Unions and Income Inequality

Noam Scheiber has an article about the relationship between unions and upward mobility:

The researchers looked at the expected income of people ages 29 to 32 whose parents were at the 25th percentile of income nationally when they were teenagers. They found that a 10-percentage-point increase in the rate of unionization in an area coincided with a rise of an additional 1.3 points on the income distribution as the average child becomes an adult.

Moreover, the benefits aren’t exclusive to low-income children. The researchers also find that a 10-percentage- point increase in the rate of union membership is associated with a 3 percent to 4.5 percent increase in the incomes of all children — regardless of their parents’ income. (The differences in the 3 percent and 4.5 percent arise from the number of demographic variables the researchers control for.)

Still, the result is especially telling given a common critique of unions — that they may raise wages for workers in an area, but they lower employment by making marginal workers unaffordable. Even if that’s the case, the current study suggests that the benefits of greater unionization are outweighing the costs: Children are doing better on average when unionization for their parents’ generation is higher, even if the higher rates of unionization could theoretically lower employment.

The authors find that children with fathers who belong to a union have significantly higher wages than children who don’t. But when it’s the mother who belongs to a union, only the wages of daughters rise.

What might be going on here? It’s possible that the explanation is sociological: Daughters with a mother who belongs to a union may be more likely to work themselves, which means they’re more likely to have higher wages. Or, put differently, union membership is helping to change social norms.

Obviously this is observational study not a controlled experiment, so it’s impossible to prove causation. Which means the conclusion is obviously wrong, since unions are bad.

Why if this was true we would expect that there was more upward mobility in Canada than the US since:

The unionization rate in the U.S. and Canada followed fairly similar paths from 1920 to the mid-1960s; both peaked at about 30%. However the U.S. rate declined steadily after 1974 to 12% in 2011. Meanwhile the Canadian rate dropped from 37% the mid-1980s to 30% in 2010.

and that’s obviously crazy. There obviously is less upward mobility in .. oh wait the US:

Canadian boys born into the lowest income decile have a 38 percent chance of reaching the top half of the income distribution by adulthood: in America, the equivalent odds are 30 percent.

There is more stickiness at the bottom of the income distribution in the US. While 16 percent of Canadian boys in the bottom decile will stay on the bottom rung as adults, in America, 22 percent remain stuck in place at the bottom.

And in Canada, wealthy children seem less able to rest on their parents’ laurels: only 18 percent of Canadian boys from the richest decile remain there as adults, compared to 26 percent of similar American boys. While 8.4 percent of top-decile Canadian boys fall to the bottom decile, only 3 percent of American boys (perhaps protected by a “glass floor” against downward mobility) experience a similar fall from grace.

Well, at least the US is better than the union hell-hole that is Europe:

The figures1 make clear the great variety of levels of union membership, ranging from 74% of employees in Finland, 70% in Sweden and 67% in Denmark

Wow, that’s terrible:

Using the relationship between parents’ and children’s incomes as an indicator of relative mobility, data show that a number of countries, including Denmark, Norway, Finland, Canada, Sweden, Germany, and France have more relative mobility than does the United States

wait that’s unpossible

Germany is 1.5 times more mobile than the United States, Canada nearly 2.5 times more mobile, and Denmark 3 times more mobile.

But, but unions bad.

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