Since emancipation more than a century and a half ago, the racial wealth gap in the United States has persisted across the ensuing decades for families of color. Structural inequities, reinforced by how structural racism shapes racially disparate policies and practices, continue to severely limit wealth-building mechanisms for Black and Latinx families of color. Household wealth is increasingly unequally distributed today, with median white household wealth almost eight times greater than median Black household wealth and five times greater than median Latinx household wealth. Economist Christian Weller at the University of Massachusetts Boston and political scientist David Madland at the Center for American Progress contextualize the modern racial wealth gap with data from the Federal Reserve’s Survey of Consumer Finances to explore how union membership might operate as a wealth-building tool for some families. The two authors are particularly interested in detailing how wealth holdings vary by race and ethnicity for union and nonunion members.
For the purpose of this study, the authors define union membership as those workers covered by a collective bargaining agreement. Importantly, the SCF data are at the household level, so all results reflect the presence of at least one union member in the household. The authors examine SCF data from 1989 to 2019, largely focused on the period after the Great Recession, from 2010 to 2019.
Key findings
- The racial wealth gap was smaller for union members than nonunion members. Median wealth was 2.5 times greater for white union households than union households of color. In contrast, it was 5.5 times greater for white nonunion households than nonunion households of color.
- Union membership positively associates with different wealth-building practices, benefits, and ratios, among them:
- 401(k) account ownership
- 401(k) account balance
- Homeownership
- Average household wealth
- Health and life insurance
- Defined benefit pensions
- Median wealth-to-income ratios
- Job and income stability
- Job tenure
- Due to the combined factors listed above, households of all races and ethnicities have more wealth as union members than as nonunion members. Specifically:
- For union members, wealth is 24.1 percent higher for households of color and 16.6 percent higher for white households than for nonunion members. This income difference is 39.9 percent for households of color and 17.1 percent for white households.
- Defined benefit pensions, which provide a defined and steady amount of income upon retirement, are the largest asset gap between households with union membership and those without.
- There is a greater wealth difference between households of color with union members and those with no union members than union and nonunion white households. Median wealth (including defined benefit pensions) for households of color with at least one union member was almost four times greater than their nonunion counterparts. In contrast, white union households had almost two times greater median wealth than their nonunion counterparts. More specifically:
- The difference in median wealth-to-income ratios by union membership is greater for households of color than for white households.
- The average wage income for union households of color is 40.2 percent greater than nonunion households. In contrast, the average wage income for white union households is 27.5 percent greater than nonunion households. Union households of color also see larger increases in income than their nonunion counterparts.
- Union households of color are less likely to experience a negative income shock and more likely to experience a positive income shock.
- Between union members and nonunion members, the difference in job tenure is 49.0 percent for households of color and 24.5 percent for white households, indicating greater job stability.
- Unionized people of color participate in different wealth-building behaviors at different rates than their nonunionized counterparts. Specifically:
- As compared to their white counterparts, the gap in stock market investments between unionized and nonunionized people of color is wider. For people of color, this gap is 45.5 percent after at least six years with their employers as compared to 18.3 percent for white workers.
- Unionized people of color save more and engage in more risk-taking behaviors, measured by the share of financial assets invested in stocks.
- Differences in benefits are greater for households of color than for white households. When people of color are union members, they are more than three times as likely to have a defined benefit pension than when they are not covered by a collective bargaining agreement.
- Most households of color who are union members are homeowners and had a 401(k) plan, 57 percent and 54.3 percent, respectively. By contrast, 50.2 percent of people of color who are nonunion members own homes, and 35.5 percent had a 401(k) plan.
Policy and practice implications
The authors have identified the following implication for practice:
- Researchers should further investigate the causal mechanisms between union membership and wealth. While the evidence is clear that unions boost the incomes of US workers and their families through added job stability and benefits, researchers can help examine the exact causal mechanisms to further the authors’ conclusion that households of color may see larger wealth gains than their white counterparts from collective bargaining agreements.
WorkRise has identified the following implications for policy and practice:
- Bolstering union power will help to lessen the racial wealth gap. Policymakers, labor advocates, workforce development practitioners, and anyone interested in improving wage stagnation and income inequality in the US labor market should promote policies that support workers’ rights to collectively bargain. Doing so can help to equalize wealth and income inequality between and across racial and ethnic households.
- Federal and state policymakers should protect workers’ rights to organize. By upholding labor standards and worker rights at the local, state, and federal levels, policymakers can make it easier for workers to organize their workplaces and collectively bargain with their employers.
- Employers should offer and promote knowledge about existing benefit plans to all employees. In pursuit of greater individual wealth-building opportunities for workers, employers could offer incentives for enrollment to help increase workers’ participation.
- Policymakers can also reinforce access to retirement savings vehicles, including promoting auto IRAs.
In general, employment stability due to union membership offers unique benefits to people of color as compared to their nonunion counterparts. More specifically, union membership offers job stability and financial benefits that people of color who are not union members find more difficult to attain. Combined, these findings indicate that households of color may experience larger wealth gains over their lifetimes than white households from collective bargaining agreements.