Unions Build Wealth for the American Working Class

Many Americans today struggle with low levels of savings, but unions offer working families a viable path to improving their financial well-being. Wealth is the difference between what people own and what they owe in debt, and building and maintaining wealth is crucial for families. Wealth allows workers to cover expenses during emergencies or periods of joblessness; put money toward purchasing a home or raising children; and fund a comfortable retirement. Unions may help families build wealth not only through increased income but also better job stability, benefits, and training.

A Center for American Progress analysis of the effects of union membership on wealth shows that being part of a union is associated with greater wealth for working-class families—defined as households without a four-year college degree—and especially working-class families of color. Because of this effect, unions are a crucial means for building wealth among the working class and reducing racial wealth gaps for workers without four-year college degrees. The key findings of this report include:

• Working-class union households hold nearly four times as much median wealth ($201,240) as the typical working-class nonunion household ($52,221), suggesting that membership vastly increases wealth for working-class families.
• Union membership helps close the wealth gap between working class and college-educated households. While the median wealth of working-class nonunion households is just 17 percent that of college-educated nonunion households, the median wealth of working-class union households is 67 percent that of college-educated nonunion households.
• Union membership is tied to large dollar gains for all workers, but working families of color enjoy the largest percentage of gains. White working-class union families hold more than three times as much wealth as working-class nonunion households, while Black families hold more than four times as much wealth, nonwhite Hispanic families more than five times as much wealth, and families of other or multiple races or ethnicities have in excess of seven times as much wealth.
• Working-class families of all races and ethnicities are far more likely to own their own homes when part of a union.

Prior Center for American Progress Action Fund research has established that union membership significantly increases wealth for all households,¹ and CAP research has shown that unions also narrow racial wealth gaps.² This analysis builds on previous evidence to show that greater wealth for union households extends to the divide between working-class and college-educated Americans.

Unions lead to higher wages, better benefits, and stronger on-the-job protections, all of which can contribute to increased wealth for union households.³ Unions directly increase wages for members of the working class⁴ as well as offer better benefits such as health insurance and retirement plans that further reduce individual expenses on health care and saving for retirement.⁵ Union workers also enjoy improved job stability, which prevents periods of unemployment; leads to fewer job changes, and thus lower costs; and results in wage growth on the job and a better chance of qualifying for retirement benefits at work.⁶ Job stability also creates peace of mind, which helps workers focus on the longer term and save more. These union benefits are particularly important for ensuring high job quality for workers without a college degree.

These factors enable workers to build wealth in multiple ways. Union membership is associated with significantly higher earnings over a worker’s entire lifetime, particularly for those without a college degree,⁷ directly raising total income. Improved benefits plans and increased job stability also alleviate the need for families to draw down their wealth to make up for lost income during spells of joblessness or to cover medical expenses that insurance does not cover.

Because the majority of workers in the United States do not have a college degree, the union wealth effect could increase wealth for millions of working-class Americans. Furthermore, because nearly half of the working class are workers of color—with Black, Hispanic, and other or multiple race or ethnicity workers making up 45 percent of the working class, and white workers comprising the remaining 55 percent—these findings cement the role of unions in advancing racial wealth equity.⁸

However, studies have shown that American households—especially members of the working class—struggle with low wealth. A 2022 survey found that nearly 1 in 3 American adults lacked the funds to cover an emergency expense of only $400,⁹ and the Federal Reserve’s 2010 through 2019 Survey of Consumer Finances (SCF) data used in this analysis showed that median working-class household wealth overall was $70,313 in that period, and 11.4 percent of working-class households had no wealth at all.

Workers across the country want to join unions. In fact, unions have reached their highest levels of support in more than half a century,¹⁰ and nearly half of U.S. workers stated that they would join a union if they could.¹¹ However, forming a union in the United States is needlessly difficult, and weak federal labor laws fail to protect countless members of the working class who want to exercise their right to come together in collective bargaining. Policymakers who value the working class must advocate for stronger protections that enhance workers’ right to join unions. They can start by passing the Protecting the Right to Organize (PRO) Act,¹² but there is much more that can be done, including preventing firms from deducting the costs of union busting¹³ and seizing the moment offered by the passage of President Joe Biden’s landmark industrial policy laws to ensure workers on jobs funded by federal spending have the chance to join a union.¹⁴

This report builds on previous CAP findings that union membership is associated with increased wealth for all workers and a narrower racial wealth gap. A 2021 CAP analysis of SCF data from 2010 through 2019 found that the median union household in the United States has more than twice the wealth of the median nonunion household. The 2021 analysis also found that Black households with a union member have median wealth that is more than three times that of Black nonunion households, and more than five times that of Hispanic households.

This report highlights how prior research about the role of unions in building wealth is especially important for the working class.¹⁵

Union membership is associated with increased wealth for working-class households

From 2010 to 2019, the median working-class union family had nearly four times as much wealth as working-class families not covered by a union contract. As shown in Figure 1, families without a four-year college degree that were covered by a union contract had a median wealth of $201,240, while working-class families without union contracts had a median wealth of only $52,221.

The analysis confirms that the increase in wealth associated with union membership in particular holds true for the working class. It also shows that the union wealth effect comes from more than just the higher incomes that union workers enjoy: Working-class families covered by a union contract enjoy a higher wealth-to-income ratio—2.6 compared with 0.96 for households not covered by a union contract. This suggests that, in addition to strengthening income, union membership allows working-class families to better sustain and grow their wealth over time.

Union membership helps close the gap between working-class and college-educated households

Union members narrow the wealth divide between working class and college-educated households, offering working people an alternative to a college education for building wealth. The median wealth for working-class nonunion families is only 17 percent that of college-educated nonunion households, while the median wealth for working-class nonunion households is 67 percent that of college-educated nonunion households. As shown in Figure 2, the wealth gains help offer workers a route to the middle class outside of a four-year degree. (Unions also help boost wealth for college-educated workers: Union households with a college degree have a median wealth of $376,406—20 percent greater than college-educated nonunion households.)

The decline in union density across the United States has been shown to have exacerbated the earnings gap between college-educated and working-class Americans,¹⁶ and these findings further cement unions’ role in reducing inequality across the economy by extending the union effect on inequality to wealth.¹⁷

Union membership offers dollar benefits for all workers, but working families of color enjoy the greatest percentage gains

Unions help reduce the racial wealth gap in the working class, as families of color enjoy the greatest percentage gains in wealth associated with union membership. As shown in Figure 3, the dollar gains for white working-class families remain significant: White families covered by a union contract have a median wealth $210,475 higher than those who are not—a median wealth more than three times that of nonunion white families. For Black, Hispanic, and other or multiple race or ethnicity families, the ratio between union and nonunion median household wealth is far greater, although total wealth remains lower than that of white workers. Black working-class households covered by a union contract have more than four times the median wealth of Black working-class nonunion households; nonwhite Hispanic working-class households have more than five times the median wealth; and households of other or multiple nonwhite races and ethnicities have more than seven times the median wealth when covered by a union contract.

Union membership helps working-class families afford their own homes

Working-class families covered by a union contract are far more likely to own their homes than those without a union contract. Figure 3 shows that this effect persists across racial categories, with a 13 percentage point higher rate of homeownership among working-class union households of all races and ethnicities. This increase is even higher for nonwhite Hispanic working-class households at 17 percentage points higher.

Homeownership has long been a key store of wealth in the United States, and higher wages and better benefits through union membership allow workers to make these crucial investments in themselves and their families by putting their savings toward purchasing a home. Improved job stability through union membership likely plays a role as well by simplifying the homebuying process and making it easier for families to afford consistent mortgage payments.

No matter the measure, union membership offers substantially more wealth for working-class families

Families build and store wealth in a variety of different ways, including saving wage income, putting money toward retirement plans, and homeownership, among other things. Union membership offers working-class families the ability to build wealth in all of these ways. The table below details common measures of household wealth, including median wealth; wealth-to-income ratio; rates of homeownership, having no net wealth, and holding pension plans; and value of pensions. This diverse array of measures shows that working-class union families have increased savings, a more comfortable retirement, and a lower likelihood of having no wealth at all , and often most prominently for working-class families of color.

Unions offer a crucial means for strengthening the wealth of working-class families and narrowing racial wealth gaps among the working class. Policymakers have made strides in starting to craft policies to create quality jobs for the working class, most notably through the economic legislation passed by the Biden administration as the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act.

Still, there is a long way to go to ensure that workers are able to join unions and have access to the many ways by which union members can boost their wealth. Policymakers at the federal and state levels must properly implement these laws to encourage joint labor-management partnerships for training and safety, for example. Policymakers should also design industrial policies that benefit all of the working class, particularly those who are employed in services.¹⁸ Finally—and most directly—policymakers need to reform labor law to make it fairer and easier for workers to form a union and bargain collectively, and they can start by passing the PRO Act.

This analysis builds on previous CAP work that demonstrated the existence of a union wealth premium, which in turn reduces racial wealth gaps. The authors used surveys from nearly a decade of SCF data that include demographic and wealth data for households across the United States, spanning from 2010 through 2019 and collected every three years.¹⁹ In total, four waves of SCF data were pooled together to produce sample sizes large enough for robust results and to cover the span of the single business cycle that followed the 2008 financial crisis and ended just prior to the onset of the COVID-19 pandemic.

The basic results presented in this paper persist even after accounting for other factors such as age, education, income, job stability, industry, and occupation, to name some of the most relevant ones. In addition, previous peer-reviewed analysis from two of the authors has demonstrated that the union wealth premium remains significant even when additional controls are taken into account.²⁰ While it is possible that union members are simply more likely to work in higher-paying jobs or industries, as union density can vary considerably across sectors, a large body of research has shown that unions increase wages and other factors that allow households to build and maintain wealth.

Definitions

The authors restricted the sample to only include households—used interchangeably with “families”—whose head of household or spouse is age 25 or older, not retired, and earning a wage or salary. This ensures that the nonunion families included are representative of workers who could enjoy wealth premiums if they joined unions; retired or self-employed respondents, for instance, could not join.

This analysis counted families as union households if their respondents or respondents’ spouses were covered by a union contract, regardless of whether those workers were union members. Therefore, the analysis may understate the role of unions because only one member of a household needed to be covered by a union contract in order for the entire household to be considered covered. For ease of language, the authors referred to the households included in the analysis as both “union households” and “union members.”

Households were considered working class if the respondent did not have a four-year college degree; households with a respondent with a four-year college degree or higher credential were considered college educated. Defining economic class by education, rather than income, allowed for more direct comparisons within and across class, as level of education remains relatively consistent for members of the labor force and does not vary as considerably with age or experience.

The analysis measured wealth as the sum of all marketable assets—such as checking accounts, real estate, stakes in firms, and vehicles—less all debt, including mortgages, credit card debt, and student loans. The wealth figure also includes the net present value of the income stream that workers expect to receive from a defined-benefit pension, if they have one. These values were adjusted for inflation—as were all dollar amounts in this analysis—and reported in 2019 U.S. dollars. The analysis focused on median wealth to convey outcomes of the typical household. Averages are often not as representative, as they were skewed by the top few percentages of households holding much more wealth than other households.

The “other or multiple race” category reported in this analysis includes all SCF respondents who do not solely identify as white, Black or African American, or nonwhite Latino or Hispanic, resulting in a diverse group that also includes Asian, American Indian, Alaska Native, Native Hawaiian, Pacific Islander, and other race or ethnicity, as well as multiple race or ethnicity families. Despite the diverse universe of experiences in this category, the Federal Reserve combines these households into one group due to sample size limitations before releasing their datasets to the public.

Furthermore, while the Federal Reserve reports Black or African American as the same category, for simplicity, the authors reported it as Black; similarly, the authors used Hispanic to report survey data that combine nonwhite Hispanic and Latino into the same response.