How Does Declining Unionism Affect the American Middle Class and Intergenerational Mobility?

This paper examines unionism’s relationship to the size of the middle class and its relationship to intergenerational mobility. Panel Study of Income Dynamics (PSID) 1985 and 2011 files are used to examine the change in the share of workers in a middle-income group (defined by persons having incomes within 50 percent of the median) and use a shift-share decomposition to explore how the decline of unionism contributes to the shrinking middle class. The files are also used to investigate the correlation between parents’ union status and the incomes of their children. Additionally, federal income tax data is used to examine the geographical correlation between union density and intergenerational mobility. Findings include that union workers are disproportionately in the middle-income group or above, and some reach middle-income status due to the union wage premium; the offspring of union parents have higher incomes than the offspring of otherwise comparable non-union parents, especially when the parents are low-skilled; and offspring from communities with higher union density have higher average incomes relative to their parents compared to offspring from communities with lower union density. These findings show a strong, though not necessarily causal, link between unions, the middle class, and intergenerational mobility. JEL code: J31, J51, J62 1 The views expressed in this article are those of the authors and do not represent an endorsement by the Federal Reserve System.