnitude of these premiums varied. The union earnings advantage was especially pronounced for young non-white Hispanic workers, among whom union wages were 41.6 percent higher ($6.44 per hour) than nonunion wages.

The remaining columns in Table 1 show the percentage of young workers who participated in health insurance and retirement plans sponsored by their employer. Excluding those whose answers suggested they had opted to remain on a parent’s plan, young workers with union coverage were 52.1 percent more likely to hold their own employer-sponsored health insurance policy. The percentage of young union workers who were included in employer-sponsored retirement plans was more than double that of their nonunion counterparts. As with median wages, the contrast in union and nonunion benefit coverage was stark among young Hispanic workers. Young Hispanic workers with union jobs were more than twice as likely to have employer-sponsored health insurance, and around 3.3 times as likely to be included in an employer-sponsored retirement plan.  

The difference in participation in these plans was similarly striking for workers between the ages of 18 and 24. Unionized workers in this age range were also more than twice as likely to have health insurance through their employer, and they were nearly three times as likely to be included in an employer-sponsored retirement plan. For health insurance, this is potentially suggestive of plan quality as well as availability, given the expansion in options for many of those under the age of 26 due to the Affordable Care Act. 

Union Wage and Benefit Premiums Remain After Adjusting for Differences Between Union and Nonunion Young Workers

Simply comparing the earnings and benefits outcomes of union and nonunion workers does not necessarily tell us whether or to what extent differences in these outcomes can be explained by union coverage. Union workers may be more likely to have other characteristics associated with higher earnings and increased benefit coverage, such as more formal education or geographic clustering in states with different market norms. Because of this, Table 1 may not accurately represent the effect of unionization on earnings and benefits outcomes for young workers. 

To assess whether differences in earnings and benefit coverage are attributable to union representation, this analysis applies standard regression techniques to control for systemic differences between the union and nonunion workforces. Table 2 shows median wages, health insurance, and retirement benefit coverage for young workers by union coverage, after controlling for age, educational attainment, gender, ethnicity and race, state, citizenship status, and major occupation and industry. 

These results suggest that union representation still confers substantial wage and benefit premiums for young workers. After adjusting for potential confounders, union representation is associated with an 11.3 percent wage premium for workers between the ages of 18 and 34. The union effect also remains substantial with respect to employer-sponsored health insurance and retirement benefits, with regression-adjusted union premiums corresponding with a 37.9 percent increase in employer-sponsored health insurance coverage and an 89.8 percent increase in employer-sponsored retirement coverage.

Table 2: Regression-Adjusted Union Wage, Health Insurance, and Retirement Advantage for Workers Ages 18 to 34, 2016–2021
      Median Hourly Wage Employer-Sponsored Health Insurance Employer-Sponsored Retirement Plan
  Union Coverage Union   Union Coverage   Union Coverage
  Rate   Premium   Premium Increase   Premium Increase
  (percent)   (percent)   (p.p.) (percent)   (p.p.) (percent)
All Young Workers 8.9   11.3   17.7 37.9   22 89.8
Ages 18 to 24 5.6   14.7   17.3 76.1   18.1 134.4
Ages 25 to 34 10.5   10.3   15 25.5   22.8 75.8
                   
Women 8.1   4.4   16.3 36.7   17.6 71.9
Men 9.6   17.6   18.7 38.4   25.2 102.8
                   
White 9.4   9.5   16.1 32.5   19.8 73.7
Black 9.2   13.6   5.4 12.3   17.8 89.9
Hispanic 7.8   19.6   27.3 77.4   29.6 170.5
Asian 7.7   7.8   22.9 43.9   26.9 107.3

Notes: Author’s analysis of Current Population Survey Outgoing Rotation Group and Annual Social and Economic Supplement, 2016–2021. Regressions include controls for age, age squared, education (less than high school, high school, some college, bachelor’s degree, and advanced), gender (when men and women appear in the same regression), race/ethnicity (when those of different races/ ethnicities appear in the same regression), state, citizenship, and major occupation and industry. The wage regressions use ordinary least squares and the health and retirement regressions are probit marginal effects. Union wage premiums in percent are converted from log points by taking the antilog of regression coefficients and subtracting one. Union health insurance and retirement coverage figures are percentage point (p.p.) increases associated with union representation. Coverage increases in percent terms are relative to the current coverage rates for non-union workers. Health insurance and retirement coverage refer to 2015–2019; wages refer to 2016–2021. All regression results are significant at the one percent level.

The regression-adjusted union wage advantage also remained pronounced for workers between the ages of 18 and 24. Union workers in this youngest age group enjoyed a regression-adjusted wage premium of 14.7 percent. (When concurrent school enrollment is added to the list of controls, the premium declines slightly to 14.4 percent). Unionization also corresponded with a 76.1 percent increase in employer-sponsored health insurance coverage and a 134.4 percent increase in retirement plan coverage.

Union representation remains associated with reduced wage inequalities for young Hispanic workers and young Black workers, though the effect is noticeably larger for the former than the latter. For Hispanic workers between the ages of 18 and 34, the regression-controlled union wage premium was nearly 20 percent. Union representation was also associated with a 77.4 percent increase in employer-sponsored health insurance for young Hispanic workers and a 170.5 percent increase in employer-sponsored retirement plan coverage. The adjusted wage and benefits premiums associated with union coverage were larger for young Hispanic workers than for any other racial or ethnic groups in this age range. 

Unionization also appeared to reduce ethnic disparities in earnings and benefits, cutting the percent gap in wages between white and non-white Hispanic workers by almost half and nearly achieving parity in combined health insurance and retirement benefits (Figure 2).

Figure 2

These results are especially noteworthy given generational differences in the racial and ethnic composition of the workforce. As Figure 3 shows, non-white Hispanic workers comprised a much larger share of the under-35 workforce than the 35-and-over workforce. Though the extent to which a larger labor movement could reduce ethnic disparities in compensation remains to be seen, the results of this analysis bode well for the idea that union representation could act as a countervailing force against economic inequality within a growing minority population.

Figure 3

Policy Implications and Conclusion

This analysis demonstrates that, even after controlling for systemic differences between union and nonunion workers, union representation continued to be associated with increased earnings and employer-sponsored health insurance and retirement plan coverage for workers between the ages of 18 and 34. The union wage and benefits advantage was especially strong for Hispanic workers in this age range.

Unions have historically acted as a significant constraint on economic inequality. Collective bargaining can help ensure stability, accountability, and parity. These attributes are especially consequential for younger workers, given the documented increase in precarious work arrangements. 

Despite decades of union decline, there are signs of a nascent resurgence in labor organizing and activism with younger workers at the forefront. This has coincided with a tight labor market and a more pro-worker mandate for the NLRB. 

To make the most of this potentially revitalizing moment, policy makers must approach pro-labor initiatives with a greater sense of urgency. The already underfunded NLRB will need additional resources to expediently process the growing number of union petition filings and unfair labor practice complaints. Policy makers must also prioritize legislation that will reduce organizing obstacles and codify collective bargaining rights for additional workers—legislation such as the Protecting the Right to Organize (PRO) Act and the Public Service Freedom to Negotiate Act, respectively.

Finally, states also have a role to play in protecting the rights of workers to organize unions and collectively bargain. So-called right-to-work legislation undercuts union funding and has been shown to weaken labor unions and undermine the workers they represent. State-run union elections can also be more unnecessarily onerous for workers in certain industries, making legislation like California’s Assembly Bill 2183 crucial to ensure that all workers are able to exercise their right to organize and join unions. 

In an economy that is otherwise strongly tilted toward the managerial class, it is vital to empower workers by protecting and supporting their unions. The advantages of union representation for younger workers make reinforcing the labor movement that much more critical as an investment in our collective future.

Methodological Notes

Union representation includes those who indicate that they are union members and those who report that they are represented by a union or covered by a union contract, even if they are not members. Unless otherwise specified, references to “unionization” and similar terms refer to employed wage and salary workers represented by a union.

For this report, racial/ethnic categories are mutually exclusive and defined as follows: White includes those who identified exclusively as non-Hispanic white. Black encompasses non-Hispanics who identified as Black, including those who also identified as other races. Hispanic includes all respondents who indicated they were Hispanic, including those who identified as other races. Asian refers to non-Hispanic Asians, Hawaiians, and Pacific Islanders who did not also identify as Black. 

This analysis uses pooled data from multiple, consecutive survey years (2016 to 2021) of the Current Population Survey to generate a sufficiently large sample to examine the effects of union representation. For earnings and union representation data, this analysis  uses data from the Current Population Survey Outgoing Rotation Group (CPS ORG), which uses a household rotation pattern such that about a quarter of respondents answer questions about their wage and salary earnings each month. For information related to health insurance and retirement plan availability, this analysis combines data from the CPS ORG with data from the Current Population Survey Annual Social and Economic Supplement (CPS ASEC). The CPS ORG and CPS ASEC data used in the analysis have different reference periods; while CPS ORG contains responses to questions about the previous week, the items from the CPS ASEC refer to the previous calendar year. This means that, for health insurance and retirement calculations, this analysis uses union status data from March (when the CPS ASEC is administered) of the survey year in tandem with data referring to the prior calendar years. While this provides the best possible proxy estimation of the relationship between union representation and the benefits in question, the reference period mismatch introduces additional measurement error and bias into the analysis.

Median hourly wages are reported in 2021 dollars that are adjusted for inflation using the Consumer Price Index for All Urban Consumers Research Series (CPI-U-RS) when available, and the CPI for All Urban Consumers (CPI-U) for more recent years. This analysis uses the set of adjustments developed by John Schmitt to estimate hourly earnings for workers who report variable weekly hours, to account for inflation-related changes in the share of earnings going over topcodes, and to incorporate commissions, tips, and overtime into median hourly earnings.

Acknowledgments

The author would like to thank Hye Jin Rho and Shawn Fremstad for their helpful comments and feedback, and Matthew Sedlar, Sarah Rawlins, Karen Conner, and Julia Godfrey for their editorial assistance.

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